Exclusive - New York attorney general eyes exchanges in high frequency probe: sources

Thu May 1, 2014 9:04pm EDT
 
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By Karen Freifeld and Nadia Damouni

NEW YORK (Reuters) - The New York Attorney General's office is seeking information from exchanges and alternative trading platforms about their relationships with high frequency trading firms, as part of its probe into allegedly unfair trading practices on Wall Street, according to sources familiar with the situation.

Attorney General Eric Schneiderman's office is expected to send subpoenas within days to exchanges, one of the sources said on Thursday. The subpoenas will likely focus on how high frequency traders may receive information before other market participants.

Another source said major banks that operate dark pools, or platforms where trades take place out of sight of the rest of the market, have been sent letters asking for information.

The sources spoke this week on condition of anonymity because they were not authorized to discuss the matter publicly.

The major U.S. exchange operators include IntercontinentalExchange Group ICE.N, Nasdaq OMX Group Inc (NDAQ.O: Quote) and BATS Global Markets.

NYSE, a unit of ICE, has already been cooperating with the attorney general by sharing data, while BATS has also had conversations with the prosecutor, two of the sources said. Nasdaq Chief Executive Robert Greifeld said in an interview on April 24 that his company had not been subpoenaed.

Exchange operators and Schneiderman's office declined to comment.

The expected move by Schneiderman's office shows how investigations into the practices of high-frequency trading firms are broadening. The U.S. Securities and Exchange Commission, Commodity Futures Trading Commission and Federal Bureau of Investigation have also said they had several active probes into high-speed and automated trading.   Continued...

 
New York Attorney General Eric Schneiderman speaks to reporters during the New Eastcoast Arms Collectors Associates Arms Fair at the Saratoga Springs City Center in Saratoga Springs, New York October 13, 2013. REUTERS/Hans Pennink