By Keri Geiger and Patricia Hurtado
March 31 (Bloomberg) — Federal agents are investigating
whether high-frequency trading firms violate U.S. laws by acting
on nonpublic information to gain an edge over competitors,
according to a person with knowledge with the probe.
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 FBI joins a roster of authorities examining high-
frequency trading, in which firms typically use super-fast
computers to post and cancel orders at rates measured in
thousandths or even millionths of a second to capture price
discrepancies. New York Attorney General Eric Schneiderman
opened a broad investigation into whether U.S. stock exchanges
and alternative venues give such traders improper advantages.
Related Article: FBI Investigate High-Frequenecy Traders for Abuse Information
–With assistance from Greg Farrell and Sam Mamudi in New York.
