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The Department of Justice is investigating high-frequency stock trading to see if any of the practices violate insider trading laws, US Attorney General Eric Holder has said.
Brokerage firms use high-frequency trading to get a jump on their competitors. Powerful computers analyse market information and then execute buy and sell orders for stocks within a fraction of a second.
“The department is committed to ensuring the integrity of our financial markets — and we are determined to follow this investigation wherever the facts and the law may lead,” Holder told a House hearing in prepared remarks.
The practice has come under increasing scrutiny in recent months. The Federal Bureau of Investment confirmed this week that it has been investigating the high-frequency trading firms for about a year.
The Wall Street Journal had reported on Tuesday that investigators were examining the practice of placing a group of trades and then cancelling them to create the false appearance of market activity.
New York Attorney General Eric Schneiderman has also campaigned against high-frequency stock trading, saying it gives firms an unfair advantage and erodes public confidence in the stock market.
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