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Wednesday, September 9, 2009

Inquiry Stokes Unease Over Trading Firms That Shape Market

In your discussion about high speed computer trading you stated, "The Securities and Exchange Commission has opened up an investigation into high-speed-trading practices, in particular the ability of some of the most powerful computers to jump to the head of the trading queue and -- in a fraction of a millisecond -- capture the evanescent trading spread before the rest of the market does" (Inquiry Stokes Unease Over Trading Firms That Shape Markets, New York Times, September 3, 2009: A1, A6).

We do we need an inquiry? The SEC needs to act. Even a millisecond advantage is front running. It is not clear whether or not this type of front running is illegal. If it is then practitioners should be prosecuted; if it is not then the practice should be banned.

I wonder how much of the recently declared profits in the financial services industry were based upon this practice.

Sent to New York Times

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