The FBI has teamed up with securities regulators to tackle the threat of market manipulation posed by computer dealing, such as high frequency trading that have taken markets beyond the scope of traditional policing.
FBI agents have joined forces with a new unit in the Securities and Exchange Commission examining hedge funds and other firms that are using algorithm-based trading strategies.
The SEC’s Quantitative Analysis Unit is focusing on the emergence of high-frequency trading firms and the rise of dark pool trading (off exchange trading). Traders using such methods can manipulate the market by flooding it with quotes, known as quote stuffing, or placing millions of orders that are quickly cancelled, to drive others to trade in ways that benefit their position, a practice known as layering.