High-Frequency Trading Probe Spooks E*Trade Investors

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By Trey Thoelcke Published
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Recent criticism of high-frequency trading seems to have spooked investors in online brokers E*Trade Financial Corp. (NASDAQ: ETFC) and TD Ameritrade Holding Corp. (NYSE: AMTD). Shares both of them are dropping for the second day in a row.

High-frequency trading has come under intense scrutiny since the release of Michael Lewis’s book “Flash Boys,” which aims to expose how the method of trading has rigged the financial markets against the little guy. U.S. Attorney General Eric Holder, in testimony before the U.S. House Appropriations Subcommittee on Commerce, Justice, Science and Related Agencies on Friday, confirmed that the U.S. Department of Justice is investigating insider trading and high-frequency trading.

Also note that the scrutiny of high-frequency trading may be why the highly anticipated initial public offering of Virtu Financial has been delayed.

As for how this affects the online brokers, the speculation is that investigators will also take a look at issues such as payment for order flow. Restrictions on payment for order flow could have a significant impact on the revenue of the online brokers. E-Trade reportedly generated about $72.5 million worth of order flow revenue last year.

Since the close of trading on Wednesday, shares of E*Trade are down more than 12% and TD Ameritrade is around 8% lower. E*Trade was trading at $20.45 in mid-day trading Friday, in a 52-week range of $9.52 to $25.58. TD Ameritrade was at $30.78, and its 52-week range is $18.79 to $35.82.

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About the Author Trey Thoelcke →

Trey has been an editor and author at 24/7 Wall St. for more than a decade, where he has published thousands of articles analyzing corporate earnings, dividend stocks, short interest, insider buying, private equity, and market trends. His comprehensive coverage spans the full spectrum of financial markets, from blue-chip stalwarts to emerging growth companies.

Beyond 24/7 Wall St., Trey has created and edited financial content for Benzinga and AOL's BloggingStocks, contributing additional hundreds of articles to the investment community. He previously oversaw the 24/7 Climate Insights site, managing editorial operations and content strategy, and currently oversees and creates content for My Investing News.

Trey's editorial expertise extends across multiple publishing environments. He served as production editor at Dearborn Financial Publishing and development editor at Kaplan, where he helped shape financial education materials. Earlier in his career, he worked as a writer-producer at SVE. His freelance editing portfolio includes work for prestigious clients such as Sage Publications, Rand McNally, the Institute for Supply Management, the American Library Association, Eggplant Literary Productions, and Spiegel.

Outside of financial journalism, Trey writes fiction and has been an active member of the writing community for years, overseeing a long-running critique group and moderating workshop sessions at regional conventions. He lives with his family in an old house in the Midwest.

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