Wall Street Watch­dog Prob­ing 170 In­stances of Pos­si­ble Al­go­rith­mic Abuses

The Economic Times - - Money & Banking Bringing In A New Order -

Wall Street’s self-reg­u­la­tor is cracking down on abu­sive trades made on the ba­sis of math­e­mat­i­cal al­go­rithms and cur­rently has some 170 on­go­ing in­ves­ti­ga­tions into the sub­ject, its chief said on Mon­day. The Fi­nan­cial In­dus­try Reg­u­la­tory Author­ity (FINRA) is look­ing at in­stances in which bro­ker­age firms may have used al­go­rithms to en­gage in abu­sive trades, or failed to su­per­vise the use of al­go­rithms by their ad­vis­ers, Rick Ketchum, FINRA chair­man and chief ex­ec­u­tive, told re­porters at the reg­u­la­tor’s an­nual con­fer­ence in Wash­ing­ton. Last week, FINRA brought mar­ket ma­nip­u­la­tion case jointly with fi­nan­cial ex­changes run by CBOE Hold­ings, NAS­DAQ OMX Group and In­ter­con­ti­nen­talEx­change Group in­volv­ing what they al­leged was an al­go­rith­mic-trad­ing scheme where waves of eq­uity trades were used to ar­ti­fi­cially af­fect op­tions pric­ing. —Bloomberg

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