Massive fraud in the high-speed trading markets is escaping detection( DUH)
Man vs. machine
Small investors lose in Wild West equity markets
By JOHN AIDAN BYRNE
Last Updated: 12:31 AM, April 7, 2013
Posted: 10:14 PM, April 6, 2013
Massive fraud in the high-speed trading markets is escaping detection because regulators and exchanges are dithering on a powerful supercomputer to uncover the scams, The Post has learned.
And as retail investors begin dipping their toes back into stocks, now at record prices, the market watchdogs are asleep at the wheel.
“Theft is getting smaller and faster, and has been for years,” one financial investigator told The Post. “Steal a penny a second and you make $864 in a day. When we look at nanosecond trading, it gets better — there are 86.4 trillion nanoseconds in a day.”
In fact, about 65 percent of equity trading volume alone is accounted for by high frequency trading computers releasing tiny, rapid-fire buy and sell orders in nanoseconds, according to Aite Group.
Unlike the individual investor, the machines have immediate access to the kind of extensive financial data that moves markets. They often employ controversial techniques like “quote stuffing” and “wash trades” to move prices in their favor.
The Securities and Exchange Commission last year approved the Consolidated Audit Trail (CAT) system to sniff out the type of brazen abuses experts say triggered Wall Street’s shocking $1 trillion flash crash nearly three years ago.
But even with an original price tag of $4 billion, CAT might as well be mothballed right now, as it won’t be operational for several more years, people familiar with the matter say.
Outgoing SEC Chairwoman Elisse Walter says the CAT system could be the most important regulatory development in her lifetime, since it would enhance the agency’s power to reconstruct and pinpoint rogue trading in the equity and options marts. Its reach may later be extended to other asset classes.
Google, IBM, NYSE Euronext and Nasdaq OMX Group are among the big names hoping to land the lucra