New York’s attorney general is planning to subpoena exchanges and has already requested information from private alternative trading platforms in a probe related to high-frequency trading, a person familiar with the matter said.
The subpoenas to exchanges will be issued within days, said the person, who asked not to be identified because the investigation isn’t public. Some private trading platforms, known as dark pools, have already received information requests, the person said.
New York Attorney General Eric Schneiderman has been investigating fairness in the markets and advantages secured by high-speed trading firms with special access to information.
Schneiderman announced in March that he was examining the sale of products and services that provide faster access to data and richer information on trades than what’s typically available to the public. Wall Street banks and rapid-fire trading firms pay thousands of dollars a month for these services from exchange companies.
This week, his office reached a deal with news distribution service PR Newswire in which the company agreed to implement practices aimed at preventing its information feed from being used unfairly by high-frequency trading firms. The accord followed earlier deals with Berkshire Hathaway Inc.’s Business Wire and Toronto-based Marketwired in which the services agreed to stop allowing high-speed traders to buy direct access to their services.
High-frequency trading, conducted in fractions of a second and the subject of author Michael Lewis’s “Flash Boys,” is also facing scrutiny from the federal government. Justice Department officials and the Federal Bureau of Investigation have said they were probing whether high-speed trading violates laws against insider trading.
Damien LaVera, a spokesman for Schneiderman, didn’t immediately respond to a phone message after regular business hours yesterday seeking comment on subpoenas of exchanges and dark pools. The subpoenas were reported earlier by Reuters.
At the Bloomberg Markets 50 Summit in New York in September, Schneiderman described high-speed investment firms with sneak previews of sensitive information as “a new generation of market manipulators,” and called the issue “Insider Trading 2.0.”