Tags: SEC | probes | Canceled | Trades | Flash | Crash

Report: SEC Probes Canceled Trades in Flash Crash

Thursday, 02 Sep 2010 09:29 AM

 

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U.S. securities regulator is looking into a Wall Street trading practice in which unusually large numbers of orders to buy or sell stocks are placed in a fraction of a second, only to be canceled almost immediately, The Wall Street Journal reported on Thursday.

The Securities and Exchange Commission (SEC) is analyzing whether the trading practice — known as "quote stuffing" – is placing some investors at a disadvantage by distorting stock prices, the Journal said citing people familiar with the matter.

SEC is also scrutinizing whether quote stuffing played any role in the May 6 "flash crash," when U.S. stock markets suffered a record fall within minutes.

The regulator is also probing whether a practice called as "sub-penny pricing," is used to manipulate the market, the newspaper said citing a person familiar with the matter.

In the sub-penny pricing method, the orders are priced in increments as small as one-tenth of a cent and far away from the actual price at which a stock is trading.

An SEC spokesman declined to comment to the Journal on the inquiry.

SEC could not immediately be reached for comment by Reuters outside regular U.S. business hours.

© 2014 Thomson/Reuters. All rights reserved.

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