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SEC Considering Options to Limit High-Frequency Trading Activity

SEC Chairman Schapiro is considering options to reign in high-frequency trading, including charging high-speed traders fees on canceled buy and sell orders.  Many in the industry warn that new fees or limits on rapid trades could limit market liquidity for all investors.  Approximately 95%-98% of orders submitted by high-speed traders are canceled, according to Tabb Group which tracks trends in electronic trading.

The SEC and CFTC have expressed concerns about high-frequency trading for years, but according to a Wall Street Journal article, Chairman Schapiro has made recent remarks signaling a heightened sense of concern and suggesting the SEC could take aggressive action on this issue.  Concerns about high-speed trading initially arose in the wake of the May 6, 2010 "flash crash." The SEC has since taken measures to try to prevent this type of event from recurring, including adding circuit breakers that pause trading in a stock when it makes a large move in a short amount of time.  However, Chairman Schapiro believes additional measures are still needed.