U.S. Stock Market & Investors Alleged To Be Victimized by High-Frequency Traders
Written By: Rheingold, Valet, Rheingold, Ruffo & Giuffra LLP
by Maria Markou
As technology has greatly evolved, modern practices and tricks have dominated the U.S. equity market. As a result, millions of investors have been exploited by high-speed predators. These fast traders utilize their advanced computers and software, in order to jump front the stock investors, get enhanced and advanced information on prices, detect what investors intend to buy, purchase it first and then try to sell it at a higher price. Some of the most well-known and largest high-speed traders are Virtu-Financial Inc., Bats Global Market Inc., and the Lexena, which has merged with Direct Edge Holdings Inc.
Furthermore, Bloomberg LP furnishes its clients with significant proprietary exchange information. Specifically, reputable banks, financial institutions, and fast trading companies spend millions of dollars on services and products that will enable them primacy and exclusiveness in trade information.
These voracious acts and methods were noticed by Brad Katsuyama, a prior Canadian trader of the Royal Bank of Canada, who proved that high-speed predators perceive the market business by using specialized algorithms. This allows them to buy and sell stock in fractions of seconds before the market news become public. Despite the blurred legality of this issue, New York Attorney General Eric Schneiderman recently decided that an investigation should be initiated regarding the privileges marketed to professional traders, which allow them to set their computers close to exchanges and purchase access to faster data streams and voluminous information on trades.
In addition to that, the Securities and Exchange Commission and Commodity Futures Trading Commission bolster the viewpoint that the underlying market rules should be scrutinized closely because of the computerized trade exploitation. The Federal Bureau of Investigation will unveil at the end of their probe if high-speed trading firms violate U.S. laws by taking advantage of unpublished information over innocent investors of pension and retirement funds.