Senate panel to probe high-frequency trading

A Senate panel will dive into the controversial world of high-frequency trading next week in response to allegations that the practice has rigged the stock market.

Senate Agriculture Chairwoman Debbie Stabenow (D-Mich.) announced Tuesday that her panel would hold a hearing on May 13 to explore the high-tech trades. The hearing will be the first in Congress specifically devoted to the practice.

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Specifically, Stabenow’s office said the hearing would focus on how the Commodity Futures Trading Commission (CFTC) can “help ensure market integrity.” Witnesses have yet to be announced.

The author Michael Lewis alleges that the trading, in which investors spend millions of dollars to complete trades in fractions of a second, effectively rigs the market against average investors since high-speed traders can react to regular orders before they are completed.

“The insiders are able to move faster than you,” Lewis told “60 Minutes” in April.

The claims have reignited scrutiny of the practice. The Securities and Exchange Commission, Justice Department, and New York prosecutors have all said they are probing the trades.

But at the same time, regulators have sought to assure the public that they can still get a fair shake from the stock market.

“The markets are not rigged,” SEC Chairwoman Mary Jo White told the House Financial Services Committee in April. "The U.S. markets are the strongest and most reliable in the world."

White fielded questions from multiple lawmakers at the House hearing on the flash trades, and several lawmakers openly questioned its fairness. Others said they had heard from investors who are avoiding the stock market because of the practice.

White said the SEC is examining the practice, and conceded that even the perception of market unfairness is an issue they need to address.

Only 54 percent of Americans say they have any investments in the stock market, according to a January poll from Gallup.

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