|Report: SEC probes 'quote stuffing' computer trades
Associated Press | September 2, 2010
NEW YORK (AP) — The Securities and Exchange Commission is looking into
certain types of stock trade orders that could be distorting share prices
and trading volume, according to The Wall Street Journal.
Quote stuffing and sub-penny pricing have become more prevalent as high-frequency computer trading has become the dominant part of the stock market in recent years, the Journal said.
The SEC could also be trying to determine if the pair of practices played a role in the May 6 "flash crash," a panicked disruption in trading that saw the Dow Jones industrials drop hundreds of points in minutes.
The Journal said the SEC wants to figure out if the practices artificially drive stock prices lower or help make it appear there is more trading volume than there truly is, which would allow sellers to profit from perceived rising demand. Manipulating share prices to benefit from the distortions would be considered illegal.