High-frequency strategies, which process massive amounts of quote and transaction data and rely on the rapid-fire submission of orders to exchanges, account for 51 percent of U.S. equity volume, up from 35 percent in 2007, according to research firm Tabb Group LLC. They include electronic market making, statistical arbitrage and tactics based on price movements in indexes compared with their constituent stocks.

Critics say the commission isn't moving fast enough to rein in the quickest traders and that money-raising functions such as initial public offerings are being harmed by perceptions the market is geared toward speculators. Initiatives similar to the so-called consolidated audit trail, meant to enhance order tracking, have been around since the early 1980s, said David Weild, the New York-based head of capital markets with Grant Thornton LLP.

"It's amazing it's taken 30 years," Weild, a former vice chairman of Nasdaq Stock Market, said in a phone interview. "Meanwhile, there's been an arms race on Wall Street and the SEC is outclassed in its ability to reconstruct events and look for vulnerabilities."

And part of Gregg Berman's response on behalf of the SEC:

"We can actually provide some metrics around some of the anecdotes from institutions that say the volume is fleeting, that it's there and then it's not," Berman said. "Are there patterns between cancels and the size of a stock? How do cancels affect large versus small-cap stocks, or ETFs? This analysis can help us generate more information about how markets work."

Berman, who studied experimental and nuclear physics, developed trading strategies in commodities and stocks at a hedge fund and became a founding member of RiskMetrics Group Inc. in 1998 when JPMorgan Chase & Co. spun off the company. He writes programming code and did some of the flash-crash modeling when the SEC examined how trade requests were withdrawn from exchange order books that day.

The analytics and research office plans to hire traders from banks and hedge funds as well as financial engineers and individuals with quantitative and analytical skills. It's looking for programmers in the C++ computer language and "UNIX gurus who really know how to get under the hood and in former lives may have written trading programs and now are going to write analytical programs," Berman said.

Berman's group will devise monitoring programs and look for patterns and outliers that might indicate nefarious behavior or market manipulation. It will also study message traffic to spot delays between the proprietary data feeds and the public streams, Berman said. The SEC fined the New York Stock Exchange $5 million last month for sending information to its private feeds faster than it provided the data to the public.

David Fuller's view Good for the SEC although I am not that optimistic about the effectiveness of this new effort. Regulators are too often slow in just understanding what the people they need to regulate are up to. They are also outgunned financially.

Nevertheless, this looks like a serious effort and the fine mentioned in the Bloomberg paragraph immediately above signals intent. Regulators cannot count on much help from exchanges which have invited in the HFT firms, which they regard as a vital source of revenue, regardless of the fact that too many other investors and traders have been driven away.

Even if the SEC succeeds, as most of us would hope, there are plenty of other exchanges where HFT firms have become big players, not least at the CMX-Commodity Exchange where silver appears to be a favourite instrument for their activities.