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.
    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

    Hope Remains for Rio Olympic Games, Despite Woes

    Facing a host of problems, Rio prepares for holding the games but experts say some risks, like Zika, may not be as grave as initially thought

    IS Use of Social Media to Recruit, Radicalize Still a Top Threat to US

    Despite military gains against IS in Iraq and Syria, their internet propaganda still commands an audience; US officials see 'the most complex challenge that the federal government and industry face'

    ‘Time Is Now’ to Save Africa’s Animals From Poachers, Activist Says

    During Zimbabwe visit, African Wildlife Foundation President Kaddu Sebunya says poaching hurts Africa as slave trade once did

    Featured Videos

    Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
    Ivorian Chocolate Makers Promote Locally-made Chocolatei
    X
    July 29, 2016 4:02 PM
    Ivory Coast is the world's top producer of cocoa but hardly any of it is processed into chocolate there. Instead, the cocoa is sent abroad to chocolate makers in Europe and elsewhere. This is a general problem throughout Africa – massive exports of raw materials but few finished goods. As Emilie Iob reports from Abidjan, several Ivorian entrepreneurs are working to change that formula - 100 percent Ivorian chocolate bar at a time.
    Video

    Video Ivorian Chocolate Makers Promote Locally-made Chocolate

    Ivory Coast is the world's top producer of cocoa but hardly any of it is processed into chocolate there. Instead, the cocoa is sent abroad to chocolate makers in Europe and elsewhere. This is a general problem throughout Africa – massive exports of raw materials but few finished goods. As Emilie Iob reports from Abidjan, several Ivorian entrepreneurs are working to change that formula - 100 percent Ivorian chocolate bar at a time.
    Video

    Video Tesla Opens Battery-Producing Gigafactory

    Two years after starting to produce electric cars, U.S. car maker Tesla Motors has opened the first part of its huge battery manufacturing plant, which will eventually cover more than a square kilometer. Situated close to Reno, Nevada, the so-called Gigafactory will eventually produce more lithium-ion batteries than were made worldwide in 2013. VOA's George Putic reports.
    Video

    Video Polio-affected Afghan Student Fulfilling Her Dreams in America

    Afghanistan is one of only two countries in the world where children still get infected by polio. The other is Pakistan. Mahbooba Akhtarzada who is from Afghanistan, was disabled by polio, but has managed to overcome the obstacles caused by this crippling disease. VOA's Zheela Nasari caught up with Akhtarzada and brings us this report narrated by Bronwyn Benito.
    Video

    Video Hillary Clinton Promises to Build a 'Better Tomorrow'

    Democratic presidential candidate Hillary Clinton urged voters Thursday not to give in to the politics of fear. She vowed to unite the country and move it forward if elected in November. Clinton formally accepted the Democratic Party's nomination at its national convention in Philadelphia. VOA national correspondent Jim Malone has more.
    Video

    Video Trump Tones Down Praise for Russia

    Republican presidential candidate Donald Trump is toning down his compliments for Russia and Vladimir Putin as such rhetoric got him in trouble recently. After calling on Russia to find 30.000 missing emails from rival Hillary Clinton, Trump told reporters he doesn't know Putin and never called him a great leader, just one who's better than President Barack Obama. Putin has welcomed Trump's overtures, but, as Zlatica Hoke reports, ordinary Russians say they are not putting much faith in Trump.
    Video

    Video Uganda Unveils its First Solar-powered Bus

    A solar-powered bus described by its Ugandan makers as the first in Africa has made its public debut. Kiira Motors' electric bus, Kayoola, displayed recently at a stadium in Uganda's capital. From Kampala, Maurice Magorane filed this report narrated by Salem Solomon.
    Video

    Video Silicon Valley: More Than A Place, It's a Culture

    Silicon Valley is a technology powerhouse and a place that companies such as Google, Facebook and Apple call home. It is a region in northern California that stretches from San Francisco to San Jose. But, more than that, it's known for its startup culture. VOA's Elizabeth Lee went inside one company to find out what it's like to work in a startup.
    Video

    Video Immigrant Delegate Marvels at Democratic Process

    It’s been a bitter and divisive election season – but first time Indian-American delegate Dr. Shashi Gupta headed to the Democratic National Convention with a sense of hope. VOA’s Katherine Gypson followed this immigrant with the love of U.S. politics all the way to Philadelphia.
    Video

    Video Dutch Entrepreneurs Turn Rainwater Into Beer

    June has been recorded as one of the wettest months in more than a century in many parts of Europe. To a group of entrepreneurs in Amsterdam the rain came as a blessing, as they used the extra water to brew beer. Serginho Roosblad has more to the story.
    Video

    Video Commerce Thrives on US-Mexico Border

    At the Democratic Convention in Philadelphia this week, the party’s presumptive presidential nominee, Hillary Clinton, is expected to attack proposals made by her opponent, Republican presidential nominee Donald Trump, to build a wall along the U.S.-Mexico border. Last Friday, President Barack Obama hosted his Mexican counterpart, President Enrique Peña Nieto, to underscore the good relations between the two countries. VOA’s Greg Flakus reports from Tucson.
    Video

    Video Film Helps Save Ethiopian Children Thought to be Cursed

    'Omo Child' looks at effort of African man to stop killings of ‘mingi’ children
    Video

    Video London’s Financial Crown at Risk as Rivals Eye Brexit Opportunities

    By most measures, London rivals New York as the only true global financial center. But Britain’s vote to leave the European Union – so-called ‘Brexit’ – means the city could lose its right to sell services tariff-free across the bloc, risking its position as Europe’s financial headquarters. Already some banks have said they may shift operations to the mainland. Henry Ridgwell reports from London.

    Special Report

    Adrift The Invisible African Diaspora

    World Currencies

    EUR
    USD
    0.8998
    JPY
    USD
    103.32
    GBP
    USD
    0.7594
    CAD
    USD
    1.3176
    INR
    USD
    66.954

    Rates may not be current.