New York attorney general goes after HFT cheats

New York attorney general goes after HFT cheats

New York's attorney general has vowed to tackle the shadier side of high-frequency trading, setting up a confidential hotline for whistle-blowers to report what he calls 'insider trading 2.0'.

Speaking at a Bloomberg event, Eric Schneiderman warned about the "toxic combination" of HFT, the sale of early access to market moving information and front-running schemes that give hedge funds first pass access to analyst reports.

"When blinding speed is coupled with early access to data, it gives small groups of traders the power to manipulate market movements in their own favour before anyone else knows what's happening. They suck the value out of market-moving information before it even goes public," the attorney general told his audience.

In July, under pressure from Schneiderman, Thomson Reuters agreed to suspend its practice of providing high-frequency traders with market-moving consumer survey results a couple of seconds before the information was given to other subscribers.

The move appears to have had a dramatic effect on trading volumes, the attorney general claims, demonstrating how crucial the two second head start was.

With the investigation into the sale of market moving data still ongoing, Schneiderman is also turning his attention to the way hedge funds get early access to analyst assessments of companies and use it to 'front run' the market.

To help tackle the abuses, a hotline has been set up, with whistle-blowers urged to report concerns about these new forms of 'insider trading 2.0'.

Comments: (1)

Neil Crammond
Neil Crammond - trader - london 25 September, 2013, 10:08Be the first to give this comment the thumbs up 0 likes

hurrah ...............finally regulators are listening after years of honest traders complaining of blatant abuse and manipulation !

            a tip .......... all they have to do is take a trip to the exchanges and look at their time and sales and witness how the exchanges allow the abuse to happen on their doorstep . My  whistle blowing is directed at the exchanges who either ignored the abuse or were in on it ! "libor abuse " was so obvious it was an embarrassment in STIRS  markets .