Schumer wants to curb traders' flash orders - AP
By The Associated Press The Associated Press – 1 hr 57 mins ago
Sen. Charles Schumer, D-N.Y., has asked federal securities regulators to crack down on a high-speed computing advantage that large financial firms have over other investors.
If the Securities and Exchange Commission does not curb a practice that Schumer says gives certain professional investors an unfair advantage, he told the agency in a letter that he will try to do so legislatively.
"The integrity of our capital markets is being compromised by the ability of some insiders to view order information before it is available to the entire market," Schumer said in a letter Friday to SEC Chairman Mary Schapiro. This allows them "to profit from that information at the expense of other investors."
So-called flash orders allow certain members of Direct Edge, Nasdaq and BATS exchanges access (for a fee) to buy and sell order information for milliseconds prior to that information being made available to the public. High-speed computer software can take advantage of that brief period to allow those members to trade ahead of those orders — at better prices — and therefore profit from advanced knowledge of buying and selling activity.
"If the SEC fails to curb this practice, I plan to introduce legislation in the U.S. Senate to prohibit the use of flash orders," Schumer added.
Schapiro said last month that the SEC was working to identify emerging risks to investors, including so-called "dark pools," or automated trading systems that don't publicly provide price quotes. Large institutional investors like banks, pension funds and mutual funds use such systems when they buy and sell large blocks of shares.
While the pools — where some flash orders are sent first — are said to generate additional liquidity in the market, Schapiro has noted that they create a lack of transparency that could cause suspicion and speculation, and cut the public out of the mix. Given the risk, Schapiro has maintained that dark liquidity may face increased regulatory action and scrutiny in the future.
Even BATS Exchange Inc. CEO Joe Ratterman called for an industry review of the practice earlier this month. In a July 7 e-mail to BATS members and others in the industry, Ratterman noted that the SEC currently deems flash orders to be legal and operating within regulatory guidelines, but said BATS is ready to participate in an industry review of potential issues, "including the possibility that they (BOLT, Flash and ELP flash order services) create a two-tier market."
Spokespersons for Direct Edge ECN LLC and Nasdaq OMX Group Inc., which run the ELP and Flash Orders services, respectively, weren't immediately available for comment Saturday.
Schumer wants to curb traders' flash orders - Yahoo! News
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Might make it a little more fair for us little guys?
Schumer wants to curb traders' flash orders
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