High-speed trading under investigation
Could flash trades made anonymously potentially bring down the markets?
That's what regulators are trying to figure out. They're examining whether giving "naked" access to high-speed traders could potentially screw up the markets, according to The Wall Street Journal.
Firms have ramped up computers to trade billions of shares a day, and the tradebot strategy has paid off handsomely. So much so, in fact, that those high-speed trades now account for more than half of all stock-trading volume, the Journal reports.
Here's how it works: Regulated brokerages have computer access codes that allow them to trade directly on exchange computers, according to the Journal. These brokerages are loaning out those codes -- at high fees, of course -- to hedge funds and other firms.
Stock exchanges and regulators have no idea who is renting
these codes. All they see are high-speed trades coming in under the
regulated brokerage's name.
With the trading now being done by
computers, it's pretty safe to assume that something will go wrong. And
one could imagine a major trading glitch -- like a wave of high-speed
orders triggering other waves -- causing a broad decline in the overall
Now, brokerages said they make continuous posttrade
checks, and can stop a computer gone wrong. But the Securities and
Exchange Commission is investigating whether the stability of the
markets are at too much risk here.
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
Investors are anxious to see if hiring can maintain its strong pace in the second half of the year.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.