Senate panel to dig in to high-frequency trading

One of Congress’s toughest corporate critics is digging into the world of high-frequency trading.

The Senate Permanent Subcommittee on Investigations, chaired by Sen. Carl Levin (D-Mich.) announced Monday that it will hold a hearing exploring the contentious practice of making financial trades in fractions of a second on June 17.

According to Levin’s panel, the hearing will explore potential conflicts of interest that arise”between the obligation of brokers to provide their customers with best execution of their orders to buy or sell securities, and the brokers’ receipt of payments from other brokers for order flow and rebates from some trading venues for placing those orders directly.”

No witnesses have been announced yet, but the panel said those called to testify will include representatives from stock exchanges, brokerage firms, institutional investors as well as a securities market expert.

The practice of high-frequency trading has come into question after high-profile allegations from author Michael Lewis that traders who can react in fractions of a second have made markets fundamentally unfair. Regulators have insisted the markets remain fair for the average investors, but the Securities and Exchange Commission announced earlier this month it was taking a number of steps to explore the issue and improve oversight.

The Justice Department has also said it is examining high-frequency traders for potential insider trading allegations.

Levin’s panel has made a habit out of grilling top corporate executives and major financial players on a range of issues, including problems stemming from the financial crisis and efforts to avoid paying U.S. taxes.