(Adds background on probes by other agencies)
By Karen Freifeld and Douwe Miedema
April 16 The New York attorney general is
probing more than half a dozen high-speed trading firms, a
person familiar with the matter said on Wednesday, as part of
his wide-ranging probe into alleged unfair technology advantages
on Wall Street.
Attorney General Eric Schneiderman's office is seeking
information on special relationships between exchanges and
so-called dark pools, platforms where large trades take place
out of sight of the rest of the market.
The office had sent out subpoenas to firms including Tower
Research Capital LLC, Chopper Trading LLC and Jump Trading LLC,
the source said on Wednesday. The firms could not immediately be
reached for comment, and a spokesman for the Principal Traders
Group, an industry association, declined to comment.
Schneiderman has been looking into what he considers unfair
Wall Street practices for about a year, and has spoken out
against advantages that speed trading firms have at exchanges
such as the ability to locate their computers on site, providing
them pricing information milliseconds before others.
The subpoena was exploratory in nature, a source at a
trading firm that was contacted by the New York attorney
general's office said, and the office appeared to be casting a
wide net involving the U.S. equity market.
"It's a huge distraction," the source said. "We look forward
to cooperating so they can also understand that we've done
nothing wrong and have received no special privileges along the
way," the source said.
The source was not authorized to speak publicly about the
matter and therefore requested anonymity.
The U.S. Justice Department this month became the latest to
clamp down on the high-speed trading industry, which uses
computers to rapidly dart in and out of trades to earn fractions
of a penny that add up to big profits over time, probing them
for possible insider trading.
The U.S. Securities and Exchange Commission, the Commodity
Futures Trading Commission and the Federal Bureau of
Investigation have said they had several active probes into
high-speed and automated trading.
CFTC Acting Chairman Mark Wetjen has said his agency is
looking at whether exchanges give some of the speed traders
discounts on fees the exchanges charge.
The FBI has confirmed it has been conducting a wide-ranging
investigation of high-speed trading for months, an outgrowth
from the years-long crackdown on insider trading.
The bureau is examining whether the speed traders are
front-running others' traders by getting to exchanges first.
Best-selling author Michael Lewis's new book "Flash Boys: A
Wall Street Revolt" has given the issue new prominence. In it,
Lewis contends that speed traders have rigged the stock market,
profiting from speeds unavailable to others.
Schneiderman's investigation is the latest focus in a probe
of Wall Street practices that give elite groups of traders
access to information at the expense of other participants. He
also has scrutinized the early release of analyst and consumer
sentiment data as well as market-moving press releases.
As part of the probe, Thomson Reuters Corp
agreed to suspend its early release of the widely watched
Thomson Reuters/University of Michigan consumer sentiment data
to a small group of clients.
(Reporting by Karen Freifeld and Douwe Miedema, Additional
reporting by John McCrank and Herb Lash in New York; Editing by
Sandra Maler, Bernard Orr)