New York’s top law enforcer has opened a broad investigation into whether U.S. stock exchanges and alternative venues provide high-frequency traders with improper advantages, a person with direct knowledge of the matter said.
Attorney General Eric Schneiderman is examining the sale of products and services that offer faster access to data and richer information on trades than what’s typically available to the public, according to the person. Wall Street banks and rapid-fire trading firms pay thousands of dollars a month for these services from firms including Nasdaq OMX Group Inc. and IntercontinentalExchange Group Inc.’s New York Stock Exchange.
Andrew Brooks, head of U.S. equity trading at Baltimore, Maryland-based T. Rowe Price Group Inc., told a Senate hearing in late 2012 that the quest for speed has threatened the market.
Proponents say that high-speed trading actually increases the availability of shares in the market and that interfering with such programs would lead to higher costs and be harmful to financial stability. Indeed, the rise of computers in stock trading has helped squeeze out specialists and market makers, who had long facilitated transactions.
“The SEC wants to protect investors, but also strengthen and promote U.S. capital markets,” Cox said. “These twin functions conflict with each other, which is why they have so far turned a blind eye on this issue.”
Some in the trading business, like Joe Saluzzi, a partner and co-head of equity trading at Themis Trading LLC in Chatham, New Jersey, have called for restraining services. Saluzzi said he’s wary of the private feeds because they’re far more detailed than public data, showing when and how a stock order was changed or canceled, which can give an insight into a particular strategy.