New York Attorney General Eric Schneiderman said Friday that his office is investigating several high-frequency trading organizations that gain advantages by receiving market information early.
Mr. Schneiderman would not name the organizations during comments at a business writers conference sponsored by the Society of American Business Editors and Writers in New York.
Mr. Schneiderman said small groups of traders are given the power to manipulate market movements when high-frequency data are connected with access to information.
“This is what separates the 'smart money' from everyone else, 'the dumb money,'” said Mr. Schneiderman, adding that it should be a huge concern to anyone who cares about the economy and the free flow of capital.
“It's insider trading 2.0,” he said.
Mr. Schneiderman cited what he said was a success by his office in July, when news and data provider Thomson Reuters agreed to stop providing a consumer confidence index to a small group of subscribers, which included money managers, two seconds before regular subscribers received the material.
Under an agreement, Mr. Schneiderman said Thomson Reuters obtained the market-moving consumer confidence index from the University of Michigan and then made it available to its elite customers before the information was published on the university's website.
He said clients subscribing to the service were then able to exploit the data, making rapid-fire trades in stocks and futures before other investors.