Dear SEC: For Your Viewing Pleasure - Obvious Perot Front Running

Tyler Durden's picture

Dearest SEC, since we know you are infrastructurally and intellectually challenged (in the broadest sense of the word), we have decided to make your life easier. As you likely are not aware, Dell today acquired Perot Systems (we imagine the companies used the attorney-client privilege to avoid disclosing any transaction details to you). All fine and good: here is the link to the 8K should you wish to familiarize yourself with the EDGAR filing system.

Yet something that you may want to consider in your 8 hour daily coffee breaks is the following. We present the option activity in Perot calls last week. Over 2,500 Oct $20 calls were purchased at about $1. The same option is now worth $9.60. The result: an approximately $2.2 million profit in the four days since the accumulation of the options started on September 15 by whoever the party(ies) that were tipped off about this deal. (We are ignoring the $17.50 strikes which also showed suspicious volume early in the month).

As we are well aware that you traditionally are in dire need of visualization aids, we present the charts that make this even more obvious.

And in order to completely connect the dots for you, here are the actual trades that if you care, you can actually dig into, and do some of the fabulous regulatorin' you are so adept at.

September 16th

September 18th

As always, please write us if you need any more calculators, abaci, pencils, erasers, graph paper or staplers to perform the activities that your $900 million budget ill affords you.

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aldousd's picture

abaci? I didn't know that's what they were called in plural! I learned something new, again!

Anonymous's picture

abacuses is also correct in English.

Korbin Dallas's picture

I have two slide rule objects (calculation engines), what they be called, slaci?

Anonymous's picture

Ill bet the $900 million they don't do a thing

Anonymous's picture

Well reported

Assetman's picture

You really should send a formal letter to Mary Shapiro exactly as is.  I'd be curious to see what the response would be...

Mediocritas's picture

Be sure to include some crayons and face paint.

sparchang's picture

And, please, save yourself the embarrassment: don't call this frontrunning.  This is called insider trading.  Just because you've learned a loaded phrase doesn't mean you can apply it indiscriminately (that means "whenever you want" in case that word was too big for you.) 

Sancho Ponzi's picture

Dude: You make some good points, but your attitude is downright offensive. Do you work as a HFT for GS or something? You defend HFT like it's your freakin' religion, and your logic is flawed. Remember what Greenspan said about derivatives? You're applying the same logic to HFT. 

sparchang's picture

Like Don Quixote tilting at windmills, I rail against ignorance in all its forms. Should a flawed argument in favor of HFT ever grace the pages of ZH, I will counter it just as quickly.  If I offend the poster in the process, it is only because I find shame to be a far better teacher than dispassionate statement of fact.

Anonymous's picture

Rock on and continue to shovel toilet paper deep into the gullets of those whose mouths spew shit.

Arm's picture

I love your early twenties rookie trader overconfidence.  Just to break your arguement.  These operations can be BOTH insider trading and front-running.

All front running is a form of insider trading, not all insider trading is front running.  (front-running is nothing more than insider trading a client order)

When you take the time to research suspicious market operations and post them for the general community, THEN you will earn the right to wield your flaming sword of semantics self-righteousness. 

sparchang's picture

In this particular case, I'm not making an argument.  I'm stating fact.  "Insider trading" and "front running" are two very different and unrelated concepts, perpetrated by two very different groups of people.  That both groups seek to profit from their respective crimes does not make them the same crime.

"Insider trading" is when a company insider (actually more broadly defined as any person with material non-public information about the company) seeks to profit from that information by anticipating the market's reaction to the news when it eventually becomes public.  The criminal in this case is the person with knowledge about the company itself. The "victim" is not obvious, but could be argued to be the market itself, or the specific anonymous participants with whom the insider traded.

"Front running" is when a broker receives a large order from a client and, given that the supply/demand effect of a large order on the market is well-known, decides to trade for himself first, before executing the client's order.  The criminal is the broker, who does NOT possess any non-public knowledge about the company but who DOES possess non-public information about imminent market activity in the stock of the company. The victim in this case is quite obviously the broker's client, who receives a worse price for his order only because his broker took advantage of him.

I will stress this again.  Insider trading can be committed by anyone with information the rest of the market does not yet know.  Front running requires advance knowledge of other market participants' orders - in particular when the perpetrator has been entrusted with the handling of such orders, and has decided to act for himself before revealing the orders to the market.

Not all front running is insider trading.  A broker is NOT an insider. A customer order is NOT materal non-public information about a company.  I may know nothing non-public about some company, but decide to buy a lot of its stock anyway.  My broker may also not know anything non-public about that company, but what he DOES know is that my order will cause the stock to rise.  He buys first, then fills my order, then sells after I have pushed up the price.  He has committed front running, but not insider trading.

"Semantic self-righteousness," I like that.  Nice turn of phrase.

ShankyS's picture

Why doesn't this seriously piss off the head of the SEC? Not from a standpoint of ZH thoroughly and consistently throwing them under the buss, but from a standpoint of pure ineptness. If I were running the show there I would have heads on the chopping block. I'd be thoroughly embarrassed. You'd like to think with their resources they would be on this like stink on ...


It is all so unbelieveable.


bchbum's picture

It must be somebody "above the law" to do something so blatantly illegal.  I'd be curious to find out who.

Anonymous's picture

dunno but betch it sounds like 'foldman fachs'

Village Idiot's picture

 I have confirmed it.  Personally, I would have probably gone with 'abacuses'.  What do they call the abacuses that have, like, 8-9  beads on a piece of nylon cord? Is it easier to work out math probelems with that style?

–noun, plural ab⋅a⋅cus⋅es, ab⋅a⋅ci

/?æb??sa?, -?ka?, ??bæka?/ Show Spelled Pronunciation [ab-uh-sahy, -kahy, uh-bak-ahy] Show IPA .

1. a device for making arithmetic calculations, consisting of a frame set with rods on which balls or beads are moved. 2. Architecture. a slab forming the top of the capital of a column.
Anonymous's picture

Balls, as in Ben Wa.

From Wikipedia -

It is possible to leave Ben Wa balls in one's vagina all day, or use them while seated in a rocking chair, for an effect that some find pleasurable.

uno's picture

Ms. Schapiro is using them as anal beads, maybe she just needs to be educated on what to do with them.

Big Al's picture

The SEC will ignore this. They only investigate insider trading when an individual rogue trader does it.  When an organization does the insider trading, the SEC views it as standard business practice.

Careless Whisper's picture

But these trades added liquidity to the market.

Jim_Rockford's picture

And the second derivative went negative a while back ....

Anonymous's picture

They have been using chloroform as an air freshener. We need a new drug czar to clean up this pubic service. (spelling correct)

phaesed's picture

When are they going to allow private companies to compete for contracts to do the SEC's job... I think it should be obvious they would do better.

aldousd's picture

Yeah for example, zero hedge on a shoe string (+ BB Terminal cost) budget.  I can see the SEC turning into what you see in the famous Gary Larson cartoon.. a suggestion box at the entrance to Hell, and becoming much more effective at mitigating corrupt behavior for it.  (i.e., got a tip on fraud? send it to

Mediocritas's picture

oooooohhh, is THAT what the address is for?

I was using it to email something....more literal

defender's picture

LOL, +1

At least it was an honest mistake.

Deficient Market's picture

They are already a suggestion box, but right now it is one that is just painted on the wall, so good luck trying to submit anything.

Mediocritas's picture

Well, that all depends on their actual job description, which I believe reads something like this:

Your job will be to screw US taxpayers out of their hard-earned money while protecting the profitability of the highest volume traders and in so doing create the most massive and obvious manipulation in market history. If someone accuses you of not looking out for the little guy, then go roast a few said little guys to prove that you are in fact looking at them, but do not, in any circumstance, make eye contact with anyone from Goldman Sachs.

So the SEC is doing an awesome job! Bravo!

Anonymous's picture

It would be unfair to the shareholders of whoever perpetrated this front-running if we were to prosecute. Therefore we will discharge all related claims. Nothing more to see here - move along... MOVE ALONG!!

PS. the writing of this extensive analysis has just cost you, the taxpayer, $10,000,000 and is therefore a great success for our agency as our record lowest cost investigation. Until now this record was held by our prior success story where we successfuly caught a retired mastermind couple that successfuly swindled their condo association of $534 through an elaborate labirinth of ponzy schemes.



buzzsaw99's picture

Dear Mary, You are a useless c^nt.

D.O.D.'s picture

Guys chill, it's prolly just a coincidence...again...

andrew123's picture

Wouldn't it make more sense to contact another regulatory agency, and just CC: Mary?  If she is not going to look into this stuff, maybe some other law enforcement agency will.  There has got to be some underling of Andrew Cuomo who would like to see their name in the paper for doing the SEC's job when they couldn't.  Perhaps this isn't the best example, but the next time you find something open and shut, I would consider goiing with some other agency.

Anonymous's picture

while your at it, check Hank Greenburgs record logs generated by his representative, Edolphus Towns, and the huge bump to Hanks networth, by the good statemans statement, political favors DO PAY OFF

Anonymous's picture

While they are at it, they can look into the 75% ramp up in CUR over the last week and a half, then surprise, suprise great news this morning, to pay off all the insiders. Geniuses.

Anonymous's picture

Tattletale....... ;-(

Anonymous's picture

While they are at it, they can look into the 75% ramp in CUR the last week and a half. Today, surpise, surprise, great news, and the insiders lock in profits. GEniuses.

deadhead's picture

TD...excellent reporting.

President Obama, you should be ashamed of Mary Schapiro as your pick for the SEC.

To: Mary Schapiro...get somebody on this trade NOW. Get the names of the call buyers. Investigate. Prosecute. No more settlements.


Cognitive Dissonance's picture

Obama is simply the latest Presidential political puppet with the financial elites' (middle) finger up his arse. He is doing what he is told to do, nothing more and nothing less.

The President of the USA has as much power as the military/industrial/banking powers allow the President to have, which are mostly ceremonial in nature.

blackebitda's picture

is this a form of economic stimulus whereas the speculators whom profit can now be able to spend into the economy helping to contribute in their role as a "consumer". 

Anonymous's picture

I play tennis with an employee of the SEC. He is a CPA and I know from personal experience, investigates SOME stock fraud cases. When I ask him about certain injustice in the stock market such as front-running, failure to deliver, etc.. He just laughs. He says the new leader Shapiro is better than the last but also says not much has changed. Seems to be very well paid for what he does, although I still haven't figured out what he does after 10 years of knowing this individual. He does not seem well informed on what is happening in the stock market.

Cognitive Dissonance's picture

Sounds like the perfect SEC employee, overpaid and clueless.

Anonymous's picture

My resume fills out those requirements nicely. Think I have a shot?

Gordon_Gekko's picture

Does he know what IS a stock market?