Securities regulators are still trying to determine who was behind an immense burst of phony high-speed trading last week that accounted for 4% of all U.S. stock market activity.

Officials say a mysterious algorithm was unleashed from the Nasdaq that placed orders in 25-millisecond bursts involving about 500 stocks. The computer program cancelled all of the orders, resulting in none of the trades going through.

Jon Najarian, co-founder of TradeMonster.com, told CNBC: “My guess is that the algo was testing the market, as high-frequency frequently does.”

High-speed trading done by computers accounts for more than half of the stock market’s volume, burying any action or influence by individual investors. Proponents of the electronic speed dialing argue that it allows markets to be more liquid, facilitating the flow of capital, while critics, including high-speed pioneer Thomas Peterffy, think its time to apply the brakes.

““We are competing at milliseconds,” he told National Public Radio. “And whether you can shave three milliseconds of an order, has absolutely no social value.”

According to Eric Hunsader, head of Nanex and a specialist in detecting trading anomalies, market testers like whoever unleashed last Friday’s flurry of activity are operating pretty much under the official radar until their actions have consequences that can’t be ignored.

“Just goes to show you how just one person can have such an outsized impact on the market,” Hunsader said. “Exchanges are just not monitoring it.”

–Noel Brinkerhoff

To Learn More:

Mysterious Algorithm Was 4% of Trading Activity Last Week (by John Melloy, CNBC)

Chicago Fed Officials Warned Regulators about Perils of High-Speed Trading Two Years Ago (by Travis Waldron, ThinkProgress)

High-Frequency Trading Pioneer: Today’s Trading “Has Absolutely No Social Value” (by Travis Waldron, ThinkProgress)