That said they can't be as clueless as former Chairman Christopher Cox.
(can they?)
From The Market Ticker:
HFT Mess -- A *SIMPLE* Answer
I know I've said it before, but it's time to rehash the HFT debate....
...Further, The Securities Act of 1934 tells us that all means by which one may manipulate prices are illegal. Period. The law is clear on this point:
(2)To effect, alone or with 1 or more other persons, a series of transactions in any security registered on a national securities exchange, any security not so registered, or in connection with any security-based swap or security-based swap agreement with respect to such security creating actual or apparent active trading in such security, or raising or depressing the price of such security, for the purpose of inducing the purchase or sale of such security by others.Got it? The entry of orders for the purpose of other than actually transacting in the security at the given price -- that is, to induce others to trade, to raise or lower the price, to do anything other than to actually transact -- is illegal.
Period....MORE
The Nanex discussion of the May 6 Flash Crash raised the same points:
Securities Exchange Act of 1934, Section 9 -- Manipulation of Security Prices
a. Transactions relating to purchase or sale of security
It shall be unlawful for any person, directly or indirectly, by the use of the mails or any means or instrumentality of interstate commerce, or of any facility of any national securities exchange, or for any member of a national securities exchange--
- For the purpose of creating a false or misleading appearance of active trading in any security registered on a national securities exchange, or a false or misleading appearance with respect to the market for any such security, (A) to effect any transaction in such security which involves no change in the beneficial ownership thereof, or (B) to enter an order or orders for the purchase of such security with the knowledge that an order or orders of substantially the same size, at substantially the same time, and at substantially the same price, for the sale of any such security, has been or will be entered by or for the same or different parties, or (C) to enter any order or orders for the sale of any such security with the knowledge that an order or orders of substantially the same size, at substantially the same time, and at substantially the same price, for the purchase of such security, has been or will be entered by or for the same or different parties.
- To effect, alone or with one or more other persons, a series of transactions in any security registered on a national securities exchange or in connection with any security-based swap agreement (as defined in section 206B of the Gramm-Leach-Bliley Act) with respect to such security creating actual or apparent active trading in such security, or raising or depressing the price of such security, for the purpose of inducing the purchase or sale of such security by others.
In reviewing these regulations:
1) Delivering market data through premium products ahead of transmission to a Network processor would seem to violate Rules 603(a) and 603(a)(2) of Regulation NMS.
2) Placing orders for which one has no intent to execute would seem to violate Section 9(a)(1)(A) of the Securities Exchange Act.
