High Frequency Trading

The cramped computer room in an office building overlooking the Harbor Freeway can't match the color and tradition of the New York Stock Exchange. No traders, opening bell or operatic din. Just floor-to-ceiling racks of Dell and Hewlett-Packard computers spitting out a monotonous drone. The only people passing through are janitors and the occasional programmer or electrician. But while the NYSE remains the cynosure of the global markets, much of the world's stock trading emanates from drab computer rooms such as this one in downtown Los Angeles, or in outposts such as Kansas City, Mo., or Jersey City, N.J. These are the epicenters of high-frequency trading, a breed of lightning-fast computerized trading that dominates today's stock market, but which critics say carries risks for investors and for the market itself.

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Just ahead of a reworking of rules governing stock markets, Securities and Exchange Commission Chairwoman Mary L. Schapiro made it clear how she feels about high-speed computerized trading, secretive dark-pool networks and other regimens that make trades nearly invisible to ordinary investors. "High-frequency-trading firms are subject to very little in the way of obligations," she said in a speech delivered at a conference of stock and bond traders, "either to protect stability by promoting reasonable price continuity in tough times, or to refrain from exacerbating price volatility.

A computer programmer accused of stealing software from Goldman Sachs Group Inc. faces up to 15 years in prison after being convicted on two federal criminal counts. A U.S. District Court jury in Manhattan found Sergei Aleynikov, 40, guilty Friday on one count of economic espionage and one count of transporting stolen goods across state lines. He is set to be sentenced in March. Aleynikov, who worked on Goldman's high-frequency-trading desk, was arrested a month after he quit the investment bank last year to work for a Chicago start-up, Teza Technologies, which was trying to build its own trading operation.

A computer programmer accused of stealing software from Goldman Sachs Group Inc. faces up to 15 years in prison after being convicted on two federal criminal counts. A U.S. District Court jury in Manhattan found Sergei Aleynikov, 40, guilty Friday on one count of economic espionage and one count of transporting stolen goods across state lines. He is set to be sentenced in March. Aleynikov, who worked on Goldman's high-frequency-trading desk, was arrested a month after he quit the investment bank last year to work for a Chicago start-up, Teza Technologies, which was trying to build its own trading operation.

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Federal regulators still haven't been able to pinpoint the cause of Wall Street's so-called flash crash a month ago, but more than two dozen experts Wednesday told the Securities and Exchange Commission what might work to prevent a repeat — and what won't work. SEC Chairwoman Mary L. Schapiro said the agency was "making progress" in its ongoing review of the market turmoil of May 6, when the Dow Jones industrial average plummeted 700 points in just 15 minutes. Schapiro last month proposed changes to stem future nose dives, most notably a temporary plan for a circuit-breaker mechanism that would halt trading for five minutes in all shares of companies in the Standard & Poor's 500 index should any single stock price change at least 10% during a five-minute period.

Over the last three decades, public companies have shifted their focus from promoting long-term growth to maximizing "shareholder value" (a euphemism for share price) in the short term. And the federal government has embraced this religion. In 1993, Congress changed the tax code to require companies to link executive pay to "performance" (typically stock price). The Securities and Exchange Commission over the last two decades has adopted rules to make corporate directors ever more "accountable" to shareholders.

After causing a brief crash in Apple stock, sparking investor confusion and withdrawing its own initial public offering Friday, the high frequency trading exchange BATS Global Markets seems to be glitch-free Monday. But it must've been a rough weekend for executives at the Better Alternative Trading System, one of the largest stock exchanges in the U.S., where more than 10% of trading happens. BATS, which is based in Kansas City and has offices in New York and London, had expected to be riding high after using its own platform Friday to launch its stock.

A highly anticipated government report about the "flash crash" of May 6 blamed the sudden stock market plunge on an unusually large order placed by a single firm that set off a cascade of selling among computer-driven, high-frequency traders. Federal investigators found that the crash ? which caused the Dow Jones industrial average to sink by nearly 1,000 points before recovering ? was set off by a trading firm's effort to sell $4.1 billion in specialized futures contracts. Prior to the release of the report Friday, the crash had been widely blamed on high-frequency traders, who use computer programs to transact massive trades.

Just ahead of a reworking of rules governing stock markets, Securities and Exchange Commission Chairwoman Mary L. Schapiro made it clear how she feels about high-speed computerized trading, secretive dark-pool networks and other regimens that make trades nearly invisible to ordinary investors. "High-frequency-trading firms are subject to very little in the way of obligations," she said in a speech delivered at a conference of stock and bond traders, "either to protect stability by promoting reasonable price continuity in tough times, or to refrain from exacerbating price volatility.

Federal regulators still haven't been able to pinpoint the cause of Wall Street's so-called flash crash a month ago, but more than two dozen experts Wednesday told the Securities and Exchange Commission what might work to prevent a repeat — and what won't work. SEC Chairwoman Mary L. Schapiro said the agency was "making progress" in its ongoing review of the market turmoil of May 6, when the Dow Jones industrial average plummeted 700 points in just 15 minutes. Schapiro last month proposed changes to stem future nose dives, most notably a temporary plan for a circuit-breaker mechanism that would halt trading for five minutes in all shares of companies in the Standard & Poor's 500 index should any single stock price change at least 10% during a five-minute period.

The cramped computer room in an office building overlooking the Harbor Freeway can't match the color and tradition of the New York Stock Exchange. No traders, opening bell or operatic din. Just floor-to-ceiling racks of Dell and Hewlett-Packard computers spitting out a monotonous drone. The only people passing through are janitors and the occasional programmer or electrician. But while the NYSE remains the cynosure of the global markets, much of the world's stock trading emanates from drab computer rooms such as this one in downtown Los Angeles, or in outposts such as Kansas City, Mo., or Jersey City, N.J. These are the epicenters of high-frequency trading, a breed of lightning-fast computerized trading that dominates today's stock market, but which critics say carries risks for investors and for the market itself.

As global stock markets skidded further Friday, federal regulators were still scrambling to unravel the cause of a nearly 1,000-point midday plunge in the Dow Jones index a day earlier — an event that triggered new criticism that Wall Street trading has grown too risky and needs to be reined in. Perhaps the most troubling aspect of the market's nosedive was that it may have been fueled by a computer glitch, human error or trading programs run...