As reported by Jean Eaglesham, Jenny Strasburg and Scott Patterson from The Wall Street Journal, U.S. securities regulators are conducting a wide-ranging investigation into the complex relationships between rapid-fire trading firms and stock exchanges, according to the official overseeing some 20 probes into computerized trading.
The inquiry into ownership and other ties is part of a broader probe into whether high-speed traders have unfair advantages over other investors, according to people familiar with the matter.
“We’re interested in understanding the ownership structure and history” of the firms, said Daniel Hawke, head of the Securities and Exchange Commission’s market-abuse enforcement unit, in an interview. “How the firm got started, who was behind it and who wrote the [computer] code that might be at issue.”
One such area under SEC scrutiny is the use of routing and trading instructions, known as order types. Many investors use relatively simple order types, such as limit orders, which specify a price at which an investor is willing to buy or sell a stock.