U.S. Securities and Exchange Commission Chair Mary Jo White unveiled the regulator’s most sweeping plan yet for reining in high-frequency trading and monitoring dark pools and other secretive trading practices in the world’s largest equity market. 
 
 Proprietary traders who use computers to buy and sell stocks in milliseconds would have to register with the SEC under recommendations made public yesterday by White in New York. 
 
 Operators of dark pools, broker-owned venues that compete with exchanges and don’t publish bids and offers, would have to provide the regulator with their rules for matching buyers and sellers, White said. 
 
 The SEC is aiming to bring more transparency to markets and address claims of unfair advantages held by traders who account for about half of U.S. stock executions and have been blamed for everything from the flash crash of May 2010 to market volatility during the European debt crisis. The agenda outlined yesterday could affect stock exchanges, brokerages and a class of proprietary traders who have so far escaped oversight. 
 
 “The SEC should not roll back the technology clock or prohibit algorithmic trading, but we are assessing the extent to which specific elements of the computer-driven trading environment may be working against investors rather than for them,” White told the Sandler O’Neill & Partners Global Exchange and Brokerage Conference. 
 
 New Scrutiny 
 
 The SEC joins the Commodity Futures Trading Commission, which has previously said it was considering registration for high-speed traders of futures. 
 
 Senator Carl Levin, chairman of the Permanent Subcommittee on Investigations, asked regulators to provide information on risks posed by high-speed traders in advance of a hearing this month, according to three people with knowledge of the matter. 
 
 Levin, a Michigan Democrat, sought responses from the SEC and CFTC to 13 questions on the effects, trends, concerns and regulatory reaction related to high-frequency trading, according to a copy of the letter obtained by Bloomberg News and confirmed by one of the people. 
 
 “We have remained concerned with those issues as public interest in high frequency trading in the U.S. capital markets, and apparent trading abuses in connection with high-frequency trading, have increased,” according to the April 11 letter signed by Levin and Senator John McCain of Arizona, the panel’s top Republican. They requested responses by May 1. 
 
 Law Enforcement 
 
 High-frequency trading has also drawn scrutiny from law enforcement. The Federal Bureau of Investigation is examining whether traders abuse information to act ahead of orders by institutional investors. New York Attorney General Eric Schneiderman is investigating whether U.S. stock exchanges and alternative venues give high-frequency traders improper advantages and has called on regulators to tighten oversight. 
 
 Schneiderman, in a posting on his Twitter account, said he was “pleased to see” White’s comments “calling for market reforms to curb unfair advantages for HFT.” 
 
 Automated trading has achieved wider renown since the publication of Michael Lewis’s book “Flash Boys” and an announcement by one of the biggest firms, Virtu Financial Inc., to go public. Virtu’s offering has since been postponed. 
 
 High-frequency trading accounts for about 48 percent of all U.S. share volume, according to research firm Tabb Group. Such firms include Chopper Trading LLC, Jump Trading LLC and Tower Research Capital LLC, all of whom have been subpoenaed as part of Schneiderman’s probe, a person familiar with the matter said in April. 
 
 Registration Requirements 
 
 The new registration requirements would apply to a subset of trading firms that aren’t registered as broker-dealers with the SEC. Rick Ketchum, chief executive officer of the Financial Industry Regulatory Authority, said last month that such unregulated firms are often responsible for manipulative or disruptive trading seen by regulators. 
 
 “There still are a lot of smaller players and by forcing these firms to register there is going to be increased oversight on what she terms destabilizing HFT,” said Sal Arnuk, co-founder of brokerage Themis Trading. 
 
 The SEC is preparing a new rule that would require more oversight by traders of their algorithms, formulas that automate the buying and selling of shares, White said. While White said she was wary of setting speed limits on traders, the SEC will consider options for minimizing the speed advantage that some proprietary traders have. 
 
 Minimizing Advantages 
 
 “These could include frequent batch auctions or other mechanisms designed to minimize speed advantages,” she said. “They could also include affirmative or negative trading obligations for high-frequency trading firms that employ the fastest, most sophisticated trading tools.” 
 
 Under the plan White outlined yesterday, stock exchanges also will come in for more scrutiny. The SEC will review the exchanges’ dozens of order types, which have been criticized for adding complexity with little public benefit by Intercontinental Exchange Inc. (ICE) Chief Executive Officer Jeffrey Sprecher, whose Atlanta-based company owns the New York Stock Exchange. 
 
 The majority of order types are designed to deal with the exchanges’ maker-taker pricing, a system of fees and rebates intended to attract orders from brokers. The maker-taker system can “create conflicts of interest and raise serious questions about whether such conflicts can be effectively managed,” White said. 
 
 SEC ‘Engaged’ 
 
 Sprecher, who has said NYSE will reduce its order types by more than one dozen, said White’s speech shows the SEC is “engaged.” 
 
 “Obviously, the Flash Boys book has galvanized more people into looking at the way these markets work,” Sprecher told the conference in a separate appearance. “The markets can be much simpler and much easier to understand and doing so will bring more confidence to the way they operate.” 
 
 The SEC also will work with stock exchanges to address claims of unfairness in how order and price data reach the public. Traders buying direct feeds from exchanges get orders and prices faster than investors relying on the public ticker, a gap highlighted in Lewis’s book and criticized by New York-based trading-platform provider IEX Group Inc. CEO Brad Katsuyama. 
 
 More Consensus 
 
 “The commission has been aware of many of these issues for some time,” said Annette L. Nazareth, a partner at Davis Polk & Wardwell LLP and a former SEC commissioner. “Over the course of time, there comes to be more consensus around the fact that something needs to be done about these issues.” 
 
 Operators of dark pools will also have to provide more information about their clients and how they process buy and sell orders, White said. 
 
 KCG Holdings Inc. (KCG), based in Jersey City, New Jersey, and New York-based Liquidnet Holdings Inc., which both operate dark pools, have already said they will publicize their dark-pool rule filings. KCG Holdings was formed last year by the merger of two dominant high-frequency traders, Getco LLC and Knight Capital Group Inc. 
 
 “Transparency has long been a hallmark of the U.S. securities markets, and I am concerned by the lack of it in these dark venues,” White said. 
 
 The regulator also will wade into the debate over how brokers fill the orders of their institutional clients. The agency will develop a requirement that brokers tell investors where their stock trades go to be executed, White said. The initiative responds to complaints that routing decisions are sometimes made against a customer’s best interests. 
 
 Preventing Failures 
 
 The measures outlined yesterday include proposals that have been embraced by some large brokers and investors and can be advanced in the near term. White cited, for instance, a proposed rule known as Regulation SCI that will require exchanges and some dark pools to guard against technology outages and failures. The SEC staff is preparing a recommendation for a final version of the rule, White said. 
 
 The SEC still envisions examining whether its own rules, including the package known as Regulation NMS, have driven excessive fragmentation and complexity, White said. The agency will create a new advisory committee of investors and others to help inform its initiatives and rule changes, she said. 
 
 SEC Commissioners Luis A. Aguilar and Michael Piwowar both said yesterday that the agency must consider how much its prior rulemaking, including its National Market System rules, have driven unhealthy changes in market behavior. 
 
 “We need to consider the extent to which the current regulatory regime, including Regulation NMS, has contributed to some of the problems we have seen and whether it should be revised and modified,” Aguilar said. 
 
 To contact the reporter on this story: Dave Michaels in Washington at dmichaels5@bloomberg.net 
 
 To contact the editors responsible for this story: Maura Reynolds at mreynolds34@bloomberg.net Anthony Gnoffo, Gregory Mott ||||| The U.S. stock market is rigged when high-frequency traders with advanced computers make tens of billions of dollars by jumping in front of investors, according to author Michael Lewis, who spent the past year researching the topic for his new book “Flash Boys.” 
 
 While speed traders’ strategies, developed over the past decade with help from exchanges, are legal, “it’s just nuts” that they’re allowed, Lewis said during an interview televised yesterday on CBS Corp.’s “60 Minutes.” The tactics are too complicated for individual investors to understand, he said. 
 
 “The United States stock market, the most iconic market in global capitalism, is rigged,” Lewis, whose books “Liar’s Poker” and “The Big Short” highlighted Wall Street excesses, said during the interview. The new book comes out today. “It’s crazy that it’s legal for some people to get advance news on prices and what investors are doing,” he said. 
 
 Related: 
 
 Everyone who owns equities is victimized by the practices, in which the fastest traders figure out which stocks investors plan to buy, purchase them first and then sell them back at a higher price, said Lewis, a columnist for Bloomberg View. To show how lucrative the tactics are, Lewis said a technology firm spent $300 million to build a line that would shave three milliseconds off the time it takes to communicate between New Jersey and Chicago, then leased it out to securities companies for $10 million each. 
 
 Photographer: Jin Lee/Bloomberg A trader is reflected in a monitor as he works on the floor of the New York Stock Exchange (NYSE) in New York. Close A trader is reflected in a monitor as he works on the floor of the New York Stock... Read More Close Open Photographer: Jin Lee/Bloomberg A trader is reflected in a monitor as he works on the floor of the New York Stock Exchange (NYSE) in New York. 
 
 Industry Obsession 
 
 The author’s comments follow New York Attorney General Eric Schneiderman’s decision to investigate privileges marketed to professional traders that allow them to place their computers within feet of exchanges and buy access to faster data streams. Officials at the U.S. Securities and Exchange Commission and Commodity Futures Trading Commission have also said market rules may need to be examined. 
 
 Man, Machine and the U.S. Stock Market 
 
 Lewis is adding his voice to a debate that has obsessed the securities industry for almost a decade while only periodically surfacing in public via events such as the May 2010 flash crash, in which the Dow Jones Industrial Average posted an almost 1,000 point loss. Previous books by the one-time Salomon Brothers Inc. trader have focused attention on everything from mortgage derivatives to baseball statistics and contributed to the outcry over the events leading to the 2008 financial crisis. 
 
 His latest target, high-frequency trading, comprises a diverse set of software-driven strategies that have spread from U.S. equity markets to most developed countries as computer power grew and regulators tried to break the grip of centralized exchanges. While the tactics vary, they usually employ super-fast computers to post and cancel orders at rates measured in thousandths or even millionths of a second to capture price discrepancies on more than 50 public and private venues that make up the American equities market. 
 
 Dominating Volume 
 
 High-frequency traders account for about half of share volume in the U.S., a statistic that shows their pervasiveness and hints at the obstacles faced by proposals to rein them in. Exchanges rely on HFTs for profits as well as liquidity, with electronic market makers all but eliminating the old system of human floor traders who oversaw the buying and selling of equities. While critics such as Lewis see a Wall Street plot, proponents say the new system is faster and cheaper. 
 
 In the U.S., the biggest high-speed traders include Virtu Financial Inc., which filed in March to sell shares to the public. Bats Global Markets Inc., the Lenexa, Kansas-based equity exchange that merged with Direct Edge Holdings LLC this year, was founded by a high-frequency trader. 
 
 Book’s Hero 
 
 “We believe Lewis’s book can have a big impact on complex market-structure issues that have been simmering for years,” Joe Saluzzi, co-head of equity trading at Themis Trading LLC and a frequent critic of the status quo in markets, said before the “60 Minutes” interview was broadcast. “Hopefully this type of publicity will finally force regulators to take action on issues that they’ve been sitting on for way too long.” 
 
 One of the heroes of Lewis’s book is Brad Katsuyama, who left Royal Bank of Canada (RY) in 2012 to form a new market, IEX Group Inc., along with other former traders from the Toronto-based bank. David Einhorn’s Greenlight Capital Inc. hedge fund invested in the platform, which started trading in October and was established to minimize the influence of predatory strategies, Goldman Sachs Group (GS) Inc. has endorsed IEX and is the venue’s biggest broker. 
 
 Ticket Prices 
 
 IEX was established partly to address concern that technology advances and fragmentation have made the $22 trillion U.S. equity market too fast and opaque. The platform, a dark pool with ambitions to officially become an exchange, imposes a delay of 350 microseconds, or 350 millionths of a second, on orders -- enough to curb the fastest trading firms. IEX aims for greater transparency by making its trading rules available for public review, unlike some other electronic venues. 
 
 During his own interview with “60 Minutes,” Katsuyama described how the stock market rips off investors. While still at Royal Bank, he noticed that prices seemed to move against him when he was trading. 
 
 “The best analogy I think is that your family wants to go to a concert,” he said. “You go onto StubHub, there’s four tickets all next to each other for 20 bucks each. You put in an order to buy four tickets, 20 bucks each and it says, ‘You’ve bought two tickets at 20 bucks each.’ And you go back and those same two seats that are sitting there have now gone up to $25.” 
 
 ‘My Jaw’ 
 
 Katsuyama concluded that his intentions became visible on some exchanges faster than others. The most fleet-footed traders could take advantage of that by submitting bids and offers on the slower markets. 
 
 Lewis said, “I spoke to dozens of investors, big investors, famous investors who said that, ‘When Brad Katsuyama came into my office and laid out to me how the market was rigged, my jaw hit the floor. I mean, I knew something was wrong. I just didn’t know what it was and no one had told us.’” 
 
 Eric Ryan, a spokesman for the New York Stock Exchange, and Nasdaq OMX Group Inc.’s Rob Madden declined to comment on Lewis. 
 
 “We completely disagree with allegations that the U.S. equity market is rigged,” Bats President Bill O’Brien said in an e-mail. “While we should never stop trying to improve our market structure, it is unfair and irresponsible to accuse people simply because they use technology and enhance competition. This has helped make our market the most competitive and liquid in the world, greatly benefiting individual investors.” 
 
 New York 
 
 New York’s Schneiderman is examining the sale of products and services that offer faster access to data and richer information on trades than is normally available to the public. Wall Street banks and rapid-fire trading firms pay for these services, providing millions of dollars in quarterly sales to exchanges and helping ensure their markets are supplied with standing orders to buy and sell stocks. 
 
 Bloomberg LP, the parent of Bloomberg News, provides its clients with access to some proprietary exchange feeds. 
 
 The investigation threatens to disrupt a model that market regulators have permitted for years as high-speed trading and concerns about its influence have grown. Trading firms pay to place their systems in the same data centers as the exchanges, a practice known as co-location that lets them directly plug in their companies’ servers and shave millionths of a second off transactions. 
 
 High-frequency-trader Virtu publicly released its initial public offering filing in March. The New York-based market maker, which provides quotes in more than 10,000 securities and contracts on more than 210 venues in 30 countries, said it had turned a profit every day except one for five years. The company uses IEX. 
 
 CFTC Review 
 
 Virtu disclosed in the IPO filing that the U.S. Commodity Futures Trading Commission is looking into its trading from July 2011 to November 2013, examining its “participation in certain incentive programs offered by exchanges or venues,” according to the IPO filing. Virtu said it doesn’t believe it broke any laws or CFTC rules. 
 
 Chris Concannon, Virtu’s president and chief operating officer, declined to comment before the “60 Minutes” broadcast, citing rules that prevent companies from speaking while planning IPOs. 
 
 Share volume totals show the transformation that high-frequency firms have wrought in American equity markets. While combined trading on the NYSE and Nasdaq rarely exceeded 2 billion shares in the 1990s, today it is regularly three times that in the U.S. About 6.05 billion shares changed hands on all U.S. exchanges in the last session, data compiled by Bloomberg show. 
 
 ‘Not Rigged’ 
 
 Not everyone says speed trading is unfair. 
 
 “While there are bad actors in every industry, the game is not rigged in the favor of professional traders who employ HFT to execute their strategies,” Peter Nabicht, senior adviser to the Modern Markets Initiative trade group and former chief technology officer at high-frequency-trading firm Allston Trading, wrote in an e-mail. 
 
 “Rather, they work hard to compete with each other to bring liquidity to the markets, benefiting average investors,” he added. “Continued debate about the next evolution of market structure is needed and welcome, provided the debate is based on fact and resulting actions are reasoned, ensuring average investors continue to benefit from the transparency and efficiency enabled by inevitable technological advances.” 
 
 Encouraging Trades 
 
 The practice of selling enhanced access to brokers accelerated as American exchanges evolved from member-owned firms amid a flurry of regulation and computer advances in the 1990s. Among other changes, the government-mandated compression of stock price increments to pennies from eighths and sixteenths of a dollar, a process known as decimalization, squeezed profits for market makers and specialists that had overseen stock trades. 
 
 Faced with the need to maintain liquidity on electronic platforms where profits were too fleeting for humans to capture, exchanges encouraged computerized firms to post orders for investors to trade against. Co-location and customized data feeds developed alongside the hodgepodge of fees and rebates that market operators use to keep speed traders coming back. 
 
 “Part of what you’re seeing here is people not understanding it, because they either haven’t taken the time or haven’t dug in,” Larry Leibowitz, the former chief operating officer of NYSE Euronext, said in a March 25 conference call with analysts arranged by Sandler O’Neill & Partners LP. “It’s the responsibility of regulators to show leadership to show, ‘We looked at these issues, and we think these are fair. These are areas we want to improve and fine tune.’” 
 
 Old Days 
 
 Market-maker privileges have always been a hallmark of equity trading, starting with the sale of seats on the floors of exchanges. LaBranche & Co., created in January 1924, went public in August 1999. In papers prepared for its IPO, LaBranche disclosed that it regularly turned about 71 percent of sales into profit before paying its managing directors. Earnings before that expense climbed at least 25 percent every year from 1995 through 1999. 
 
 Results like those, as well as concern that NYSE and Nasdaq were too powerful, helped spur reforms since 2000 such as decimalization and a broader overhaul known as Regulation NMS that was aimed at lowering barriers to trading. Through rules mandating that any order for stock be routed to whoever in the country was transmitting the best offer to buy or sell, regulators hoped competition among a much larger pool of de facto market makers would lower costs for investors. 
 
 Lower Fees 
 
 That happened. Buying 1,000 shares of AT&T before 1975 would have cost $800 in commissions, Charles Schwab, who founded discount brokerage Charles Schwab Corp., told the U.S. Senate in February 2000. That’s roughly 100 times more than the fees paid by some retail stock-pickers today. 
 
 Federal regulators have asked for years whether new restrictions were needed. In February 2012, Daniel Hawke, the head of the SEC’s market-abuse unit, said the agency was examining practices such as co-location and rebates that exchanges pay to spur transactions. Last year, the CFTC announced a review of speed trading and sought industry input. 
 
 SEC Commissioner Daniel Gallagher said on March 28 that individuals are concerned that high-frequency traders detract from fairness in the marketplace. 
 
 “The problem with high-frequency trading right now is that there’s a perception that for the little guy, the markets aren’t fair,” Gallagher told CNBC during an interview. “That perception to me is a reality. It’s something we need to address.” 
 
 To contact the reporters on this story: Nick Baker in Chicago at nbaker7@bloomberg.net; Sam Mamudi in New York at smamudi@bloomberg.net 
 
 To contact the editors responsible for this story: Chris Nagi at chrisnagi@bloomberg.net David Scheer
– The SEC is finally trying to rein in the robots. Chairman Mary Jo White today announced a massive initiative designed to tame high-frequency traders, the Wall Street Journal reports. These automated trades currently make up more than half of all trading volume, yet they've almost totally avoided direct regulatory oversight because the computers are trading on behalf of their owners, not clients. The rules White is proposing would change that, forcing high-frequency traders to register as broker dealers. White also said the SEC was working on rules to prevent the computers from engaging in strategies that put the market at risk of massive swings, like the infamous flash crash. The SEC also introduced plans to affect how human traders operate, Bloomberg adds—the agency is concerned that the stock exchanges have too many types of orders, adding complexity for no reason, and that some traders are using exchange-sold price feeds that are faster than the ones the general public relies on.