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 "We currently have... a number of ongoing investigations regarding
various market integrity and structure issues, including
high-frequency traders and automated trading," White told a U.S.
House of Representatives appropriations panel.
"We are very much focused on any abuses in that space."
On Monday, the FBI confirmed it has been conducting a wide-ranging
probe into high-speed trading for months, an outgrowth from the
years-long crackdown on insider-trading.
An FBI spokesman who did not wish to be named said Monday night that
the bureau was investigating whether high-frequency traders are
front-running others' trades by getting to exchanges first.
A big trade, such as a bank shorting a million shares of a company
under investigation, could be considered a material event, the
spokesman added.
A person familiar with the FBI probe told Reuters on Tuesday that
the FBI is also looking at areas such as whether high-speed firms
can cut the line in terms of how security orders are placed or are
engaged in "spoofing" trades that are not really trades to give the
illusion of market activity.
White declined to answer questions from Reuters on the sidelines of
the hearing about whether the SEC's probes are exploring similar
topics as the FBI's.
The long-running debate about high-frequency trading intensified on
Monday, after bestselling author Michael Lewis published a new book,
"Flash Boys: A Wall Street Revolt." The book contends that
high-speed traders have rigged the stock market, profiting from
trades made at a speed unavailable to ordinary investors.
Proponents of high-speed trading have criticized the book, saying
high-speed traders actually benefit other investors by providing
liquidity to the market.
For years, the SEC has been looking into high-speed trading and
"dark pool" trading, which takes place away from major exchanges.
Regulators hope to determine whether ordinary investors are at an
unfair disadvantage to high-speed traders, who rapidly dart in and
out of trades to earn fractions of a penny that add up to big
profits over time.
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In the last year, the SEC started subscribing to the same
proprietary data trading feeds that the high-speed traders use,
hoping to better understand how the markets are functioning.
White told lawmakers the SEC has not yet reached any conclusions on
what, if any, new rules might be needed.
"Our approach at the SEC...is to be data-driven and disciplined to
determine where high-frequency traders fit into the range of market
quality issues," she said.
White also told lawmakers the SEC needs more money in order to keep
on top of the rapidly changing market technologies so it can police
the markets.
"Detecting misconduct in constantly evolving securities markets,
including as a result of the growth of algorithmic, automated
trading and 'dark pools,' requires substantial resources," she said.
The SEC is seeking a $1.7 billion budget for fiscal 2015, up from
its current budget of $1.35 billion.
But Congress is not expected to pass a budget any time soon because
the Senate, controlled by Democrats and the House of
Representatives, controlled by Republicans, already struck a
spending deal.
(Reporting by Sarah N. Lynch in Washington, D.C. and Karen Freifeld
in New York; editing by David Gregorio)
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