FINRA Warns Against Fraudulent IOIs Once More... Not Even "Or Else" Follows

Tyler Durden's picture

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Anonymous's picture

Earlier this evening, while the drinking was light, I was cleaning a gun, and feeling alright.

I turned the radio on, it was Monday night.

Some dude said FINRA, was leading alright, invest with FINRA, and I'd be alright.

But seriously I think I heard a finra commercial on monday night football.

Anonymous's picture

Picked up the following Credit Suisse brochure on "Advanced Execution Services(R) The Standard in Algorithmic Trading (R)" at the TradeTech West Conference in SF last week.

Excerpt:

"The difference is secrecy. Confidentiality is more than just an aspect of good customer service with AES; it is a cornerstone of our trading strategy whcih revolves around the concept of reducing signals. We never shop order flow and never advertise our volume in a name. AES orders are never seen by traders, market-makers, sales-traders, sales-people, or anyone else except dedictaed AES desk support personnel. To help ensure this, we have brought in a global "Big 4" auditing firm to assess the effectiveness of our information barriers. Ask your AES sales personal for a copy of the most recent report."

It goes on to quote Sun-Tzu...

"Be extremely subtle,
even to the point of formlessness.
Be extremely mysterious,
even to the point of soundlessness."

Speaking of Sun-Tzu, Tyler... Are you planning to be at http://www.wbresearch.com/tradetechcanada/home.aspx

No need to answer. In any case I'm gald you found the FINRA IOI link on daily credit interesting.

Yours truly, Narrator

Fritz's picture

Enforcement?

FINRA reports to LLoyd B. in the org chart, just below the SEC and the White House.

WTF did you expect?

Sqworl's picture

+1000000 Stupid Robot Operation...run by SIA, owned by GS.

Head of FINRA was well paid to look the otherway at Citi...then went to NYSE to clean house collect more $$$ and then to retire at FINRA..laughing all the way to the Bank.

Anonymous's picture

Who regulates IOIs in UK/Europe?

Cognitive Dissonance's picture

"after all the direction of manipulation is up, and when is the last time anyone heard the regulators complaining about that?"

There has always been a "natural" bias upward. After all, when the economy grows, it's "natural" for the market to grow. But this tendency has been helped to such a degree lately that it has become down right criminal. Of course, when many are making money (or at least paper profits) who would complain?

Regardless of your long or short position at the time the bias is being helped along, you have taken that stand for various "natural" reasons and the basic unfairness to the entire market (yes, even those who are long and being rewarded) shows up in increased volatility and, in my opinion, the ultimate instability of those long positions. If they didn't go up naturally, there is a much greater tendency for them to go back down.

What really burns my ass is the inherent corruption of the system, using the "natural" tendency of those making money not to complain about the situation. Even those who are long and see the obvious manipulation aren't likely to complain when it's to their benefit. Everyone loves a little jingle in the jeans.

Even my mother, who wouldn't know the difference between a stock market and a farmers market, saw the obvious conflict of interest and was angered when I explained what was going on in response to her question of why the market was going up in the face of an obviously bad economy. 

Of course, maybe my "natural" tendency to be biased against manipulation came out in my explanation and influenced her response. But as long as I got what I wanted, what's wrong with that?

Anonymous Hand's picture

+1 for your subtle self-aware humour.

zice's picture

Remember even Dorian Gray had natural tendencies. I would think that this great un-masking is pricking everyones sensibilities as the true picture of themselves is revealed.

Thurgy's picture

How about a damn program trading tick rule, or program to program restrictions.  I don't know and haven't given it much thought but what is a solution to stop computers from ever having more than 50% control over the market.

deadhead's picture

Isn't this kinda like Chuck Schumer "asking" the Fed to be more transparent?

FINRA is an embarassment. 

SEC is worse.

President Obama must get rid of Mary Schapiro now.

Daedal's picture

Haven't seen any coverage of CFTC. I'd be curious to see what they have been up to.

Anonymous's picture

"...exercising the "sell short" option in retail and institutional brokerages is immediately punishable by listening to Mary Schapiro talking softly about how honest the regulators are for 24 hours non stop."

Best comment ever.

Anonymous's picture

This is worse than you make it out to be, for once.

IOI's are frequently used by Goldman, Knight, etc., when they have a customer order that is big enough to make front running profitable. They can't just trade ahead of customer, so they get someone else to do it. IOI's are how they let the other players know that there is a big order. They are saying "please move the market for me so I can fill my customer at a bad price".

But couldn't someone game this system -- i.e. send a *fake* IOI that pretends to be a customer, that would cause other HF operations to move the market when no customer order exists? Maybe after taking a position that would profit from this move? Absolutely, and this is what FINRA is warning traders not to do.

They are telling traders that the IOI system is only to be used for gouging customers, and is not to be diluted by spoofed order flow. This way the guys getting these IOIs don't have to think twice about what they mean....

Anonymous's picture

Hmmm, i wonder if this was in GS manipulating secret sauce. How easy it would be to ping the market (or stock) with the code! Would too many pings add up to a DoS?

Anonymous's picture

Have you ever tried front running an IOI ?.. most are fake "naturals" anyway.. it's not like front running a known order it's like front running the ghost of an order.not a profitable strategy