SEC looks into high-speed trade orders

NEW YORK, Sept. 2 (UPI) -- U.S. regulators are looking at huge batches of stock trading orders that do not result in actual trades, sources told The Wall Street Journal.

The practice, which is known as "quote stuffing," involves placing orders for stocks and canceling the order within seconds, which gives the impression that a stock is in high demand, The Journal reported Thursday.

Capital Management said traders initiated orders to buy or sell 89.7 billion shares on the Nasdaq exchange on Feb. 18. At the end of the day, however, only 1.2 billion shares traded hands -- about 1 percent of the orders placed.

The SEC would not comment on the investigation, which sources said was connected to an ongoing probe of the events of May 6, when the Dow Jones industrial average suddenly lost 700 points, only to recover most of that within the next 15 minutes.

The SEC is also examining what role "sub-penny pricing" had to play in the day's event, which is known as the "flash crash."

Sub-penny pricing involves using high-speed computers to troll the market for small price variations that trigger buy and sell orders.

"There are dozens, sometimes hundreds of these occurring every day," said Eric Hunsader, a co-founder of stock market research firm Nanex, referring to an Aug. 17 event in which 16,187 buy orders for Abbot Laboratories stock were placed in 2 seconds of time with only 14 of those orders resulting in trades.