FBI investigates high-frequency deals for insider trading

U.S. federal agents are investigating whether high-speed trading companies violate U.S. laws by using fast-moving market information not available to other traders, a FBI spokesman confirmed on Monday.

Launched by the Federal Bureau of Investigation about a year ago, the investigation called the High-Speed Trading Initiative is still in its primary stages, a senior FBI official and an agency spokesman told the Wall Street Journal, which first reported the story.

Al Jazeera has confirmed the existence of the probe, with an official stating: "It is something we are concerned about and something we are looking into for potential violations of insider trading rules."

High-speed trading based on information about orders that other investors do not have access to and hence putting them at a disadvantage could contravene existing laws.

The agency is believed to be focusing on high-frequency traders front-running others' trades by getting to exchanges first, among other areas.

An FBI spokesman said a big trade, such as bank shorting a million shares of a company under investigation, could be considered a material event.

The FBI has deployed a large number of agents, looking at proprietary-trading outfits as well as fast-trading operations at brokers who buy and sell orders on behalf of clients, such as mutual funds and pension plans.

Regulators, including the Securities and Exchange Commission, the Commodity Futures Trading Commission and the Financial Industry Regulatory Authority that oversees broker dealers are working with the FBI on the probe.