Updated, 3:48 p.m. |
Goldman Sachs’ high-frequency trading operations have been getting a lot of attention recently. Just perhaps not the bank’s favorite kind.
New York’s attorney general, Eric T. Schneiderman, recently sent a letter to the firm requesting information about its high-speed trading operations, according to a person familiar with the matter who was not authorized to speak publicly.
In a regulatory filing on Friday, the bank also disclosed that federal regulators were scrutinizing its high-frequency trading operations, although it did not specify the investigating agency.
In recent months, federal authorities have ramped up their scrutiny of high-frequency trading, a general term used to describe methods by which firms can buy and sell stocks ahead of other investors.
In April, Attorney General Eric H. Holder Jr. confirmed that the Justice Department was investigating high-speed trading “to determine whether it violates insider trading laws.” Eric T. Schneiderman, the New York State attorney general, has called the practice “Insider Trading 2.0.”
Goldman disclosed that it was under investigation in a regulatory filing on Friday but did not identify by which agency. The filing also confirmed that the bank was under investigation for potential violations of the Foreign Corrupt Practices Act, including its hiring practices abroad.
In addition, Goldman said in the filing that it expected its litigation expenses to remain “high” and disclosed that it had increased its reserves to pay for legal expenses to $3.7 billion from $3.6 billion.
A spokesman for Goldman declined to comment.
High-frequency trading has drawn criticism for being unfair because even a fraction of a second’s advantage can mean the gain or loss of millions of dollars. That criticism has increased as concerns grow that regulation has not kept up with advances in the technology that makes such trading possible.
Goldman has not been on the sidelines. In March, Gary Cohn, Goldman’s chief operating officer, wrote an op-ed article in The Wall Street Journal that proposed ways to rein in potential trading abuses.
“While an industry-based solution is preferable, some issues cannot be addressed by market forces alone and require a regulatory response,” Mr. Cohn wrote. “Innovation is critical to a healthy and competitive market structure, but not at the cost of introducing substantial risk.”
The article preceded reports in April that Goldman was in talks to sell its so-called dark pool high-frequency trading operation, also known as Sigma X. Harvey Schwartz, the bank’s chief financial officer, subsequently denied that the bank had plans to sell the unit.
The author Michael Lewis also brought widespread attention to the methods of high-speed traders in his recent book “Flash Boys.”
Goldman declined to comment on the letter from Mr. Schneiderman’s office or the filing, which also disclosed that the bank was under investigation for potential violations of the Foreign Corrupt Practices Act, including its hiring practices abroad.
In addition, Goldman said in the filing that it expected its litigation expenses to remain “high” and disclosed that it had increased its reserves to pay for legal expenses to $3.7 billion from $3.6 billion.
On Friday, The Wall Street Journal reported that Goldman, Credit Suisse and Barclays had all received similar letters from the attorney general. The International Business Times reported last week about Mr. Schneiderman’s interest in Barclays and Credit Suisse.
A spokesman for Mr. Schneiderman’s office declined to comment.