CASH MACHINE

Wall Street's Secret Weapon

Is computer trading manipulating prices?

Could this be the secret of Goldman Sachs' success? Traders at that bank and others financial institutions are employing high-frequency computers, some similar to the machines used by the New York Stock Exchange, to execute deals faster than anyone else—and are pulling big profits as a result. High-frequency trading, which now accounts for half of all trades, uses algorithms to scan trends, change strategies, and make orders in milliseconds. It can outsmart competitors, and the SEC is investigating certain elements of the trading, which critics allege can be used to manipulate prices. Though Goldman Sachs admits to using the technology, the bank insists that it hasn't created an unfair advantage. Says one NYSE Euronext employee: "It's become a technological arms race."