Flash orders, we hardly knew ye. In just two weeks, these trades have exploded into public consciousness and then been served a likely death sentence by the Securities and Exchange Commission. Used in perhaps 2 per cent of US equity trading, investors can have their order “flashed” to a group of traders a fraction of a second before the broader market; the aim is to reduce trading costs. The SEC is also set to examine “dark pools”, electronic trading venues that do not publicly display quotes, and high frequency trading (HFT). The UK's securities watchdog is doing the same.

Eliminating all market asymmetries is impossible. Some participants have always had better information than others and pressed home that advantage by investing in ever better infrastructure. Similarly, investors trading big blocks of shares have always sought the best execution strategy, while others have tried to anticipate their plans and gain from them. Now, however, trading is powered by algorithmic trading and occurs in milliseconds across multiple venues.

This has created benefits, including narrower bid-ask spreads and cheaper trading, as well as more choice. Still, regulators are right to ask questions. They should know who is using HFT and to what standards they are held. For example, do HFTs only ping the market with orders that are immediately cancelled in order to extract pricing information? Other issues include what protection exists should an algorithm misfire, and the risks posed by clients using “sponsored access” to execute high-frequency trades on an exchange without being its member.