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

Australia-Cambodia Resettlement Agreement Raises Concerns

Agreement calls for Cambodia to accept refugees in return for $35 million in aid and reflects Australia’s harder line approach towards asylum seekers and refugees More

India Looks to Become Arms Supplier Instead of Buyer

US hopes India can become alternative to China for countries looking to buy weapons, but experts question growth potential of Indian arms industry More

Earth Day Concert, Rally Draws Thousands in Washington

President Obama also took up the issue Saturday in his weekly address, saying there 'no greater threat to our planet than climate change' More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Are Energy Needs Putting Thailand's Natural Beauty at Risk?i
X
Steve Sandford
April 17, 2015 12:50 AM
Thailand's appetite for more electricity has led to the construction of new dams along the Mekong River to the north and new coal plants near the country's famous beaches in the south. A proposed coal plant in a so-called "green zone" has touched off a debate. VOA's Steve Sandford reports.
Video

Video Are Energy Needs Putting Thailand's Natural Beauty at Risk?

Thailand's appetite for more electricity has led to the construction of new dams along the Mekong River to the north and new coal plants near the country's famous beaches in the south. A proposed coal plant in a so-called "green zone" has touched off a debate. VOA's Steve Sandford reports.
Video

Video Overwhelmed by Migrants, Italy Mulls Military Action to Stabilize Libya

Thousands more migrants have arrived on the southern shores of Italy from North Africa in the past two days. Authorities say they expect the total number of arrivals this year to far exceed previous levels, and the government has said military action in Libya might be necessary to stem the flow. VOA's Henry Ridgwell reports.
Video

Video Putin Accuses Kyiv of ‘Cutting Off’ Eastern Ukraine

Russian President Vladimir Putin, in his annual televised call-in program, again denied there were any Russian troops fighting in Ukraine. He also said the West was trying to ‘contain’ Russia with sanctions. Henry Ridgwell reports on reactions to the president’s four-hour TV appearance.
Video

Video Eye Contact Secures Dog's Place in Human Heart

Dogs serve in the military, work with police and assist the disabled, and have been by our side for thousands of years serving as companions and loyal friends. We love them. They love us in return. VOA’s Rosanne Skirble reports on a new study that looks at the bio-chemical bond that cements that human-canine connection.
Video

Video Ukrainian Volunteers Search for Bodies of Missing Soldiers

As the cease-fire becomes more fragile in eastern Ukraine, a team of volunteer body collectors travels to the small village of Savur Mohyla in the what pro-Russian separatists call the Donetsk Peoples Republic - to retrieve bodies of fallen Ukrainian servicemen from rebel-held territories. Adam Bailes traveled with the team and has this report.
Video

Video Xenophobic Violence Sweeps South Africa

South Africa, long a haven for African immigrants, has been experiencing the worst xenophobic violence in years, with at least five people killed and hundreds displaced in recent weeks. From Johannesburg, VOA’s Anita Powell brings us this report.
Video

Video Sierra Leone President Koroma Bemoans Ebola Impact on Economy

In an interview with VOA's Shaka Ssali on Wednesday, President Ernest Koroma said the outbreak undermined his government’s efforts to boost and restructure the economy after years of civil war.
Video

Video Protester Lands Gyrocopter on Capitol Lawn

A 61-year-old mailman from Florida landed a small aircraft on the Capitol lawn in Washington to bring attention to campaign finance reform and what he says is government corruption. Wednesday's incident was one in a string of security breaches on U.S. government property. Zlatica Hoke reports the gyrocopter landing violated a no-fly zone.
Video

Video Apollo 13, NASA's 'Successful Failure,' Remembered

The Apollo 13 mission in 1970 was supposed to be NASA's third manned trip to the moon, but it became much more. On the flight's 45th anniversary, astronauts and flight directors gathered at Chicago's Adler Planetarium to talk about how the aborted mission changed manned spaceflight and continues to influence space exploration today. VOA’s Kane Farabaugh reports.
Video

Video Badly Burned Ukrainian Boy Bravely Fights Back

A 9-year-old Ukrainian boy has returned to his native country after intensive treatment in the United States for life-threatening burns. Volodia Bubela, burned in a house fire almost a year ago, battled back at a Boston hospital, impressing doctors with his bravery. Faith Lapidus narrates this report from VOA's Tetiana Kharchenko.
Video

Video US Maternity Leave Benefits Much Less Than Many Countries

It was almost 20 years ago that representatives of 189 countries met at a UN conference in Beijing and adopted a plan of action to achieve gender equality around the world. Now, two decades later, the University of California Los Angeles World Policy Analysis Center has issued a report examining what the Beijing Platform for Action has achieved. From Los Angeles, Elizabeth Lee has more.
Video

Video Endangered Hawaiian Birds Get Second Chance

Of the world's nearly 9,900 bird species, 13 percent are threatened with extinction, according to BirdLife International. Among them are two Hawaiian honeycreepers - tiny birds that live in the forest canopy, and, as the name implies, survive on nectar from tropical flowers. Scientists at the San Diego Zoo report they have managed to hatch half a dozen of their chicks in captivity, raising hopes that the birds will flutter back from the brink of extinction. VOA’s George Putic reports.
Video

Video Exhibit Brings Renaissance Master Out of the Shadows

The National Gallery of Art in Washington has raised the curtain on one of the most intriguing painters of the High Renaissance. Mostly ignored after his death in the early 1500s, Italian master Piero di Cosimo is now claiming his place alongside the best-known artists of the period. VOA’s Ardita Dunellari reports.
Video

Video Sidemen to Famous Blues Artists Record Their Own CD

Legendary blues singer BB King was briefly hospitalized last week and the 87-year-old “King of the Blues” may not be touring much anymore. But some of the musicians who have played with him and other blues legends have now released their own CD in an attempt to pass the torch to younger fans... and put their own talents out front as well. VOA’s Greg Flakus has followed this project over the past year and filed this report from Houston.
Video

Video Iran-Saudi Rivalry Is Stoking Conflict in Yemen

Iran has proposed a peace plan to end the conflict in Yemen, but the idea has received little support from regional rivals like Saudi Arabia. They accuse Tehran of backing the Houthi rebels, who have forced Yemen’s president to flee to Riyadh, and have taken over swaths of Yemen. As Henry Ridgwell reports for VOA, analysts say the conflict is being fueled by the Sunni-Shia rivalry between the two regional powers.

VOA Blogs

World Currencies

EUR
USD
0.9247
JPY
USD
118.78
GBP
USD
0.6657
CAD
USD
1.2190
INR
USD
62.395

Rates may not be current.