Eric Schneiderman, New York State Attorney General
Bloomberg News is reporting that New York State Attorney General, Eric Schneiderman, has issued subpoenas to six high-frequency trading firms. The article, however, names only three firms, none of which are household names.
According to the article, Schneiderman is asking the firms, which include Chopper Trading LLC, Jump Trading LLC and Tower Research Capital LLC about the “special arrangements they have with exchanges and dark pools as well as their trading strategies.”
This is a curious approach. Why not ask the three big stock exchanges, the New York Stock Exchange, Nasdaq and BATS to hand over the names of all high frequency traders to whom they have sold expensive perks that have the effect of rigging the stock market against the average investor.
On March 18 of this year, Schneiderman gave an address at New York Law School indicating his intimate knowledge of the unfair and potentially manipulative practices taking place at the stock exchanges and, somewhat demurely, calling out Securities and Exchange Commission Chair, Mary Jo White, for not doing enough to stop these abuses.
On the subject of co-location, where the high frequency traders are allowed for a high fee to locate their own computers inside the exchange’s data centers to be close to the exchange’s main computers and shave fractions of a second off their trading speed, Schneiderman said: “In that tiny sliver of time, these firms get a first look at the direct-data feeds provided by the exchanges. They see pricing, volume, trade and order information and use it with their sophisticated technology, and algorithms that make the systems automatic, to trade on it before others can possibly react.”
Schneiderman said this co-location also allows the high frequency traders to “continuously monitor all the exchanges for large incoming orders. And if they spot a large order from an institutional investor, like a pension fund, high-frequency traders can instantaneously get on the other side of the trade — driving up the prices artificially.” (Continue to original article)