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

Turkey's Erdogan: Women Not Equal to Men

Speaking at conference in Istanbul, President Erdogan says Islam has defined a position for women: motherhood More

Ahead of SAARC Summit, Subdued Expectations

Some regional analysts say distrust between Pakistani, Indian officials has slowed SAARC's progress over the year More

Philippines Leery of Development on Reef Reclamation in S. China Sea

Chinese land reclamation projects in area have been ongoing for years, but new satellite imagery reportedly shows China’s massive construction project More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Aung San Suu Kyi: Myanmar Opposition to Keep Pushing for Constitutional Changei
X
November 24, 2014 10:09 PM
Myanmar opposition leader Aung San Suu Kyi says she and her supporters will continue pushing to amend a constitutional clause that bars her from running for president next year. VOA's Than Lwin Htun reports from the capital Naypyitaw in this report narrated by Colin Lovett.
Video

Video Aung San Suu Kyi: Myanmar Opposition to Keep Pushing for Constitutional Change

Myanmar opposition leader Aung San Suu Kyi says she and her supporters will continue pushing to amend a constitutional clause that bars her from running for president next year. VOA's Than Lwin Htun reports from the capital Naypyitaw in this report narrated by Colin Lovett.
Video

Video Mali Attempts to Shut Down Ebola Transmission Chain

Senegal and Nigeria were able to stop small Ebola outbreaks by closely monitoring those who had contact with the sick person and quickly isolating anyone with symptoms. Mali is now scrambling to do the same. VOA’s Anne Look reports from Mali on what the country is doing to shut down the chain of transmission.
Video

Video Ukraine Marks Anniversary of Deadly 1930s Famine

During a commemoration for millions who died of starvation in Ukraine in the early 1930s, President Petro Poroshenko lashed out at Soviet-era totalitarianism for causing the deaths and accused today’s Russian-backed rebels in the east of using similar tactics. VOA’s Daniel Shearf reports from Kyiv.
Video

Video Hong Kong Protests at a Crossroads

New public opinion polls in Hong Kong indicate declining support for pro-democracy demonstrations after weeks of street protests. VOA’s Bill Ide in Guangzhou and Pros Laput in Hong Kong spoke with protesters and observers about whether demonstrators have been too aggressive in pushing for change.
Video

Video US Immigration Relief Imminent for Mixed-Status Families

Tens of thousands of undocumented immigrants in the Washington, D.C., area may benefit from a controversial presidential order announced this week. It's not a path to citizenship, as some activists hoped. But it will allow more immigrants who arrived as children or who have citizen children, to avoid deportation and work legally. VOA's Victoria Macchi talks with one young man who benefited from an earlier presidential order, and whose parents may now benefit after years of living in fear.
Video

Video New Skateboard Defies Gravity

A futuristic dream only a couple of decades ago, the hoverboard – a skateboard that floats above the ground - has finally been made possible. While still not ready for mass production, it promises to become a cool mode of transport... at least over some surfaces. VOA’s George Putic reports.
Video

Video Falling Gas Prices Impact US Oil Extraction

With the price of oil now less than $80 a barrel, motorists throughout the United States are benefiting from gas prices below $3 a gallon. But as VOA’s Kane Farabaugh reports, the decreasing price of petroleum has a downside for the hydraulic fracturing industry in the United States.
Video

Video Tensions Build on Korean Peninsula Amid Military Drills

It has been another tense week on the Korean peninsula as Pyongyang threatened to again test nuclear weapons while the U.S. and South Korean forces held joint military exercises in a show of force. VOA’s Brian Padden reports from the Kunsan Air Base in South Korea.
Video

Video Mama Sarah Obama Honored at UN Women’s Entrepreneurship Day

President Barack Obama's step-grandmother is in the United States to raise money to build a $12 million school and hospital center in Kogelo, Kenya, the birthplace of the president's father, Barack Obama, Sr. She was honored for her decades of work to aid poor Kenyans at a Women's Entrepreneurship Day at the United Nations.
Video

Video Ebola Economic Toll Stirs W. Africa Food Security Concerns

The World Bank said Wednesday that it expects the economic impact of the Ebola outbreak on the sub-Saharan economy to cost somewhere betweenf $3 billion to $4 billion - well below a previously-outlined worst-case scenario of $32 billion. Some economists, however, paint a gloomier picture - warning that the disruption to regional markets and trading is considerable. Henry Ridgwell reports from London.
Video

Video Chaos, Abuse Defy Solution in Libya

The political and security crisis in Libya is deepening, with competing governments and, according to Amnesty International, widespread human rights violations committed with impunity. VOA’s Al Pessin reports from London.
Video

Video US Hosts Record 866,000 Foreign Students

Close to 900,000 international students are studying at American universities and colleges, more than ever before. About half of them come from Asia, mostly China. The United States hosts more foreign students than any other country in the world, and its foreign student population is steadily growing. Zlatica Hoke reports.

All About America

AppleAndroid

World Currencies

EUR
USD
0.8048
JPY
USD
118.04
GBP
USD
0.6382
CAD
USD
1.1270
INR
USD
61.892

Rates may not be current.