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SEC probes cancelled trades in flash crash: report

(Reuters) - U.S. securities regulator is looking into a Wall Street trading practice in which unusually large numbers of orders to buy or sell stocks are placed in a fraction of a second, only to be canceled almost immediately, the Wall Street Journal reported on Thursday.

The Securities and Exchange Commission (SEC) is analyzing whether the trading practice -- known as "quote stuffing" -- is placing some investors at a disadvantage by distorting stock prices, the Journal said citing people familiar with the matter.

SEC is also scrutinizing whether quote stuffing played any role in the May 6 "flash crash," when U.S. stock markets suffered a record fall within minutes.

The regulator is also probing whether a practice called as "sub-penny pricing," is used to manipulate the market, the newspaper said citing a person familiar with the matter.

In the sub-penny pricing method, the orders are priced in increments as small as one-tenth of a cent and far away from the actual price at which a stock is trading.

An SEC spokesman declined to comment to the Journal on the inquiry.

SEC could not immediately be reached for comment by Reuters outside regular U.S. business hours.

(Reporting by Sakthi Prasad in Bangalore; Editing by Tomasz Janowski)