![]() ![]() With investigations into high-speed-trading practices by the SEC, Federal Bureau of Investigation and New York Attorney General's Office, lack of precise records could be a stumbling block in trying to prove whether a high-speed strategy is illegal or abusive, analysts say.įinra, Wall Street's self-regulator, is considering requiring all its broker-dealer members and exchanges to sync their trading clocks to within less than a second of the country's official clock to reduce the impact of clock drift. Regulators should intervene to improve synchronization, he added. ![]() President of the market-research firm KOR Group LLC. The issue of clock synchronization was raised with lawmakers last week at a Senate banking committee hearing on markets.Įxchange time stamps are "universally ignored because they are not synchronizing to a common clock source and cannot, therefore, be sequenced with each other across market centers," testified At such speeds, it is increasingly difficult to track the time and order of trades because of a phenomenon called "clock drift." This is when the time keeping of a broker or other trader is slightly out of sync with regulators' official time based on government atomic clocks.Ī further chronological complication: Different trading venues and firms record data at varying levels of precision, creating mismatched trade stamps. Many transactions are completed in millionths of a second. ![]() That's very much a regulatory responsibility." "People will always have an edge in trading, but you have to make sure the market still has integrity. "If two clocks are out of sync by even a 10th of a second, it's impossible to do proper surveillance across multiple platforms,"Ĭhief executive officer of the Financial Conduct Authority, said in an interview. Without the ability to clearly reconstruct the order of market events, regulators say they may struggle to detect abuses such as "spoofing," where a trader manipulates prices by entering and canceling orders for a stock to lure other traders into the market, and other illegal practices that distort prices. ![]()
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