Full Kaufman Letter To Mary Schapiro, Or Is The HFT Party About To End?

Tyler Durden's picture

Issues under attack include everything that currently lays the groundwork for a multiple-tiered market, including:

  • Flash Orders
  • High-Frequency Trading (with a juicy tangent regarding Renaissance Technologies)
  • Co-location of Servers at the Exchanges and Other Venues
  • Direct Market or Sponsored Access
  • Dark Pools
  • Liquidity Rebates
  • Retail Order Flow

If you want to learn more about any of these issues, just select the tags for this article.  Furthermore, we welcome readers' critical commentary and suggestions here as it will be read by all the right people.

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KeyserSöze's picture

Mr. Kaufman is going up against Goliath he needs our support. 

I left a message for him thanking him.


Right about now the vampire squid is slithering the halls of D.C. searching to jam its blood funnel into Mr. Kaufman.

Tyler is there such a place where politicians can go to report threats of intimidation as the 'conspiracy theorist' Matt Taibbi reported? 

I wonder if any readers know?  Much appreciated.

Cognitive Dissonance's picture

Does anyone really expect the game to be made (a little bit more) honest when so many people in so many positions of power are benefiting from the current rigged game?



capitalisa's picture

Ummm...  Yeah, I do!  Question would be:  WHY don't you??

Anonymous's picture

Heh. I don't think you realize how big the lynch mob is.

Cheeky Bastard's picture

there are 1 billion arms in the US, and cca. 100 million people who are on the verge of using them. That is all you need to know.

Anonymous's picture

If all those you speak of arm up and go camp out in the Hamptons, I'm pretty sure Wall St. would take notice.

Anonymous's picture

Unfortunately they have all the nukes. These guys are not above nuking the US and then blaming "terrorists"; several nuke attempts have been bungled already. Although similar methods have been used to eliminate debts and contracts they don't want to pay up, like towards the most spectacular target, Cantor Fitzgerald.

Cheeky Bastard's picture

true; but that would involve the military to be complacent; something that will NEVER happen. As far as i know; they swear their allegiance to the constitution and the citizens of the USA, not to the president or any institution ( meaning HoR, Senate, White House etc )

Anonymous's picture

In such a scenario the military would split just like all the other institutions. No matter how it unfolded the cost to ourselves is unimaginable. A wild card is that we have many combat veterans around now.

Karston1234's picture

Just continue writing this kind of post. I will be your loyal reader. Thanks again.
online schools | distance learning schools | campus based schools

SpartanTnT's picture

I just left a message for him thanking him

crzyhun's picture

On the surface this makes sense. But who in their right mind can overview this, make sense of it and rectify it? Then the question, "Rectify it to what form?"  

"Retreat forward." Terrence McKenna.

The SEC's span of control/regulation is dubious though attempted. Any group in the review, assesment and suggestion will more than likely only pull from an existing array of option. These are faulty at best. True innovation requires objectivity and diligence. Who?

mossberg's picture
mossberg (not verified) crzyhun Aug 24, 2009 3:55 PM

 stayed below the Aug 5 high. This may be a sign of upcoming trend reversal, either in  or in the equities/commodities.

good articles; good articles 4 slow news day ..http://www..
hat tip: finance news & finance opinions

Anonymous's picture

Can't ZH filter out anybody that posts a link to www.iamned#$^#$^.com?!? Doesn't anybody else get tired of this spammer and their poorly written scripts - "Either in or in the equities/commodities...". boo! hiss! I wouldn't visit that website to save my life.

Anonymous's picture

The words that stuck out for me were "perhaps unintentionally" in the first sentence of the second paragraph.

Joe Sixpack's picture

"perhaps" is a big word. I think it is fair to give the benefit of the doubt, but to investigate. I think this approach was appropriate here, too:



IT IS CONCLUDED that the rushed plan of the Treasury and Federal Reserve appears to be FINANCIAL BLACKMAIL levied upon the United States of America, whether intentionally so or not;"

Anonymous's picture

Sent him a note asking him to continue fighting the fight, and not to waver.

Anonymous's picture

I also just left a message thanking him.

Letthepossumlive's picture

   I do believe things will change for the better. I recently read an article by Judd Bagley called The Pendulum Swings. I think we are seeing the pendulum beginning to swing the other way and it will have a load of momentum behind it. People are starting to see just how much influence Wall Street has on the government and any politician with a brain could accelerate his/her career in a matter of months by actually distancing itself from the status quo.

    I could just see the big boys giving high fives over outing Tyler but instead woke up with a hangover and a WTF just happened. They are losing power by the day but they have a long way to go and won't give up easily. People are getting more educated and more pissed.  Other blogs had comments about who broke what story. Wouldn't it be great if the MSM starting competing on breaking stories of corruption instead of the PR fluff fed to them? It's coming.

AnonymousMonetarist's picture


Pecora 2.0?


Wiki:In 1939 Ferdinand Pecora published a memoir that recounted details of the investigations, Wall Street Under Oath. Pecora wrote: "Bitterly hostile was Wall Street to the enactment of the regulatory legislation." As to disclosure rules, he stated that "Had there been full disclosure of what was being done in furtherance of these schemes, they could not long have survived the fierce light of publicity and criticism. Legal chicanery and pitch darkness were the banker's stoutest allies."

Bruce Krasting's picture

It's not about the money. It's about the money.

How much money are we talking about here? Is this 1/2 cent a share or is it 5 cents?

Love to know.

TumblingDice's picture

Perhaps the question of the legality of Goldman Sachs monopoly over the Supplemental Liquidity Provider role deserves attention here as well.

Other legal questions regarding potential illegal behavior and moral hazards in our free markets that come to mind:

Are banks colluding to restrict supply of housing by not putting foreclosed properties unto the market, and at the same time not having recognizing the losses that stem from the foreclosures?

Are discussions pertaining to the most important topic of mark to market accounting rules being held entirely in public, or will banks receive an advance "heads-up" notice of a potential change in these rules?

What percentage of the NYSE and NASDAQ market cap is owned by the Federal Reserve and State and Federal governments?

Assetman's picture

Perhaps a more direct request to the SEC is to bring to a halt all activity related to NYSE's SLP program-- at least until a coprehensive study is conducted.  All one needs to do is provide is the NASDAQ rebuttal to give Kaufman and his group enough reason why the SEC needs to give pause to SLP.

From my understanding, the SLP program put in place at the NYSE is still in "trial balloon" mode... is that correct?

Anonymous's picture

Bring William Black on board. he scares the shit out of the corporations. Dude is solid and personifies integrity

agrotera's picture

Excellent idea.  Sadly, The SEC is compromised in many ways because of the fact that the financial service industry and the private interests of the privately held Federal Reserve hold all sway with most politicians, and also, the SEC and other regulating agencies.  People wonder why the so called "smaller firms" always have appropriate watch by the SEC and other agencies, but it is the toobigtofail entities that effectively pick and choose how to be regulated--AIG is a perfect example.

So, for this investigation to be fully successful, the SEC should run this investigation, but people like Mr. WIlliam Black, and of course Tyler and Marla, will be the perfect detector of any insufficiencies of this investigation.  If the SEC could regain it's stature as a regulator, the only way this would be possible is to allow it's investigations to be scrutinized by appropriate critics, and to take the criticism 100% seriously.

Veteran's picture

Forgot to log in.  Bring William Black on board.  he scares the shit out the corporations and personifies integrity.  Dude is solid

Anonymous's picture

Just sent a letter to Senator Kaufman and you don't even have to do a math problem to talk to him.


Anonymous's picture

Thanks for posting this. I used it to send my appreciation.

casey's picture

The Globe and Mail in Canada is reporting that Madoff is dying of cancer.  Hmmm!



Anonymous's picture

Has he bombed any airliners recently?
If so send him to Libya

Sqworl's picture

I am calling and emailing Ron Paul...If anybody in Washington can help, its him...

mossberg's picture
mossberg (not verified) Aug 24, 2009 3:55 PM

goes up, the value of the would go up as well, but that has not been the case. Last week was the epitome

good articles; good articles 4 slow news day ..http://www..
hat tip: finance news & finance opinions

AnonymousMonetarist's picture

This space monkey reports that insertion of 'zero-based' in Paragraph 1 was successful.

Anonymous's picture

A bit off topic but how long does it take to validate a login. I am still waiting :/

Anonymous's picture

This again corroborates that this website pushes conspiracy theories day after day, hiding behind anonymous nicknames such as "Tyler Durden".

The only catch is that the conspiracy exists.
Keep up the good work guys!

HankPaulson's picture

There needs to be criminal prosecutions. Schapiro is obviously hopelessly inadequate for the times. She needs to go.

davidelevine's picture

I'm sure people saw this in today's WSJ but just in case:

Goldman's Trading Tips Reward Its Biggest Clients



Joe Sixpack's picture

I sent a letter to Sen. Kaufman and thanked him. I also asked him to support S604 (the senate version of Ron Paul's HR1207). I used http://www.Congress.org, and chose the option to make the letter publicly viewable (does not display your name publicly).

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windhorse2000's picture

I just spoke to one of the Sen. aides and thanked him, and stated how important this was.

AKA Clark's picture

Along the same lines, I suggest that we have every company that gets any waiver of any rules from any Agency (Federal, Self Regulatory, or other) declare quarterly: 1) All waivers they have received, 2)When they received each waiver and for what purpose, 3) When the waiver expires (if ever) and 4) The approximate market value ($ impact) of each waiver to their organization

peterpeter's picture

I can read between the lines and figure out which interest groups and bloggers have their fingerprints on many of the issues Kaufman raises, even if I disagree with them.

But... how is it that Kaufman takes issue with Direct Edge using liquidity rebates (a private company's pricing model) in an effort to take marker share away from the LSE.  He uses the word "unfortunately", which I find beyond absurd.

A US Senator is upset that a NJ company is trying to take market share away from the LSE through more aggressive pricing?!?!

I have lots of issues with the letter, but that one for me takes the prize.


Anonymous's picture

I'm an analyst, so let me break it down simply:

First: Every order that goes into any market needs to be good for at least one second. It has to be a real order.

Second: Nobody should get paid for providing liquidity. It creates a huge moral hazard creating too much liquidity is created. That distorts price. Specifically, that makes price a function of liquidity instead of making price a function of a set of information.

Third: Instead of getting paid, firms should PAY to provide liquidity. That way the incentive to create liquidity is checked because liquidity has to be provided within the context of making a directional decisions (even if it is a minute by minute one).

Fourth: If entities do get paid to provide liquidity (rebates) it has to be there no matter which way the market moves.

peterpeter's picture

> I'm an analyst, so let me break it down simply:

Ummm... I hope your analytic abilities are better than your understanding of capital markets and market micro-structure.

1 second orders, paying to add liquidity...  Please return to your discounted cash flow models.

> Fourth: If entities do get paid to provide liquidity (rebates) it has to be there no matter which way the market moves.

That is how it currently works.


Anonymous's picture

I need the services of an actuary to see if I will likely still be alive when the SEC concludes it's 20-year comment period on the rule changes they have yet to even propose. Bah. Humbug.

Anonymous's picture

So here is a Senator No Name (an appointed former Biden staffer)that has a zip wall street, trading background who interestingly suggested that DTCC get a non compete contract written into the securities law to identify "fail to delivers" and no one asks "gee how does this happen?

This reminds me of that real special "Indy Mac is in Trouble" letter that a certain Senator from NY sent to the OTS tanking the stock, making more than a few hedge funds "happy". I mean where is the skepticism?

How about taking the part of the market that works (equity, options and fututres) and trash it to deflect inquiry into OTC Derivatives? Conspiracy anyone?

channel_zero's picture

Erm, so that's all it takes for you guys to have some hope?

The SEC may be the right regulatory agency, but they don't have the resources to investigate in a timely manner?  Will they have the political firepower to call out the bad actors?

It's "game on" for GS once someone attempts to legislate something.  Do you think they will just roll-over?  Hookers with a heart of gold makes a good movie character, but it ain't happening to GS, BofA.



sidkof's picture

Well, that's in stocks, what would you think of a report by equity analyst was paid, you said you worked for DuPont, DuPont paid if an analyst report, what kind of report do you think credibility that would be mensagens para orkut