How to Understand the Stock Market

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As with any of the big questions worth asking, there is no easy answer to whether the stock market is rigged. The real answer is both yes and no. On the one hand, the market has rules and regulations, oversight boards like the Securities and Exchange Commission, and is open for all investors to participate in on a potentially equal basis. On the other hand, the way the market works is clearly “unfair,” as Tepper puts it (1). Unfairness is built into the system because the actual point of sale is not something the ordinary investor is privy to—meaning the price of stocks is not a true reflection of investor supply and demand. This inherent unfairness built into the process of the stock market is why maverick developers like Brad Katsuyama has developed the IEX (Tepper 1). Abraham points out other reasons why the stock market methodologies remain unfair, “rigged,” in the sense that Wall Street insiders have access to information that ordinary investors do not. For example, money market managers and other insiders have access to “huge amounts of capital” that create fluctuations in price in what could be considered an unfair advantage—similar to the ways Wal-Mart undercuts small businesses at the bottom end of the supply chain (Abraham 1). Abraham also reminds investors of the importance of political clout.

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Politics plays an indirect but important role in market values, particularly in sectors with large lobbying presence.



Ordinary investors are poised to mitigate these unfair disadvantages through technological tools. IEX is one of many possible solutions. Investors could soon have access to an abundance of applications that help them participate in flash trading if they wished. The crypto-currency craze is another consumer-driven reaction to the Wall Street domination of the market. With crypto-currency, ordinary investors are in charge of supply and demand, not money market and hedge fund managers, or bigwig bankers and lobbyists. Investors also need to take some responsibility for surrendering their power through willful ignorance. As Abraham points out, the Internet offers a wealth of information about what is going on in the market each day—even each hour. While these websites cannot substitute for the quality of insider information that bankers and money market managers have access to on Wall Street, at the point of sale, it still does empower more investors. If more investors used the power of information and information technology,….....

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Works Cited

Abraham, Stephan, “Is the Stock Market Rigged?” Investopedia. https://www.investopedia.com/articles/stocks/10/stock-market-rigged.asp

Tepper, Taylor. “Is the Stock Market Still Rigged?” Time. 22 March, 2016. http://time.com/money/4261496/is-the-stock-market-still-rigged/

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