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US Justice Department probes high-speed trading

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(Globalpost/GlobalPost)

The US Justice Department has launched a probe of high-speed trading to see whether it involves illegal insider trading, Attorney General Eric Holder said Friday.

"In the financial sector, concerns have been raised recently about a practice called 'high-frequency trading,'" Holder said, according to his prepared remarks for a House of Representatives hearing.

"I can confirm that we at the Justice Department are investigating this practice to determine whether it violates insider trading laws."

High-speed traders employ algorithmic formulas and whip-speed transmission lines to buy and sell stock. Critics say the high-speed trading firms have tilted the market to win commissions and guaranteed profits at the expense of average investors.

"The Department is committed to ensuring the integrity of our financial markets -- and we are determined to follow this investigation wherever the facts and the law may lead," Holder, the top US law enforcement official, told a House Appropriations subcommittee.

A growing number of government agencies are scrutinizing the controversial practice, including the US Securities and Exchange Commission, the Commodities Futures Trading Commission and the New York state attorney general.

The public debate over high-speed trading heated up with Monday's release of a book by prominent author Michael Lewis.

In "Flash Boys: A Wall Street Revolt," Lewis argues that stock exchanges, large Wall Street banks and high-speed traders have together established a system that results in higher prices for the stock purchases of ordinary investors.

Proponents of high-speed trade argue that Lewis and other critics have misrepresented how the technology functions and the intent behind the system. They also note that some of the most-criticized practices are entirely legal.

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http://www.globalpost.com/dispatch/news/afp/140405/us-justice-department-probes-high-speed-trading