SEC plans to ban flash trading - will dark pools be next?


Chalk this one up to the power of the blogosphere. Sen. Charles Schumer of New York stated today that he had received a personal guarantee from Mary Schapiro, head of the Securities and Exchange Commission, that a ban on "flash trading" was in the offing, according to Bloomberg News. The practice had allowed stock exchanges and specialized trading shops to sell advanced-notice of stock orders, providing customers with an extra split-second to trade before pending stock orders.

Critics charge that flash trading allowed sophisticated Wall Street players -- Goldman Sachs (GS), Credit Suisse (CS) -- to pocket billions of risk-free profits through computer algorithms that probe flash orders to determine actual prices that buyers and sellers are willing to pay, and then instantly pushing the actual market price to those levels. A number of leading financial blogs, including ZeroHedge, had been agitating for an end to the practice since early this year.

Originally published