SEC no match for high-tech traders The Securities and Exchange Commission is hopelessly outgunned in resources and technical savvy by the computerised traders it regulates, a leading US senator has warned ahead of a hearing into recent stock market glitches. Senator Jack Reed said a hearing set for Thursday will be the first in a series investigating whether the market structure created by the SEC contributed to the near failure of Knight Capital and the botched flotations of Facebook and BATS Global Markets. It will also examine whether some high-frequency traders have an unfair advantage. "Technological innovation is such that the tech can change every six months, so we have to make sure we are prepared," said Mr Reed, "and I don't think that the SEC has the resources, the skilled personnel or the latest technology." He said: "The SEC is looking at markets that are generating significant profits that justify firms investing in the very latest technology, and that investment is not being met by the regulators." The statements raise the pressure on the SEC ahead of a delayed public roundtable on the lessons of Knight Capital and the impact of technology on the stability of markets, which the regulator has now scheduled for October 2. Staffers for Mr Reed hope to press the agency to revisit a consultation document on market structure it issued in early 2010, which sought a debate on the right balance between the benefits of competition and the risks of complexity. After the "flash crash" in May that year, when the Dow Jones Industrial Average tumbled hundreds of points within minutes only to rebound, the agency introduced new trading rules for brokers. "Their actions have been like applying Band Aids on open wounds, but no one is asking why these wounds keep reopening," said Ted Kaufman, a former US senator and professor of law at Duke University. Larry Tabb, chief executive of Tabb Group, a capital markets consultancy, who will be among the witnesses at the subcommittee hearing, asked: "Is the market that the SEC has designed actually beneficial? They are not on top of what they need to be in order to understand and regulate the market. Every time they change the chess board, every time they have a rule change, traders programme their machines to take advantage. Last week NYSE Euronext said it would pay a $5m fine to settle charges that the exchange operator had provided certain clients an advance look at trading data before releasing it to the broader market. The financial penalty marked the first time the SEC had ever fined an exchange. This week, a study released by a US regional Federal Reserve bank warned that many high-frequency trading firms, which account for half the volume on US equity markets, were taking shortcuts in their risk controls and called for controls to be tightened.