SEC Begins Probe Of Flash Trading


Next up: Dark Pools (hint, hint, Mary)

Update: From Bloomberg

July 30 (Bloomberg) -- The U.S. Securities and Exchange Commission will review so-called flash orders used by four equity markets, NYSE Euronext Chief Executive Officer Duncan Niederauer said.

Charles Schumer, the third-ranking Democrat in the U.S. Senate, told the SEC to review flash orders in a July 24 letter. Regulators told NYSE officials they will examine them, and based on those discussions it appears unlikely the SEC will impose curbs on other forms of high-speed trading, Niederauer said today in a conference call with analysts to discuss the New York-based company’s second-quarter results.

“I don’t think there is any fear of them doing something that would severely damage the displayed liquidity on U.S. equity markets,” he said. “High-frequency trading is actually the most consistent source of liquidity.”[TD: Time for one more of those "The Y in the NYSE stands for Trust" ads]

John Nester, a spokesman for the SEC, didn’t return a telephone call seeking comment. Last month, SEC Chairman Mary Schapiro said the agency is concerned that electronic indications of bids and offers are being disseminated to a select group of brokerages.

NYSE’s competitors -- Nasdaq OMX Group Inc., Bats Global Markets, Direct Edge Holdings LLC and the CBOE Stock Exchange -- give information to their clients about orders for a fraction of a second before the trades are routed to rival platforms. NYSE Euronext, the world’s largest owner of stock exchanges, told the SEC in May that these flash orders result in most investors getting worse prices.