News / Economy

High Frequency Traders Under Scrutiny

High Frequency Traders Under Scrutinyi
X
April 08, 2014 9:41 PM
The U. S. Justice Department is investigating the relationship between high frequency trading firms and major exchanges -- and regulators in Washington and the state of New York are taking aim at them as well. At issue is the integrity of the worldwide marketplace and the appropriate use of advanced technology. VOA’s Bernard Shusman reports from Wall Street in New York City.
Bernard Shusman
The U. S. Justice Department is investigating the relationship between high frequency trading firms and major exchanges -- and regulators in Washington and the state of New York are taking aim at them as well.   At issue is the integrity of the worldwide marketplace and the appropriate use of advanced technology. 

Technology has made stock trading easier, enabling worldwide participation in U.S. financial markets.  Now -- with advanced super computers and agreements with trading exchanges - some companies are able to trade stocks in fractions of a second.  The practice -- known as high-speed trading -- is controversial.  But as St. John’s University professor Michael Perino points out, traders have been trying to speed up the process as long as there have been securities markets.

“There is a great old story, it may not be true or not, but apparently the Rothschilds used carrier pigeons to get word of Napoleon’s defeat at Waterloo before anyone else and made money in the London Stock Exchange that way," he said. "And through telegraphs and fiber-optic cables throughout the years, everybody is trying to get faster and faster to the information because it gives them a competitive advantage.  High frequency traders just take that to the next degree.”

Still, these high frequency trading practices have come under the scrutiny of both the U.S. Justice Department and officials in New York State.  Attorney General Eric Holder confirmed an investigation is underway.

“We at the Justice Department are investigating this practice to determine whether it violates insider trading laws." he said. "The Department is committed to ensuring the integrity of our financial markets -- and we are determined to follow this investigation wherever the facts and law may lead.”

 For a fee, some of the exchanges and financial information services have supplied the high speed traders with extra bandwidth, special high speed switches and ultra-fast connection cables.  With that arrangement, HFT (High Frequency Trading) companies can receive information faster and gain an advantage over others in the market.

A new and controversial  book, “Flash Boys,” has whipped up a storm about such trading practices, and cites BATS Global  as one company it says is rigging the markets.  On a business network program  on CNBC, BATS CEO William O’Brien defended his company’s activities.

“BATS Direct Edge didn’t exist 10 years ago," he said. "And we became the biggest stock market on any given day in the United States by going to our customers, proving we had a value proposition and winning their business.  We didn’t do anything by trying to scare people.  And, I don’t think it’s true and I don’t think it’s right. “

Drexel Hamilton is a typical full-service institutional broker-dealer.  Like many other broker-dealers, it believes high frequency trading could kill the market place and turn away customers.  Ian Burgess, a managing director at Drexel Hamilton, says it makes the market less efficient.

“We see bids all of a sudden disappearing while we try to go in there and sell stock," he said. "We see offers also vaporizing when we’re trying to buy stock.  It makes it much more difficult and much more costly, I think.”

The Wall Street Bull is still one of New York’s major attractions.  But, the question is whether it will continue to be an attraction if the investing public loses confidence in the stock market.

You May Like

Photogallery Pistorius Sentenced, Taken to Prison

Pistorius, convicted of culpable homicide in shooting death of girlfriend Reeva Steenkamp, will likely serve about 10 months of five-year sentence, before completing it under house arrest More

UN to Aid Central Africa in Polio Vaccinations

Synchronized vaccinations will be conducted after Cameroon reports a fifth case of the wild polio virus in its territory More

WHO: Ebola Vaccine Could Be in Use by January

WHO assistant director Dr. Marie Paule Kieny says clinical trials of Ebola vaccines are underway or planned in Europe, US and Africa More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
After Decades of Pressure, Luxembourg Drops Bank Secrecy Rulesi
X
October 21, 2014 12:20 AM
European Union finance ministers have reached a breakthrough agreement that will make it more difficult for tax cheats to hide their money. The new legislation, which had been blocked for years by countries with a reputation as tax havens, was approved last week after Luxembourg and Austria agreed to lift their vetoes. But as Mil Arcega reports, it doesn’t mean tax cheats have run out of places to keep their money hidden.
Video

Video After Decades of Pressure, Luxembourg Drops Bank Secrecy Rules

European Union finance ministers have reached a breakthrough agreement that will make it more difficult for tax cheats to hide their money. The new legislation, which had been blocked for years by countries with a reputation as tax havens, was approved last week after Luxembourg and Austria agreed to lift their vetoes. But as Mil Arcega reports, it doesn’t mean tax cheats have run out of places to keep their money hidden.
Video

Video Kobani Refugees Welcome, Turkey Criticizes, US Airdrop

Residents of Kobani in northern Syria have welcomed the airdrop of weapons, ammunition and medicine to Kurdish militia who are resisting the seizure of their city by Islamic State militants. The Turkish government, however, has criticized the operation. VOA’s Scott Bobb reports from southeastern Turkey, across the border from Kobani.
Video

Video China Political Meeting Seeks to Improve Rule of Law

China’s communist leaders will host a top level political meeting this week, called the Fourth Plenum, and for the first time in the party’s history, rule of law will be a key item on the agenda. Analysts and Chinese media reports say the meetings could see the approval of long-awaited measures aimed at giving courts more independence and include steps to enhance an already aggressive and high-reaching anti-corruption drive. VOA’s Bill Ide has more from Beijing.
Video

Video US ‘Death Cafes’ Put Focus on the Finale

In contemporary America, death usually is a topic to be avoided. But the growing “death café” movement encourages people to discuss their fears and desires about their final moments. VOA’s Jerome Socolovsky reports.
Video

Video Ebola Orphanage Opens in Sierra Leone

Sierra Leone's first Ebola orphanage has opened in the Kailahun district. Hundreds of children orphaned since the beginning of the Ebola outbreak face stigma and rejection with nobody to care for them. Adam Bailes reports for VOA about a new interim care center that's aimed at helping the growing number of children affected by Ebola.
Video

Video Young Nairobi Tech Innovator on 'Track' in Security Business

A 24-year-old technology innovator in Nairobi has invented a tracking device that monitors and secures cars. He has also come up with what he claims is the most robust audio-visual surveillance system yet. As Lenny Ruvaga reports from the Kenyan capital, his innovations are offering alternative security solutions.
Video

Video Latinas Converting to Islam for Identity, Structure

Latinos are one of the fastest growing groups in the Muslim religion. According to the Pew Research Center, about 6 percent of American Muslims are Latino. And a little more than half of new converts are female. VOA’s Carolyn Presutti travelled to Miami, Florida -- where two out of every three residents is Hispanic -- to learn more.
Video

Video Exclusive: American Joins Kurds' Anti-IS Fight

The United States and other Western nations have expressed alarm about their citizens joining Islamic State forces in Syria and Iraq. In a rare counterpoint to the phenomenon, an American has taken up arms with the militants' Syrian Kurdish opponents. Elizabeth Arrott has more in this exclusive profile by VOA Kurdish reporter Zana Omer in Ras al Ayn, Syria.
Video

Video South Korea Confronts Violence Within Military Ranks

Every able-bodied South Korean male between 18 and 35 must serve for 21 to 36 months in the country’s armed forces, depending upon the specific branch. For many, service is a rite of passage to manhood. But there are growing concerns that bullying and violence come along with the tradition. Reporter Jason Strother has more from Seoul.
Video

Video North Carolina Emerges as Key Election Battleground

U.S. congressional midterm elections will be held on November 4th and most political analysts give Republicans an excellent chance to win a majority in the U.S. Senate, which Democrats now control. So what are the issues driving voters in this congressional election year? VOA National Correspondent Jim Malone traveled to North Carolina, one of the most politically competitive states in the country, to find out.
Video

Video Comanche People Maintain Pride in Their Heritage

The Comanche (Indian nation) once were called the “Lords of the Plains,” with an empire that included half the land area of current day Texas, large parts of Oklahoma, New Mexico, Kansas and Colorado.The fierceness and battle prowess of these warriors on horseback delayed the settlement of most of West Texas for four decades. VOA’s Greg Flakus reports from Lawton, Oklahoma, that while their warrior days are over, the 15,000 members of the Comanche Nation remain a proud people.
Video

Video Turkey Campus Attacks Raise Islamic Radicalization Fears

Concerns are growing in Turkey of Islamic radicalization at some universities, after clashes between supporters of the jihadist group Islamic State (IS) or ISIS, and those opposed to the extremists. Pro-jihadist literature is on sale openly on the streets of Istanbul. Critics accuse the government of turning a blind eye to radicalism at home, while Kurds accuse the president of supporting IS - a charge strongly denied. Henry Ridgwell reports from London.

All About America

AppleAndroid

World Currencies

EUR
USD
0.7798
JPY
USD
106.41
GBP
USD
0.6203
CAD
USD
1.1242
INR
USD
61.430

Rates may not be current.