Wall Street algo trading ends up in the crosshairs of the FBI. The American federal police has opened an investigation into high-speed trading: the suspicion is that companies armed with super-computers and latest-generation algorithms are committing insider trading, a crime which consists in taking advantage of the market from confidential or outside information beyond the reach of other investors.
According to the Wall Street Journal, the investigation began a year ago, but is still in its infancy, given the complexity of the operations under study. Among the practices accused of potential market abuse is the creation of waves of orders immediately canceled and aimed exclusively at creating a false impression of interest in various securities. US authorities also suspect that high-frequency trading is being used to trade based on illegally obtained information.
The FBI investigation - which collaborates with the Securities and Exchange Commission, the American Consob - is only the latest in a long list. The high-speed trading industry is already under the scrutiny of New York state Attorney General Eric Schneiderman and the Commodity Futures Trading Commission, which is examining the ties between high-speed trading firms and stock exchanges.
Algo trading is a highly controversial practice that allows computers to conduct financial transactions within tenths of a second. The debate on these operations, which on the New York Stock Exchange represent up to 70% of transactions, was also fueled by the publication of a book, "Flash Boys: a Wall Street Revolt", in which the author Michael Lewis argues that the American stock market is damaged by traders who use sophisticated technologies to the detriment of investors who cannot afford them.
Attachments: Wall street journal
