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SEC proposes ban on flash trading

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Steve Chiotakis: The Securities and Exchange Commission has proposed a ban on a
controversial practice known as flash trading. It’s part of a larger effort to make the markets more transparent.
Marketplace’s Amy Scott reports.


Amy Scott: Flash orders give some traders a sort of sneak peak at the market. It allows them to see an order to buy or sell stock a fraction of a second before that order is revealed publicly.

The SEC is concerned the practice gives traders with lightning-fast computers an unfair advantage. The electronic stock exchanges Nasdaq and BATS recently stopped offering flash orders when the practice started drawing scrutiny this summer. But a rival market called DirectEdge has continued to offer its form of flash trading.

The public has 60 days to comment on the proposed ban. The SEC yesterday also proposed rules to limit conflicts of interest and improve disclosure at credit rating agencies. They’ve been blamed for fueling the financial crisis by giving risky mortgage-backed securities their seal of approval.

In New York, I’m Amy Scott for Marketplace.

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