Senator Urges Ban on Flash Trading

This is just one example of advanced technology running ahead of regulators and producing distortion in markets and unfair advantages to those with access to the technology. This is from Schumer's website.

SCHUMER URGES BAN ON SO-CALLED 'FLASH ORDERS' THAT GIVE PRIVILEGED TRADERS SNEAK PEEK AT STOCK SALES BEFORE OTHER INVESTORS

Major U.S. Exchanges Currently Offer Programs Allowing Certain Traders To Profit Off Of Advance Knowledge of Buying and Selling Activity

Schumer Says Technique Creates Two-Tiered System That Puts Retail and Institutional Investors At Unfair Disadvantage

Senator Considering Legislation If SEC Does Not Act To Bar Practice

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"This kind of unfair access seriously compromises the integrity of our markets and creates a two-tiered system where a privileged group of insiders receives preferential treatment, depriving others of a fair price for their transactions. If allowed to continue, these practices will undermine the confidence of ordinary investors, and drive them away from our capital markets," Schumer wrote in a letter Friday to SEC Chairman Mary Schapiro.

Schumer's concerns regard special programs offered by exchanges such as NASDAQ and BATS, as well as an electronic trading platform called DirectEdge. Each of these marketplaces currently allow sophisticated high-frequency traders to gain access to trading information before it is sent out widely to other traders. For a fee, the exchange will "flash" information about buy and sell orders for just a few fractions of a second before the information is made publicly available. These traders, using super-fast computers, can then act on that early information to trade ahead of the pending orders. The practice can influence the pricing of stocks, experts say.

"Flash trading" is a type of high-frequency trading, a technique that has gained attention recently for contributing to the spike in trading volume and, according to critics, increased volatility on U.S. exchanges. According to one industry estimate, high frequency trading accounted for $21 billion in profits in 2008.