People May Have Gotten A Little Frisky With Their Algorithms 170 Times


Which really doesn’t seem like a lot, but maybe is?

Wall Street's self-regulator is cracking down on abusive trades made on the basis of mathematical algorithms and currently has some 170 ongoing investigations into the subject, its chief said on Monday.

The Financial Industry Regulatory Authority (FINRA) is looking at instances in which brokerage firms may have used algorithms to engage in abusive trades, or failed to supervise the use of algorithms by their advisers, Rick Ketchum, FINRA chairman and chief executive, told reporters at the regulator's annual conference in Washington….

FINRA is concerned about algorithms designed to trigger illegal, manipulative market behaviors such as "spoofing," when orders are rapidly placed and canceled to create the illusion of market demand. Unsuspecting traders are then tricked into buying or selling at artificial prices, only to later find that the orders were canceled.

A large percentage of the improper market activity represents orders firms handle as agents for their clients, not necessarily market activities by the firms themselves, Ketchum said.

Wall St. watchdog probing 170 instances of possible algorithmic abuses [Reuters]