Keep it in the family.

As thetrader has written about for some time, the HFT Algos have destroyed the market structure. The illusion of volume is there, only to vanish whenever a big order is to be executed. Quote stuffing predators are only slowing down the system, and have of course contributed to last year’s Flash Crash, as well as the numerous min flash crashes we have seen in individual stocks for the past year. Banning quote stuffing, would be good for the market, as the market practice creates negative value for the market. A zillion orders that come into the market, and simultaneously vanish, are definitely not creating the liquidity we would like to see. Will the big investments into algo stuffing computers prove worthless?

“U.S. prosecutors have joined regulators’ investigation into whether some high-speed traders are manipulating markets by posting and immediately canceling waves of rapid-fire orders, two officials said.

Justice Department investigators are “working closely” with the Securities and Exchange Commission to review practices “that are potentially manipulative, like quote-stuffing,” Marc Berger, chief of the Securities and Commodities Task Force at the U.S. Attorney’s Office for the Southern District of New York, said today at an event in New York.” (Bloomberg)

http://www.bloomberg.com/news/2011-04-29/high-frequency-trades-manipulation-probe-joined-by-u-s-justice-department.html