Wall Street's super traders come under fire

Regulators are poised to curb so-called high frequency trading that uses sophisticated algorithms to analyze equity markets and trigger trades at lightning speed.

The practice, also known as HFT, today accounts for more than half of daily U.S. stock trade.

Around 100 secretive HFT companies are being pushed into the spotlight in the wake of the May 6 “flash crash,” which saw the Dow Jones index sink over nine percent within minutes, only to recover seconds later.

Although the reasons for the crash are still being studied, it is largely blamed on the automated trade that dominates modern markets, and specifically on its most intricate form, high frequency trading.

The Securities and Exchange Commission, the governmental body overseeing U.S. stock markets, will release later this month its report on the crash that is set to include steps to limit certain HFT methods.

The commission's chairwoman Mary Schapiro on Tuesday said that the introduction of HFT in recent years “has raised serious questions and concerns” and is driving away from Wall Street many Americans who fear repeats of the May crash.

Critics say HFT firms are picking up easy profit by beating everyone else by split seconds while acting irresponsibly in the stock exchanges where they are not restricted by regulation, with some not even registered as brokers.

A key driver for the “flash crash” is believed to be the HFT computers, which automatically stopped trade at the start of the slide, drying up liquidity instantly and sending the markets crashing.

One measure already applied to prevent similar crashes are circuit breakers that automatically halt trading on a single share if its value plummets by more than 10 percent within five minutes.

But while some argue HFT, or algo-trading, undermines fundamentals of the stock market — the emblem of U.S. capitalism — others say the sophisticated computers help stabilize today's increasingly fragmented market.

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