High-frequency trading is in the sights of a Senate panel thatconducted some of the sharpest scrutiny of Wall Street firms overwrongdoing tied to the 2008 credit crisis.

Senator Carl Levin, chairman of the Permanent Subcommittee onInvestigations, asked regulators to provide information on risksposed by high-speed traders in advance of a hearing this month,according to three people with knowledge of the matter.

Levin, a Michigan Democrat, sought responses from the Securitiesand Exchange Commission (SEC) and Commodity Futures TradingCommission (CFTC) to 13 questions on the effects, trends, concerns,and regulatory reaction related to high-frequency trading,according to a copy of the letter obtained by Bloomberg News andconfirmed by one of the people.

“We have remained concerned with those issues, as publicinterest in high-frequency trading in the U.S. capital markets andapparent trading abuses in connection with high-frequency tradinghave increased,” according to the April 11 letter signed by Levinand Senator John McCain of Arizona, the panel's top Republican.They requested responses by May 1.

Elise Bean, staff director for the Permanent Subcommittee onInvestigations, declined to comment.

Lawmakers are increasing pressure on regulators and prosecutorsto rein in computerized and algorithmic traders who account forabout half of U.S. stock trades. Traders like those highlighted byMichael Lewis in his book “Flash Boys” have been linked by criticsto the May 2010 flash crash and market volatility during theEuropean debt crisis.

SEC and CFTC Plans

SEC Chair Mary Jo White, in a speech today, unveiled heragency's strongest plan yet for reining in high-frequency trading.Proprietary traders who use automated strategies would have toregister with the SEC and comply with its rules, White said at theSandler O'Neill & Partners Global Exchange and BrokerageConference in New York.

The CFTC is also considering possible new regulations, includingwhether a registration requirement would improve marketoversight.

Levin's committee is known for its highly publicizedinvestigations that often result in regulatory investigations orregulatory action. Past hearings have focused on Goldman SachsGroup Inc.'s sales of collateralized debt obligations that souredduring the credit crisis, JPMorgan Chase & Co.'s London Whaletrading losses and Credit Suisse Group AG's offshore taxevasion.

In his letter to the SEC and CFTC, Levin asked if the regulatorshad found evidence that investors pay a higher price to buy orreceive a lower price to sell and any evidence linkinghigh-frequency trading to exchange-related problems orconcerns.

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