New York Attorney-General Eric Schneiderman used a speech on Tuesday to launch a broadside against high-frequency trading.FRED R. CONRAD/The New York Times
Is high-frequency trading unfair? The top prosecutor in New York State certainly appears to think so.
Eric Schneiderman, New York's Attorney-General, used a speech on Tuesday to launch a broadside against what he termed "insider trading 2.0" – the host of ways that high-frequency traders "distort our markets" and "guarantee themselves enormous revenue."
If you smell an investigation at this point, you would be correct. Mr. Schneiderman has reportedly launched a probe into a variety of practices employed by high-frequency traders and requested information from major stock exchanges, according to Bloomberg News.
Some of the arrangements used by such traders, he said, are "fundamentally unfair – and potentially illegal." On his list are a number of practices that are now considered commonplace: allowing high-frequency trading firms to put their servers at the exchange premises, a "co-location" that saves precious milliseconds on trading times; providing extra bandwidth to such traders; and installing other hardware to facilitate super-fast trading.
In recent months, Mr. Schneiderman has pushed for firms to stop allowing high-frequency traders to get a slight but significant head start on accessing certain types of information. For instance, last month Business Wire said it would cease selling a direct feed of its stream of press releases and announcements to high-frequency traders – a move Mr. Schneiderman commended.
His latest effort, however, goes well beyond a purveyor of press releases to target wholesale structural change in markets. On Tuesday, he called upon exchanges and his fellow regulators to review reforms that could eliminate what he called the "unfair advantage provided to elite and technologically sophisticated market players at the expense of others."
It's far from clear whether any such reforms will be considered or implemented, or whether Mr. Schneiderman will be able to mount any prosecutions in this arena. But his crusade suggests that concerns about high-speed, computerized trading aren't going away any time soon.