The Department of Justice is investigating high-frequency stock trading to see if any of the practices violate insider trading laws, U.S. Attorney General Eric Holder said Friday.
Brokerage firms use high-frequency trading to get a jump on their competitors. Powerful computers analyze 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 FBI confirmed this week that it has been investigating high-frequency trading firms for about a year. The Wall Street Journal reported 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. The Securities and Exchange Commission is also carrying out a number of active investigations into the practice, SEC Chairman Mary Jo White told the House Committee on Appropriations on Tuesday.