TIME insider trading

Justice Department To Probe High-Frequency Trading

U.S. Attorney General Eric Holder testifies before a House Appropriations Committee Commerce, Justice, Science, and Related Agencies Subcommittee hearing on the Justice Department's fiscal year 2015 budget request on Capitol Hill in Washington, D.C. on April 4, 2014.
U.S. Attorney General Eric Holder testifies before a House Appropriations Committee Commerce, Justice, Science, and Related Agencies Subcommittee hearing on the Justice Department's fiscal year 2015 budget request on Capitol Hill in Washington, D.C. on April 4, 2014. Nicholas Kamm—AFP/Getty Images

Attorney General Eric Holder says the Justice Department will investigate whether the lightning fast transactions violate insider trading laws. The FBI said earlier this week that it is also probing high-frequency trading

Attorney General Eric Holder said Friday that the Justice Department is investigating high-frequency trading to determine if it violates insider trading laws.

“The Department is committed to ensuring the integrity of our financial markets—and we are determined to follow this investigation wherever the facts and the law may lead,” Holder said in prepared remarks Friday for a hearing of the House Appropriations subcommittee that oversees the Justice Department.

High-frequency trading is when financial institutions, traders or brokers use sophisticated computer algorithms and high speed data networks to make lightning fast trades. For the Justice Department to find it illegal, it would have to establish that the traders are buying or selling a security while in possession of nonpublic information about the product.

The Federal Bureau of Investigation said earlier this week that it too is probing high-frequency trading. New York Attorney General Eric Schneiderman, the Commodity Futures Trading Commission and the Securities and Exchange Commission are also looking into the practice.

The debate has gained increased public momentum—and some angry finger-pointing—due to Michael Lewis’ new book Flash Boys: A Wall Street Revolt, which alleges that the stock market is rigged against the average investor in favor of high-speed traders at hedge funds and investment banks. In the past week, the New York Times published an excerpt of the book and CBS’ 60 Minutes featured Lewis on its program.

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