The Securities and Exchange Commission has reportedly set its sights on the often-mysterious world of high-frequency trading, questioning whether these sophisticated traders' cozy relationship with exchanges gives them an unfair advantage.
According to The Wall Street Journal, the SEC probe is zeroing in on the computer-driven trading platforms of exchanges, including BATS Global Markets, which ironically is debuting as a public company on Friday just as the news breaks.
High-frequency trading firms, which tend to avoid the limelight, have come into focus in the wake of the May 2010 “flash crash,” which featured a brief 1,000-point plunge on the Dow after glitches in computer-trading systems. These traders use advanced and powerful computer systems to rapidly execute trades, often ahead of most other investors.