NEW YORK [Reuters] - The U.S. Securities and Exchange Commission has gone fishing for high frequency 'flash boy' traders at ten brokerage firms.
The SEC trawl is a follow on from author Michael Lewis' new book : 'Flash boys: A Wall Street Revolt', in which he claimed (March 31) that markets are rigged by high-frequency traders who buy and sell stocks at speeds not available to investors.
Flash boy traders engage in 'spoofing' and 'layering' tactics - where high-frequency 'trades' are placed but then cancelled before execution so as to manipulate the market and trick realtime investors into buying or selling a stock at an artificial price point.
There is no suggestion of any wrongdoing at the firms identified by the Commission which has asked its staff to note all tips, complaints and referrals that its employees receive concerning high frequency trading.
The SEC's focus is on: Allston Trading LLC and Jump Trading LLC - both of Chicago; six New York based outfits - Hudson River Trading LLC; Latour Trading LLC, which is an affiliate of Tower Trading; Merrill Lynch, Pierce, Fenner & Smith - owned by Bank of America Group; Two Sigma Investments LLC; Two Sigma Securities LLC; and Virtu Financial; a Jersey City firm - Octeg LLC, which has been merged into a unit of KCG Holdings Inc.; and Tradebot Systems Inc. from Kansas City, Missouri.
A number of government agencies, including the SEC, New York State Attorney General Eric Schneiderman's office, the Commodity Futures Trading Commission and the Federal Bureau of Investigation have each disclosed they had active probes into high-speed and automated trading.