SEC ‘has’ to investigate Christmas Eve sell-off, says ex-SEC attorney

She’s specifically pointing the finger at high-frequency trading, an automated trading platform that can place a large number of orders at lightning speed.

Goody’s comments echo those of CNBC’s Jim Cramer, who argued Wednesday that the rapid sell-off should have been probed by Wall Street regulators.

“When stocks went into free-fall on thin volume the day before Christmas, that should have prompted officials at the exchanges, maybe [the] Treasury [Department], [the] SEC, to ask what the heck happened,” he said on “Mad Money.”

The SEC did not immediately respond to a request for comment.

Goody believes the volatility is eroding investor trust in the stock market.

“Once there is massive sell-off, you have the ability for people who are in the market, like high-frequency traders, to get out early and then once the market starts coming around to come up, buy in low,” she said. However, everyday investors lose more money because they can’t act as quickly, she added.

And that’s exactly what happened on Dec. 24, said Goody.

“The automated algorithms … start a massive sell-off and then investors hear that and start selling and then the stop-loss orders kick in,” she said. “It’s all of this automated technology that we really haven’t kept up with.”

— CNBC’s Elizabeth Gurdus contributed to this report.


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