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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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Mon, 08/24/2009 - 12:51 | Link to Comment KeyserSöze
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.

Mon, 08/24/2009 - 12:52 | Link to Comment Cognitive Dissonance
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?



Mon, 08/24/2009 - 13:26 | Link to Comment capitalisa
capitalisa's picture

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

Mon, 08/24/2009 - 14:07 | Link to Comment Anonymous
Mon, 08/24/2009 - 14:48 | Link to Comment Cheeky Bastard
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.

Mon, 08/24/2009 - 15:29 | Link to Comment Anonymous
Mon, 08/24/2009 - 15:55 | Link to Comment Anonymous
Mon, 08/24/2009 - 16:27 | Link to Comment Cheeky Bastard
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 )

Mon, 08/24/2009 - 21:45 | Link to Comment Anonymous
Wed, 12/15/2010 - 06:52 | Link to Comment Karston1234
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

Mon, 08/24/2009 - 12:58 | Link to Comment SpartanTnT
SpartanTnT's picture

I just left a message for him thanking him

Mon, 08/24/2009 - 13:01 | Link to Comment crzyhun
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?

Mon, 08/24/2009 - 16:55 | Link to Comment mossberg (not verified)
Mon, 08/24/2009 - 20:12 | Link to Comment Anonymous
Mon, 08/24/2009 - 13:06 | Link to Comment Anonymous
Mon, 08/24/2009 - 15:23 | Link to Comment Joe Sixpack
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;"

Mon, 08/24/2009 - 13:14 | Link to Comment Anonymous
Mon, 08/24/2009 - 13:19 | Link to Comment Anonymous
Mon, 08/24/2009 - 13:21 | Link to Comment Letthepossumlive
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.

Mon, 08/24/2009 - 14:30 | Link to Comment AnonymousMonetarist
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."

Mon, 08/24/2009 - 13:28 | Link to Comment Bruce Krasting
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.

Mon, 08/24/2009 - 13:34 | Link to Comment TumblingDice
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?

Mon, 08/24/2009 - 15:12 | Link to Comment Assetman
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?

Mon, 08/24/2009 - 13:36 | Link to Comment Anonymous
Tue, 08/25/2009 - 04:43 | Link to Comment agrotera
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.

Mon, 08/24/2009 - 13:37 | Link to Comment Veteran
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

Mon, 08/24/2009 - 13:48 | Link to Comment Anonymous
Mon, 08/24/2009 - 17:50 | Link to Comment Anonymous
Mon, 08/24/2009 - 13:49 | Link to Comment casey
casey's picture

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

Mon, 08/24/2009 - 15:12 | Link to Comment Anonymous
Mon, 08/24/2009 - 14:00 | Link to Comment Sqworl
Sqworl's picture

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

Mon, 08/24/2009 - 16:55 | Link to Comment mossberg (not verified)
Mon, 08/24/2009 - 14:33 | Link to Comment AnonymousMonetarist
AnonymousMonetarist's picture

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

Mon, 08/24/2009 - 14:42 | Link to Comment Anonymous
Mon, 08/24/2009 - 14:43 | Link to Comment Anonymous
Mon, 08/24/2009 - 14:45 | Link to Comment HankPaulson
HankPaulson's picture

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

Mon, 08/24/2009 - 14:49 | Link to Comment davidelevine
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


Mon, 08/24/2009 - 15:36 | Link to Comment Joe Sixpack
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, and chose the option to make the letter publicly viewable (does not display your name publicly).

Mon, 08/24/2009 - 16:10 | Link to Comment Anonymous
Mon, 08/24/2009 - 16:20 | Link to Comment windhorse2000
windhorse2000's picture

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

Mon, 08/24/2009 - 16:31 | Link to Comment AKA Clark
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

Mon, 08/24/2009 - 17:41 | Link to Comment peterpeter
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.


Mon, 08/24/2009 - 17:45 | Link to Comment Anonymous
Mon, 08/24/2009 - 18:38 | Link to Comment peterpeter
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.


Mon, 08/24/2009 - 17:52 | Link to Comment Anonymous
Mon, 08/24/2009 - 19:01 | Link to Comment Anonymous
Mon, 08/24/2009 - 19:07 | Link to Comment channel_zero
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.



Sat, 01/22/2011 - 03:35 | Link to Comment sidkof
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

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