High-speed technology trading debacles like the one experienced over recent months are causing the SEC to clamp down on exchanges that try to increase profits by creating products that cater to the high-speed trading industry.
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In rushing to get needed technology developed for high-speed traders, exchanges may have put individual investors at a disadvantage. These programs may not have sufficient oversight to keep investors from being harmed.
The SEC fined NYSE Euronext as part of a settlement that the exchange improperly provided information faster to high speed traders who pay more for a specialized feed than it did to public investors.
Data feeds of other exchanges were also analyzed in an effort for the SEC to become more familiar with high-speed trading practices. The analysis does not necessarily mean the SEC is about to rain down regulatory enforcement across exchanges.
But the probes strike at the heart of exchanges’ efforts to increase profits
as fewer companies become listed on the exchanges and trading revenue declines.
Regulators in 2010 wondered if the practice of packaging data for sale had gone beyond appropriate levels. Large exchanges like the NYSE and the Nasdaq have increasingly boosted profits through these programs and have geared their market focus toward them.
The probes come as a result of a year full of high profile trading glitches, not the least of which was the initial public offering of Facebook shares.