The FBI Takes On Wall Street’s High Frequency Traders

The FBI is usually portrayed in movies as being a highflying, death-defying band of super agents.  Though the agency certainly does have its share of personnel that infiltrate criminal organizations and dismantle terrorist plots, the FBI on a whole has a far greater reach than these high profile kinds of cases.

For example, the FBI is also deeply involved in identifying, disrupting, and prosecuting those who commit financial crimes.  It is in this capacity that the bureau recently called on the financial community to help it put an end to a particular kind of trading activity which authorities believe may be illegal.

After the so-called “flash crash” of 2010, market regulators have come to believe that high frequency trading may hurt the stability of the nation’s stock markets. The FBI recently called on insiders who work for the nation’s financial institutions to cooperate with authorities in investigating the legality of high frequency trading.  The call is part of an ongoing FBI operation which aims to crack down on sophisticated financial crimes, including insider trading abuses.  High frequency trading, though not inherently illegal, is thought by the FBI to potentially be a cover for other illegal activities in certain cases.

Over the course of the FBI’s multiyear crack down on illegal trading activity, the bureau has tallied at least 79 convictions, including convictions of hedge fund managers.  In this latest phase of the investigation, the FBI is looking to see if high frequency trading may violate existing laws, including laws against trading based on insider information, and laws intended to guard against wire fraud and securities fraud.

One of the reasons that the FBI is making such a public call is that these kinds of cases are extremely complex, and they can be very difficult to prove without the help of whistleblowers and informants.


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