Mega-Banks Get to Be Infallible, But We Don't

By Brenda P. Wenning

NEW YORK (AdviceIQ) -- Imagine being able to trade stocks and knowing you will make a profit every day. Of course, for the average investor, this is impossible, but mega-banks aren't average investors. They do it with super-fast computers -- and no scruples.

According to Jim Quinn of The Burning Platform investing site, "JPMorgan experienced ZERO trading loss days in 2013. Goldman Sachs, Morgan Stanley and most of the mega-banks have had virtually perfect daily trading results since 2010. If they are all winning, who is losing?"

Banks such as JPMorgan, Goldman Sachs and Morgan Stanley can, of course, attract the best and brightest traders, so you would expect above-average results from them. But how does anyone manage to make it through an entire year without a single day in which trading losses take place?

Through legal theft, also known as high-frequency trading. As we've reported, Michael Lewis' new book Flash Boys shines a light on this dark side of Wall Street, pointing out that HFT enables Wall Street's biggest players to buy shares at one price then sell them to investors at a higher price in a practice known as front running.

Granted, for a bank the size of JPMorgan, which has $2.48 trillion in assets, HFT accounts for a relatively small part of its business. But is it fair for a bank that earned $5.27 billion in profits during the latest quarter to have access to trading information that gives it an advantage over the rest of us? And should the rest of us be paying for it?