The FBI has a running investigation into high-speed trading, the controversial practice of using computers to automatically buy and sell stock within a fraction of a second. News of the probe comes hot on the heels of Michael Lewis' headline-making interview and book about the practice, but the investigation was actually launched a year ago, the Wall Street Journal reports—and senior officials still consider it to be in its early stages. It spins out of the FBI's crackdown on insider trading.
In the past, regulators have focused on whether high-speed trading causes market instability, Bloomberg explains, but now they're wondering whether it's unfair or fraudulent. Agents suspect the trades may be based on insider info, and that firms may be hiding suspect trades amidst a flurry of fast transactions. They're also examining the practice of placing large numbers of orders to move the market, and then canceling them. "There are many people in government who are very focused on this ... and who think it breaks the law," an FBI spokesperson said. But because computers are doing all the trading, it may be hard to prove fraudulent intent. (More high speed trading stories.)
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