(Corrects year unit was launched to 2012 in 3rd paragraph)
By Sarah N. Lynch
WASHINGTON, March 5 Examiners at the U.S.
Securities and Exchange Commission who specialize in
computerized trading strategies have started sharing their
expertise with the Federal Bureau of Investigation.
In recent months, representatives from the FBI as well as
other regulatory agencies have met with members of the SEC's
Quantitative Analytics unit, an SEC spokesman said.
Launched in 2012, the Quantitative Analytics unit is housed
within the SEC's Office of Compliance, Inspections and
It is staffed by computer trading experts and math gurus who
help gather data, identify risks and target examinations of
investment advisers for hedge funds and other firms.
"Our Quantitative Analytics Unit consists of specialized
examiners with PhDs and extensive backgrounds in mathematics,
physics, and computer science," SEC spokesman Kevin Callahan
"They play a key role in examinations of the most
sophisticated algorithmic trading firms and other investment
advisers. The unit shares its expertise in this area with other
regulatory agencies and participates in conferences to increase
the dialogue with financial firms and other regulators."
An FBI spokesperson did not respond to requests for comment.
The SEC has been stepping up its scrutiny of algorithmic
trading in recent years, especially after the May 6, 2010 "flash
crash" when the Dow plunged 700 points in mere minutes before it
sharply recouped most losses.
In September 2011, Reuters first reported that SEC examiners
were asking high-frequency trading firms to hand over details of
their trading strategies as part of its authority to examine
financial firms for compliance with U.S. regulations.
The requests were not necessarily related to suspicions of
wrongdoing, but any major concerns can be referred to the SEC's
enforcement division for investigation - especially if certain
trading programs are being used to manipulate the markets.
The SEC's increasing focus on learning the ins-and-outs of
computer-driven trading strategies can also help inform
policymaking on market structure, another area the SEC is
The SEC's recent information-sharing meetings with the FBI
and others on algorithmic trading by advisers was reported
earlier on Tuesday by the Financial Times.
This is not the first time the SEC has sought to beef up its
collaboration with the FBI. For the past couple years, a unit
within the SEC's enforcement division that handles all incoming
tips, complaints and referrals has had a resident FBI agent.
(Reporting By Sarah N. Lynch; additional reporting by Emily
Flitter in New York.)