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TheStreet Open House

Electronic Trading Executives Want to Shoot the Messenger

NEW YORK ( TheStreet) -- The Wall Street Journal, USA Today and other media are a big reason investors have lost confidence in the stock market, according to a panel of electronic trading executives speaking at an industry conference hosted by Sandler O'Neill Thursday in New York.

"What we're most aligned on is we want to turn the average person into the average investor. We all benefit when that happens," said Bill O'Brien, CEO of Direct Edge, a stock exchange whose owners include Goldman Sachs (GS), JPMorgan Chase (JPM) and Knight Capital Group (KCG).

What's keeping them away, according to O'Brien, is "headline risk. It's the flash crash and the other events we've been through in the past year." O'Brien added, however that, "it's not just retail, it's actually the professionals too," who have lost confidence in trade execution and the smooth functioning of markets.

In addition to the May 6, 2010 "Flash Crash," when the Dow Jones Industrial Average fell 1,000 points, or 9%, and recovered within minutes, the executives referred to the botched IPO of Facebook (FB) on May 18, 2012, which was marred by trading glitches. Nasdaq Omx Group (NDAQ) was fined $10 million last month by the Securities and Exchange Commission over its failures tied to the IPO. They also alluded to a computer error at Knight which cost the company $460 million last year and drove it into the arms of competitor GETCO.

Another infamous trading glitch came when exchange operator BATS was forced to pull its own initial public offering. BATS founder Dave Cummings wrote in an email at the time that "some in the media love to overhype the occasional glitches," because "they envy people who make money."

As a participant in Thursday's panel discussion, Cummings may have been the most impassioned in blaming the media for his industry's problems.

"We're facing a no-win struggle that, you know, train wrecks sell newspapers and so that's what the media wants to cover. It's more interesting to say the sky is falling, the market's rigged, there's huge problems. No matter all the good news you pump out that says 'OK, the market worked again today, we didn't have any problems,' it doesn't get printed. And even when they have nothing to run they regurgitate a list of all the problems you had the past five years because it's more interesting to read than 'Hey everything's fine we don't have problems.' And so I think it's just a media perception, but what do investors want? The market's more than doubled in the last five years. They can trade for less than 10 bucks. At the click of a button get a fill in less than a second with a penny spread in most, you know, high cap stocks. It doesn't get any better than that," Cummings said.

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