These Are The 10 "Liquidity-Providing" HFT Firms The SEC Is Investigating

Tyler Durden's picture

Despite a full court press of PR to confirm HFT firms are friends of retail investors and do no wrong; the SEC, it appears, sees it differently. While Mary White has confidently explained the market is not rigged, her agency is now actively seeking tips, complaints, or referrals that show, as The Chicago Tribune reports, evidence of abuse of order types, as well as traditional forms of abusive trading like "layering" or "spoofing" and other issues relating to high-frequency trading that might be violations of the law. Here are the 10 firms (including poster child holy-grail trader Virtu Financial) that the SEC is probing... can you spot the oddly missing one...

 

Via The Chicago Tribune,

The U.S. Securities and Exchange Commission has been seeking information on 10 registered broker dealers as part of an ongoing investigation into high-frequency trading strategies, according to an internal SEC document reviewed by Reuters.

 

The firms listed are Allston Trading LLC; Hudson River Trading LLC; Jump Trading LLC; Latour Trading LLC, which is an affiliate of Tower Trading; Merrill Lynch, Pierce, Fenner & Smith, owned by Bank of America Group; Octeg LLC, which has been merged into a unit of KCG Holdings Inc; Tradebot Systems Inc; Two Sigma Investments LLC; Two Sigma Securities LLC; and Virtu Financial.

 

They are all some of the largest trading firms in the U.S. Allston and Jump are both based in Chicago. Hudson River, Latour, Merrill, Two Sigma, and Virtu are headquartered in New York. KCG is in Jersey City, New Jersey, and Tradebot is based in Kansas City, Missouri.

 

Jump, Latour, Bank of America, Hudson River, Tradebot and KCG declined to comment. The other firms did not immediately respond to a request for comment.

 

Their number and the open-ended quest for information shows that the SEC is casting a wide net as it looks to unearth wrongdoing in the marketplace.

 

...

 

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 said they had active probes into high-speed and automated trading.

 

The SEC has been seeking evidence of abuse of order types, as well as traditional forms of abusive trading like "layering" or "spoofing" and other issues relating to high-frequency trading that might be violations of the law, SEC Director of Enforcement Andrew Ceresney told Reuters in May.

 

Spoofing and layering are tactics where traders places orders that they cancel before they are executed to create the false impression of demand, aiming to trick others into buying or selling a stock at the artificial price.

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While this list is notable (and wide) as Reuters notes, there is one name missing that surprised us... arguably the ibggest of all - Citadel... (too busy enabling the NYFed's VIX-selling machinations we assume is not considered rigging)