The FBI has disclosed a year-long investigation into whether Wall Street’s high-speed trading firms [HFTs] break U.S. laws by trading on non-public information to gain an edge over everyday investors and day traders alike, the Wall Street Journal reports.
“Trading ahead of other investors based on information about orders that other investors can’t see could violate insider-trading laws,” an FBI spokesperson explained to the Journal. “There is a big concern that high-frequency traders are getting material nonpublic information ahead of others and trading on it.”
The report also said the FBI is working with New York Attorney General Eric Schneiderman, the Securities and Exchange Commission and the Commodity Futures Trading Association in looking into HFTs.
Bloomberg also has an update:
“The Federal Bureau of Investigation’s inquiry stems from a multiyear crackdown on insider trading, which has led to at least 79 convictions of hedge-fund traders and others. Agents are examining whether traders abuse information to act ahead of orders by institutional investors, according to the person, who asked not to be named because the probe is confidential. Even trades based on computer algorithms could amount to wire fraud, securities fraud or insider trading.”
The news comes after best-selling author, Michael Lewis, appeared on ’60 Minutes’ on CBS Sunday night to promote his new book “Flash Boys: A Wall Street Revolt,” in which he claims the stock market is “rigged” to benefit a group of insiders that have made tens of billions of dollars exploiting high-frequency trading.