NY Attorney General Sends Subpoenas To High Frequency Traders

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In perhaps the most public investigation on Wall Street in recent memory, Bloomberg News is reporting that New York Attorney General Eric Schneiderman has sent subpoenas to six high frequency trading firms.

Six firms receive subpoenas, including two in Chicago, one in New York

Among the six firms are said to be two Chicago firms, Chopper Trading LLC and Jump Trading LLC, and one New York firm, Tower Research, according to the report.  The firms did not provide comment. Interestingly, the subpoenas seek to determine if special arrangements exist between the high frequency traders and the exchanges and dark pools.

Is unfair advantage being provided?

Schneiderman announced last month that an area of interest is if the exchanges and dark pools provide unfair advantage to the high frequency traders.  In particular, the focus is on if the traders had access to non-public information and had the ability to trade on that information and if the fast traders were provided other undue advantages.

The issues could get interesting, as exchanges and dark pools lease space next to the exchange trading facility for astronomical sums and pay for tremendously quick connections which provide them benefits they consider legal, but are currently in review.

In addition to the New York Attorney General, the FBI is investigating high frequency trading and two weeks ago had asked the traders to come forward with information voluntarily.



About the Author

Mark Melin
Mark Melin is an alternative investment practitioner whose specialty is recognizing a trading program’s strategy and mapping it to a market environment and performance driver. He provides analysis of managed futures investment performance and commentary regarding related managed futures market environment. A portfolio and industry consultant, he was an adjunct instructor in managed futures at Northwestern University / Chicago and has written or edited three books, including High Performance Managed Futures (Wiley 2010) and The Chicago Board of Trade’s Handbook of Futures and Options (McGraw-Hill 2008). Mark was director of the managed futures division at Alaron Trading until they were acquired by Peregrine Financial Group in 2009, where he was a registered associated person (National Futures Association NFA ID#: 0348336). Mark has also worked as a Commodity Trading Advisor himself, trading a short volatility options portfolio across the yield curve, and was an independent consultant to various broker dealers and futures exchanges, including OneChicago, the single stock futures exchange, and the Chicago Board of Trade. He is also Editor, Opalesque Futures Intelligence and Editor, Opalesque Futures Strategies. - Contact: Mmelin(at)valuewalk.com