Tuesday, 1 April 2014

FBI Confirms Probe Into High-Speed Trading

By Hannah Thomas-Peter, New York CorrespondentThe Federal Bureau of Investigation has been investigating high-speed trading firms for “several months”, Sky News has confirmed.
High frequency or high speed trading involves the use of extremely fast computer networks to shave fractions of a second off the time it takes companies to place electronic orders, potentially giving them a huge advantage over traditional rivals.
Companies using the technology can, for example, identify a large, slower order for stock from an ordinary investor, buy that stock ahead of them, and sell it back at a profit.
The practice accounts for about 50% of trading on New York stock exchanges, and is not illegal.
But the FBI wants to know if companies are using their speed advantage in an illegal way.
According to an FBI spokesman the ongoing, wide-ranging investigation includes a number of different companies and concentrates on practices including the front running of shares, 'spoofing' shares, phantom trading, insider trading and other market manipulation.
The FBI is not the only authority investigating the issue.
Among others, the SEC and the New York Attorney General’s Office are also probing how it works and whether in some circumstances it is illegal.
News of the FBI’s criminal investigation comes at the same time as high-profile financial author Michael Lewis released a book revealing details of the high-frequency trading market.
He told CBS’ 60 Minutes programme that the stock market was “rigged”, and high frequency traders were profiting at the expense of ordinary investors.
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