The underbelly of high frequency trading

Using algorithms to instantaneously trade shares en masse has become a popular means of generating wealth, but the technology has a darkside with brokers using it to find and exploit loopholes.

In language that is more in keeping with hackers and crime syndicates, the Financial Times reported last week that the FBI was going to assist securities regulators in the US to tackle “dark pools” and high frequency trading abuses. Although it is not clear what the FBI’s qualifications are in the complicated area of market making or arbitrage trading, it is presumably their technical expertise they are bringing to the party as financial firms are rapidly outpacing the SEC in exploring new ways to make money with computers.

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