Train, though. Michael lewis wrote a bestselling book about trading and said u. S. Markets were rigged and now everyone cares. And congress is paying attention. A senate panel is holding a hearing this morning into highfrequency trading, asking whether the business is riddled with conflict of interest and if it is responsible for the loss of investor confidence. Megan hughes is covering the hearing on capitol hill. It is a whos who in the industry at this point, right . That is right. I will tell you the star witness is in his first panel, brad cap zeyuma. A brad kat blew the uncovered and whistle on a lot of these highfrequency trading frat practices. His testimony, there seems to be agreement that on some level the market is rigged. New technology should not erase enduring values. Financial markets cannot survive on technology alone. They require a much older concept, trust. And trust is eroding. The next panel, we will have quite a juxtaposition. That is what we will hear from some of the executives that you mentioned. We will hear from executives from the New York Stock Exchange as well as others that do not necessarily agree with each other. Opinion differences of about the impact of highfrequency trading on the market. Definitely looking forward to that. You can always count on senator levin for some theatrics, but what we want to know is what, if anything, congress should do about highfrequency trading. From here in new york, our cofounder and partner. And kevin from greenwich associates. It may help for senators levin and senators mccain to draw attention to highfrequency trading and raise questions of conflicts of interest. But should congress be stepping in . I will jump in, if you dont mind. First, i think we i think kevin will agree with me. We are pleased to see this debate move away from highfrequency trading or traders being good or bad and into the much more meaty topic of serious conflict of interest embedded in the system that we trade within. Or whether there are. Yes, but there are issues around the border routing. It is very telling that the title of this panel is starting off with conflicts of interest. I conflicts of interest. The debate has definitely shifted there. On brokersing routing, border routing behavior. ,n a speech last week commissioner cara signed referred to the conflicts of interest. It seems like they are all telegraphing that we are on the same path. My question is, do regulators really understand what the business is all about anyway . Thisems nobody knew what was really about. There are two main thoughts that i have about this whole debate, some i agree with and some i do not. Off by and large than 20 years ago. The market is definitely complicated. And i think practitioners have a hard time understanding. I think the regulators do have a pretty good grasp at this point. They have been looking at this since at least 2009, 2010. They have been examining this deeply. Congress has more of a step back approach and they have bigger fish to fry in the u. S. Economy. But i think the core thing that people need to take away from s is, yes, we can investors are better off and we it trade in the market, but is way more complex than it needs to be. I do believe congress has stepped up their game. If you look at senator levins history, he has a history his staff member, tiger lost, is the senior staff munger senior staff member under commissioner kaara stein. And senator reid and senator levin have been delving into this for years. What is interesting is you do have the right people who are really well versed. They know what is going on in the broker routing and the conflicts of interest. And they are in the positions of power now. This is not just one of your congressional Market Structure panels looking into into highfrequency trading. One thing that is frustrating is that it is very political. It has to be. Whether they like it or not, they are politicians. It is about what is clinically viable as opposed to what is best for the marketplace. The idea of Closing Everything and scrapping what we have today , and get in a room and dont let anyone else out until we come up with a decision. But that would be a union negotiation. And the need of jpmorgan in the 1920s when they locked everyone in the room and made them find a way forward. That would be great. Both of you gentlemen are familiar with an oped published in the wall street journal by andy gensler who, i think, proposes a really a very interesting solution to this problem. The practices put into place in 2007 are right big knowledge to be the source of the perceived problems in computerized trading. He says it all comes down to two words, best price. Why not change best price two x two best why not change best price to best execution ech . I agree. What is interesting is why we an interesting market averagee to change 300 exchanges a year, if you are most american to have their most money and 401 k funds and mutual funds and index funds, those orders tend to be t. Rowe price or fidelity or putnam buying 800,000 shares in a pool for everybody. This Market Structure with all of the timing differences between all of these different technologyll the differences, there is a lot of builtin arbitrage and unwanted touching. There he goes again, confusing highfrequency trading with teenage dating. [laughter] at a mean to bring him back to the topic, but there is a great parallel in europe. They talk a lot about best execution in europe. They give a little bit of freedom to the brokers to help their clients decide what is best for them. And this is true in other markets, the bond market, the soft market. The best price is not necessarily the best. Help people understand what youre talking about exactly. The way i understand it, and correct me if im wrong, is lets say, if im with t. Rowe price and im putting in an order for 100,000 shares maybe that is a lot. Say00 shares of ibm, lets postup and the best price available is 1000 shares posted by some highfrequency trader. If i try to execute at that price, i have exposed myself because i did not subsequently have additional orders to fill out my 10,000 shares. I might be better served if i could just buy 10,000 shares at a slightly higher price. Is that more or less . Lets make it even simpler. If youve got to online account and you want to trade 10 shares and you can buy them a penny cheaper from broker one then you whatrom broker two, then is the best execution echo the one with the best execution . The one with the lowest fees and highest return. On a seems to be focusing small investor issue and taking into account the true explicit cost of one particular trade. When you are trading 100,000 intos, that is broken up orders. What does the broker do with that hundred thousand shares as it is routed into an algorithm . The go sit in the brokers pool first . Then does it try to bid on a high rebate change . Witness in that hearing named Robert Italiano andis a professor at game showing that the outcome and the execution for the client is vastly different, given the same mvbo at the time. Is splitting that up and sending it to their Proper Exchange where it is most likely to get thebest and cheapest price best thing for the investor or not . Really quickly, andy kessler raises another important point in his oped, which is that wall street journal which is that wall street wants to get paid. Trading firms and operators of dark pools, etc. , have introduced frictions in order to get paid somehow. This is what Michael Lewis complains about, the scalping that goes on. If it were fixed in such a way that it was best execution, wouldnt the street want to get paid in just another way . In other words, we would end up paying the same amount for trading, invisible or visible, but maybe we would just know it better. Is true with nonprofits. We are already seeing our Research Showing that evolving working this in trade. Clients are willing to pay for information, especially if it is obligated. They want someone to help them understand how to navigate the markets. If it isally complicated. They want someone to help them understand how to navigate the markets. Do we need more regulations or do we let the market sort this x is theselves . If ie answer, then the market will move that way. If the market is not terribly upset, things will continue on as is. There is a free Market Solution to the whole problem. And i surprisingly agree with kevin. Every once in a while. The best solutions are not going to come, certainly from congress. I think there does need to be a rules of the road that comes down from our regulators, from the sec and from sandra finr a. But the market shares are increasing, even in this environment. Another speaker on the panel is changing the way they view their responsibility in the market as a way to facilitate investing as opposed to a shortterm trading. The wheels are moving. A marketbased solution for the market. Great to see you. Back in ang to be couple of minutes here on Market Makers. And coming up, congressman sander levin the socalled tax debate. U. S. Companies are avoiding taxes by basing themselves overseas. Plus, do you finally have world cup fever . Watching some of the games might be easier than you might think. President obama has a new plan to boost u. S. Manufacturing. Today, he will offer vendors to use federal equipment and Research Facilities to test their ideas. It is a small step, but one of the white house hopes will create more jobs. Last month, manufacturing employment reached 12. 1 million as the highest since the financial crisis. The co of the National Association of manufacturers, the industrys lobbying arm, is in washington. What is the potential for the u. S. To add on manufacturing jobs in the next few years . I think the potential is great, particularly if you get our policies right. It is tremendous to have the president and members of congress focus on manufacturing and focus on building a Strong Manufacturing base. But we have a few problems in washington that have to get resolved. That is the issue of taxes and regulation and trade and energy and infrastructure. A few issues on the agenda that need to be addressed. What about the economy . How do you feel about the pace of the economy right now . Is it accelerated . Are you in the camp that thinks that the Federal Reserve will have to raise Interest Rates sooner than 2015 . Or perhaps with Christine Lagarde and the imf, which yesterday cut its forecast for u. S. Economic growth . Our futures are very optimistic. There is a survey we just did with industry week that shows a great majority of manufacturers are optimistic about their economic future. But any cool number also say also sayn equal number that we do not have the right policies in place in order to create sustained growth in our sector. Our executive committee was in town last week. And we met with fed chair he janet yellen fed chair janet yellen and we talked about the noncompetitive tax policy, our regulatory structure that is adding costs onto manufacturers and make it more expensive to do business here, and several other issues. Weve got to get those fundamental issues right if were going to see sustained growth in our sector. You are skeptical on the current policies, but there are so many things going right. You have the cheap rice of natural gas, and a Game Changing easierogy that makes it for utilization. And there are postrecession highs showing that Companies Like to invest money in order to keep growing. Those are good things. You are exactly right. I have to say that the Energy Revolution in this country, specifically natural gas and fracking, has really enabled manufacturing to grow. Energy is a huge cost input for manufacturing. We use one third of the Nations Energy supply. Been a good few years with Natural Gas Prices becoming much more affordable. Is not to reverse regulations that end up increasing the cost of energy. We want to make sure we keep this renaissance going, and that means Lower Energy Costs for the longterm. What kind of regulations are you talking about . I you talking about the changes that the president has asked the Environmental Protection agency to make, for example, to clean up some of the pollution from coal power . The president s climate regulatory action plan will impose massive costs onto manufacturers and other sectors of the economy. Through its regulation of coal. That is one of the reasons that the effort leading to challenge those regulations. We will be in court on those regulations, as we have others. If you think about it, manufacturing is creating one third of this Nations Energy supply. We rely on affordable and are liable supply to allow us to compete. Could you define massive . Even the u. S. Chamber of commerce has studied the impact of those epa regulations and come up with a number. And the number, while large, is not massive relative to the size of the entire economy. A lot of coal plants will be retired. You have to look at the Regulatory Environment in total and say exactly what those costs are imposing. You have the climate plan. You have the ozone regulations coming out later this year or early next year, which by the around 100timates, million. And that is their least expensive form. Keep adding costs onto manufacturers, as costs in other countries and i is it better just to destroy the environment . Is that the alternative . No, that is not the alternative. Everyone wants clean air and clean water. We want to make sure we have the right timeline to allow us to create the technologies that enable us to clean up the environment. Manufacturers have been responsible for the largest increasing Greenhouse Gas sector of the any economy. That is because we have become more efficient so we can drive down the cost of doing business for ourselves. A newll see that embraced technologies in the future. We just dont want to be forced into a situation where technologies are not available. For instance, Carbon Capture and storage technology. The companies producing that is saying, wait a minute, we dont have that technology yet to be viable on a commercial scale. We want to make sure we have the Technology Available to allow us to do things that help benefit the environment and also be productive. Thank you so much. Coming up, you dont have to watch the games in a bar. There are plenty of Seats Available for the world cup. We are approaching 26 minutes past the hour. We will be talking about one of elon musks companies, the largest provider of solutions him. It rents use solar panels and over a a monthly fee number of years with no upfront cost. They are becoming integrated for about 200 million and possibly an additional 150 million. Alexgo is a salute valeo is a solar panel manufacturer. Or might possibly become a manufacturer. They are looking for a city that could have gigawatt production in two years. They are to beef up their presence. Latest move. S he is a busy guy. Coming up, a senator will be with us to look at talking about Companies Live from bloomberg headquarters in new york, this is Market Makers with Erik Schatzker and Stephanie Ruhle. Good morning, once again. Im alix steel in for Stephanie Ruhle today. Happy tuesday. Thank you for joining me. Thank you for having me. Lets talk about what may be the hottest thing on wall street, immersions. These are mergers and cutisitions designed to taxes by heading overseas. We told you about medtronic buying covidien for about 43 million and in the process moving to ireland. At least 40 other companies have done similar deals and some in Congress Want put an end to it. The top democrat on the house ways and means it in its tracks. Thank you for joining us this morning. I need to ask you this question to begin with. Orther it is medtronic pfizer, doesnt really matter. If you are the ceo of an American Corporation looking at the u. S. Corporate tax rate at 35 and seeing an opportunity to reduce that, however you do it including through an inversion deal, wouldnt you do the same thing . First of all, medtronic is not playing not paying 35 . They are paying about half of that. Congressman, that is partly because medtronic has also been very active and determined to become a more tax efficient company, which has helped it to reduce its tax rate to 18 . But as you know, there is another appeal to the inversion deal, but which is unlocking or releasing the socalled overseas profits that are isapped overseas, and that really what medtronic has in its sights. Part of thehat is problem and we need to look at that problem. Inversion is not the way to do this. The inversion process has been accelerating in this country, and in the last years it has multiplied. Essentially, companies are keeping major operations here and they are combining, but doing that in order to pay fewer taxes by essentially setting up the domicile in other places. I think we need to very seriously look at the inversion issue. My brother and i have introduced legislation to do just that. It is interesting. Apparently, in the contract between the two companies, they indicate their deal is off if congress acts. I think that shows that the basic purpose of this related to is to taxes and not the other aspects of their operations. This is an effort to lower their tax rate. Congressman, it seems like your track would be to increase the foreign ownership, perhaps to 50 from 20 . If you have x amount of employees here in the u. S. , you cannot really qualify. It is making it more difficult for companies to these tax inversion deals. Awant to share with you response from orin hatch of utah , saying broadly speaking, there are two ways to address the issue of inversion. The first is to make it more difficult for u. S. Corporati