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Letter To Senator Charles Schumer - Ban Goldman's SIGMA X Dark Pool

Tyler Durden's picture


Dear Senator Schumer,

You recently approached SEC head Mary Schapiro with some very valid concerns about Flash trading, and the potential for investor abuse by advance looks to select market participants ahead of the general order pool. Your crusade was subsequently enjoined by such equity market luminaries as Robert Greifeld, president and CEO of the Nasdaq Stock Market, who had this to say regarding not just Flash trades in particular, but numerous other components of market topology, whose sole purpose is to obfuscate natural order flow and to provide loopholes for dominant market players to extract inefficiencies (i.e., scalp regular investors) arising from established and SEC-endorsed mechanisms of efficient market circumvention:

"Flash orders, which are a fundamental part of high-frequency trading, are but one symptom of the current evolving market structure. Nasdaq OMX is concerned that the securities industry appears
willing to accept more and more ‘darkness’ and limits on the
availability of order information. Instead, the policy goal should be
clear: to eliminate any order types or market structure policies that
do not contribute to public price formation and market transparency.”

"The industry has a unique opportunity at this time to take a hard look
at dark order types and the underlying market structure issues that do
not support public price information

Senator Schumer, while Zero Hedge applauds your initiative, the truth is that the wrongdoing in the context of potential investor market abuse runs far deeper and is much more pervasive than you realize. And while one can highlight the merits of the Op-Ed published in the New York Times earlier by quant titan Paul Wilmott entitled "Hurrying Into The Next Panic" (a recommended read for you and your staff), which notes numerous frightening implications brought about by the domination of Hiqh Frequency Trading, let us stick within the context of advance looks, which is at the basis of your letter seeking the ban of Flash-like behavior.

Zero Hedge would like to highlight that while your letter to Mary Schapiro indicated your concern with such market actors as DirectEdge, BATS and Nasdaq, the truth is there are substantially larger and more dangerous "fish" on which you should focus your attention.

As a primary example, I would like to refer you to Goldman Sachs' dark pool, SIGMA X.

As evidence I present an analytical paper prepared by none other than Goldman Sachs, compliments of the Bank Holdings Company's GSET (Goldman Sachs Electronic Trading) division.



While I recommend you read the full report and other related literature (especially if you wish to understand why VWAP or Volume-Weighted Average Price is such a critical concept in modern trading), I would like to bring your attention to page 6 of this report, and in particular the following sections:

"The child orders generated by Goldman Sachs algorithms interact with SIGMA X liquidity."


"When a client routes a marketable order through SIGMA, the smart router first exposes the order to SIGMA X liquidity."

This basically means that as a Goldman algo strategy splits an incoming block trade into smaller (child) components, these orders will first be advance-exposed to Goldman's own prop strategies which get a "first look" (no pun intended) at the order flow to dispose of as they desire. Additionally, due to the flashing advance window, Goldman implicitly knows in advance of a potential spike in order flow - in other words if there is a size buyer or seller of any given particular stock - an incalculable edge in today's market, allowing one to potentially take advantage (frontrun) of forced buyins and unwinds and major block trades.

This provides the firm with a material advantage over other market participants.

In order to get a sense of the size of this potential abuse, as Goldman itself discloses, SIGMA X traded over 123 million (matched-only, single counted) shares daily in May, over 600 million per week. This is a staggering amount of shares over a cumulative extended period of time, and could potentially provide the firm with a substantial unfair advantage over other participants.

Furthermore, Goldman is a dominant Program Trading market player on the New York Stock Exchange, by virtue of its participation in the NYSE's Supplemental Liquidity Provider program. As publicly disclosed, Goldman traded over 796 million principal shares (for its own benefit, not as an agent) in the prior week alone, almost double the next largest market participant Credit Suisse which traded a total volume of just over 420 million shares.

Whether or not Goldman can implicitly take advantage of the advance looks Goldman receives compliments of its own dark pool, SIGMA X, and then subsequently reroutes this informational advantage to trades executed on the NYSE, and other exchanges and ECNs, is also a very pertinent question.

However, even if acting in a vaccum exclusively within the confines of SIGMA X, Goldman's modus operandi begs the question: if, as your letter discloses, you believe Flash-like behavior is a detriment to investors, we encourage your team to focus its attention on this matter. The potential abuse in the context of SIGMA X, is substantial, and much more so if it is not confined to the dark pool exclusively.

In conclusion, SIGMA X was conceived and brought to market via Spear, Leeds and Kellogg: I would like to present to you the form contract with Goldman that new customers have to sign when they agree to engage SLK for any client purposes. I bring your attention to the highlighted area:

Zero Hedge is happy to answer any questions at your convenience. You may contact us at

PS. In case readers are having trouble grabbing the original document, here is the link to the file saved internally.


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Wed, 07/29/2009 - 16:26 | 18569 Project Mayhem
Project Mayhem's picture

Nice work

Wed, 07/29/2009 - 16:26 | 18571 Anonymous
Wed, 07/29/2009 - 16:40 | 18600 Anonymous
Anonymous's picture

Uhh, it is banned.

Wed, 07/29/2009 - 17:11 | 18637 Anonymous
Anonymous's picture

Why? The horse was 21. I think it's legal in SC if the horse is at least 21.

Wed, 07/29/2009 - 16:27 | 18574 buzzsaw99
buzzsaw99's picture

Only in Goldman's world can you add liquidity by taking money out.

Wed, 07/29/2009 - 18:40 | 18702 VegasBD
VegasBD's picture

Ha! Thats a good way to put it

Wed, 07/29/2009 - 16:28 | 18575 Alexander Supertramp
Alexander Supertramp's picture

Namaste, you righteous bastards.  "Every generation needs a new revolution," said Thomas Jefferson.  Thanks for your part in leading ours. 

Wed, 07/29/2009 - 16:28 | 18577 Anonymous
Anonymous's picture

well done.

Wed, 07/29/2009 - 16:32 | 18580 Anonymous
Anonymous's picture

This is the most relevant & important website in the financial universe.

Wed, 07/29/2009 - 16:43 | 18605 Anonymous
Anonymous's picture

I second that. No comparison between ZH and CR. Can't think of another site that gives this sort of "insider" information. I just hope ZH remains free.

Wed, 07/29/2009 - 18:04 | 18680 Cheeky Bastard
Cheeky Bastard's picture

i third that and if i might add that ZH is in the financial blogosphere what Gutenberg's press machine was in .... well the sphere of books, and i have no doubt whatsoever that there is a Pulitzer prize stashed somewhere in the following years for this blog and its creators ...

Wed, 07/29/2009 - 18:17 | 18691 dnarby
dnarby's picture

How cool would that be if a Pulitzer was given to someone who remained anonymous.


If they took it to their grave...  Talk about creating a freakin' legend.

Wed, 07/29/2009 - 18:42 | 18705 VegasBD
VegasBD's picture

The character Tyler Durden will eventually bring down the credit markets. love it.


Wonder if Chuck Palahniuk reads zero hedge?


Wed, 07/29/2009 - 20:49 | 18821 Cheeky Bastard
Cheeky Bastard's picture

use your imagination, there is always someone to pick up the prize without breaking the true identity of TD

Thu, 07/30/2009 - 01:31 | 19034 aldousd
aldousd's picture


Wed, 07/29/2009 - 23:24 | 18973 Anonymous
Anonymous's picture

here here. I couldn't agree more. Senator Schumer, I assume you will be preparing a subpoena for the good folks here at ZeroHedge so they can share further their learned insights into the workings of HFT.

Wed, 07/29/2009 - 16:35 | 18581 kote
kote's picture

More Street Smart SIGMA X goodness:

How long til they take these offline do you think?

Wed, 07/29/2009 - 16:37 | 18593 Oso
Oso's picture

already happened.

Wed, 07/29/2009 - 16:42 | 18596 kote
kote's picture

WOW.  Google cache of the same URL below.  It actually was there.  It took 2 minutes for them to take it down... and it's been up for months at that URL.

More also at

Wed, 07/29/2009 - 16:43 | 18604 Project Mayhem
Project Mayhem's picture

holy **** it's now deleted off   (click download on the cached page and see what happens)


Tyler you better have some backup copies of this little monster

Wed, 07/29/2009 - 16:44 | 18610 kote
kote's picture

Still up at the thought link posted above.  Check the third page.  Very weird.

Wed, 07/29/2009 - 17:44 | 18665 Anonymous
Anonymous's picture

select the print (7pages) will open as a pdf and just cancel the print

Wed, 07/29/2009 - 17:50 | 18671 Project Mayhem
Project Mayhem's picture

thanks, that worked

Wed, 07/29/2009 - 20:59 | 18833 agrotera
agrotera's picture

NO coincidence--there is alot of history getting rewritten, and facts suppressed.  I have noticed it a few times on wikipedia, but i just thought my memory was off, until i read the essay on how the whole naked short selling scandal that they helped to expose, is being blocked from report on wikipedia.

Wed, 07/29/2009 - 16:44 | 18607 Cow
Cow's picture

ummm... how about ...already

Wed, 07/29/2009 - 16:50 | 18619 kote
kote's picture

Hey Cow, the bear beat you to it.  Just sayin' :)

Also, to GS, THAT WASN'T A CHALLENGE.  But, I'm still impressed.

Wed, 07/29/2009 - 17:28 | 18656 Anonymous
Anonymous's picture

Jesus, TD you are the best. That said are you stocked up on kevlar longjohns?

Wed, 07/29/2009 - 17:05 | 18631 Anonymous
Anonymous's picture

everything on their site self-destructs after a short period of time - e.g. you need to reload the search terms - and then save the PDF

Wed, 07/29/2009 - 17:20 | 18649 kote
kote's picture

Looks like you're right.  However, it doesn't make any sense at all to be doing this.  Security through obscurity?  Force internal sites to use dynamic code to recreate the links every few minutes?  When it's already publically available and cached?

Whatever.  Someone got a nice bonus for the implementation I'm sure.

Wed, 07/29/2009 - 21:44 | 18879 We Are Legion
We Are Legion's picture

Yeah... someone NOT the IT person who made it...

Wed, 07/29/2009 - 16:34 | 18583 Veteran
Veteran's picture

Killer as always


As an aside, saw on Bloomie ol' Obama said we is at the beginning of the end.  Think a Churchill quote, (paraphrased of course because my memory is shot) might be more appropriate:

This isn't the end, or even the beginning of the end.  It is perhaps the end of the beginning. . .


Wed, 07/29/2009 - 16:36 | 18586 dark pools of soros
dark pools of soros's picture

why just Sigma X?  ban ALL dark pools

Wed, 07/29/2009 - 16:44 | 18609 rickets
rickets's picture

Further, no more invisible orders via ECNs which allows participants to step in front of what others see as the best bit/offer.  I also have to ask if multiple ecns/marketcenters are really a good idea.  One centralized marketcenter - with no competition, would make a flatter, more fair marketplace.  The more avenues for execution the harder to regulate and the higher the chance of inequality.  Now, I say that knowing that means someone has to run it fairly...which is an issue....

Wed, 07/29/2009 - 16:51 | 18620 Anonymous
Anonymous's picture

There is also a problem with having more than one ecn or execution avenue: it is not a first come first serve market. Years ago this was not as much of an issue, but now with so many ECNs and dark pools, investors bidding stock at a level first are often not the first filled as they may be unlucky and sitting on a different ecn than a sellor elects to take. The market should reward the first participant at the best price the first fill.

Wed, 07/29/2009 - 16:36 | 18588 newera22
newera22's picture

Great post. Reading between the lines here, I suspect that Schumer may not be as benevolent as you think. In fact by pointing out some bad apples he may be finding a way that protects his key backers. I will leave it at that.

Wed, 07/29/2009 - 17:12 | 18638 Anonymous
Anonymous's picture

Apocalypse Now- My sentiments exactly. This is a test. Testing, testing 1,2,3...

Wed, 07/29/2009 - 18:47 | 18706 Anonymous
Anonymous's picture

I doubt that Schumer is benevolent--and I'm sure he's taken quite a bit of money from the FIRE industries. However, Schumer needs to at least play up doing something about this, lest the plebs (some of them well armed) become very, very unhappy with blatant giveaways. He can make noise and possibly get bigger bribes from GS or whoever gets in the crosshairs. But at least he can't say he didn't know, because Tyler is pointing it out to him in technicolor detail.
P.S. I just got my Zero Intelligence shirt, can't wait to parade around town!

Thu, 07/30/2009 - 01:35 | 19036 aldousd
aldousd's picture

Tyler and friends you have to love it. You have the smartest people in the room walking around town with shirts on that say "Zero Intelligence."  Like they're all like little Hugh Axtons.

Wed, 07/29/2009 - 19:08 | 18726 milkum bilkum pc
milkum bilkum pc's picture

My exact thought..., or could be they are so dumb that they stepped in the crap before looking and now opened up further inspection of GS and others.... One can only hope on the latter.

Wed, 07/29/2009 - 16:39 | 18589 ToNYC
ToNYC's picture

Perhaps it might be simpler to note that even the sharpest minds couldn't possibly be thinking about anything in 30 msec..they only feel comfortable trading 123 million shares in a day for its own account when there is zero risk..and they thus have exactly no need to hedge..duh! they are zero hedgers! VAR can be astromonical because the divisor is close to zero..packet drop errors only.

Too simple for the unRegulators?..too Big to be Challenged..the Joseph Jett effect at Kidder Peabody - 1994

What is the sound of a whistle-blower in a vacuum?


Wed, 07/29/2009 - 16:37 | 18592 Project Mayhem
Project Mayhem's picture

Yeah don't forget Baikal and Turquoise  ;)

Wed, 07/29/2009 - 16:39 | 18594 ptoemmes
ptoemmes's picture

As good as I have read from you especially, as a novice at best, I understood it.



Wed, 07/29/2009 - 16:40 | 18598 silencedogood
silencedogood's picture

Dennis Kneale,

If your station ACTUALLY did research instead of waiting for reuters and the AP to put stories out you can may actually get a viewing audience.  The CNBC 'Money Honeys' are spectacular but basicly lip syncing a story put out by Reuters or the AP is NOT analysis.  Dennis, you are old enough to remember Milli Vanilli...try to learn from their mistakes!

-Silence Dogood

Wed, 07/29/2009 - 16:42 | 18599 molecool
molecool's picture

Kick ass letter, Tyler - these guys are picking a fight with the masters in obfuscation - plus they have half of Congress at their beck and call. Schumer and his crew will need all the help they can get to make a case that is 'politically too inconvenient' to pass up. Not sure if this ever goes anywhere - whenever we think the heat is on those cats don't seem to break a sweat.

Wed, 07/29/2009 - 16:41 | 18603 Miles Kendig
Miles Kendig's picture

There is ample history in Washington of seemingly friendly persons who, in fact end up end up acting as as an agent provocateur.  I hope that Senator Schumer is in fact looking to assist in reclaiming the prospect of free markets from those that now hold them hostage.  However, of all the folks in the US Senate that could address this issue Schumer is one I would have lingering questions about.  Tread cautiously.

Great letter!

Wed, 07/29/2009 - 17:01 | 18625 Anonymous
Anonymous's picture

I will never forget (or forgive) Chuck Schumer for his disgusting strutting in support of the federal assassins during the Waco Hearings. Go watch Waco: Rules of Engagement if you want to see what I mean. I watched every day of those hearings back when they happened, and there were moments where that man made my blood boil. A disgusting power-tripper he is. He's also been said for years to be in the pocket of banks. Use him as a vehicle of convenience, but remember: Your Mileage May Vary.

Wed, 07/29/2009 - 16:46 | 18614 Anonymous
Anonymous's picture


This area is way off by bailiwick. But, it is manifesting, that you will have to hand-hold and walk every step for not just readers like me, but for the regulators and most everybody else.

Your patience will be tested, because you sir, I emphasize again, will have much hand-holding to do and connect every single dot.

Thanks for your hard work.

Honest Abe

Wed, 07/29/2009 - 16:48 | 18616 Comrade de Chaos
Comrade de Chaos's picture

"it appears the original link to the paper was taken down within 10 minutes of this post."

priceless, hm, someone does pay attention :) . if only they knew what ZH does or does not know :) , keep them guessing!

Wed, 07/29/2009 - 17:15 | 18644 kote
kote's picture

Dymanically updated link available at

Wed, 07/29/2009 - 18:48 | 18707 Comrade de Chaos
Comrade de Chaos's picture

p.s. I mean GS and not the Senator Schumer.

Wed, 07/29/2009 - 16:54 | 18621 Anonymous
Anonymous's picture

dear Tyler, i don't know if u did it, but when you talk about Nyse Program Trading you should also, according to me, take a look to the second table, " trading by executing market".
it gives a deeper view on the total volume traded by those firms...

Wed, 07/29/2009 - 17:05 | 18630 RobotTrader
RobotTrader's picture

Yet another banner day for the Sigma X, Dark Pools, Prop Desk A, and Prop Desk B at Goldman Sachs.

The Fed and Treasury Department successfully sold another huge chunk of Treasuries today, thanks to Goldman's dunking of all commodities, which promptly put a bid up on the U.S. Dollar and U.S. Treasuries.

Note the dollar rally today.  The Chinese Plutocrats must be giddy.  Geithner and Goldman now under their thumbs, China is now able to dictate currency market direction.

Of course, they obliged by lapping up today's Treasury issues like a dog lapping up barbeque sauce off of Tony Roma's ribs thrown out onto the sidewalk.

The Chinese are like dogs.  Give them enough, and they will eat and eat and eat without stopping.  Like the Chinese adding more and more and more to their vast horde of U.S. Treasuries.

Looks as if the same crowd of little old ladies who shucked off their canes and walkers to buy oils, golds, fertilizers, infrastructure, emerging markets, etc. turned tail and immediately stampeded out of the casino after Geithner started a small grease fire in order to spook the herd back into the "safety assets".

That's what happens when billions and billions under management is now daytraded on a 5-minute chart, and long positions are immedately converted into short positions within hours.

Meanwhile, while inflation assets were being dumped, looks as if everyone decided that the next best place to hide was in bombed out, government-owned, junk banks like Citigroup and near bankrupt retailers like Pier 1.  It really doesn't matter what the firm's prospects are, if the market is having a bad day, money will pile into anything and everything that is going up.

And don't forget Cramer's call for $20 oil.  All the car manufacturers and airlines were up big today.  I expect a lot of funds will be piling on those stocks tomorrow.

Everyone will be staring bug-eyed at the screens tonight, scanning and checking out what to buy tomorrow now that 100% of their commodity positions have been offloaded.



Wed, 07/29/2009 - 17:13 | 18642 aldousd
aldousd's picture

You certainly have a way with words Robot.

Wed, 07/29/2009 - 17:25 | 18655 dark pools of soros
dark pools of soros's picture

its more the dots he connects under the guise

you should see the desperate longs of those junk banks cheer today as if they still could score the winning touchdowns of years gone by


in time they will look back and feel it was just a mindless summer dream

Wed, 07/29/2009 - 17:20 | 18650 Anonymous
Anonymous's picture

I also think there is not enough capital on earth to support support if you know what I mean. So, this is hot potato capital funding for short term needs. When bond purchases are needed, they drop the market and people rush into purchasing treasuries. When it looks like China might acquire a number of US companies, they influence the masses and robots to bid up equity prices by encouraging the risk trade. It doesn't matter that the value of the bonds might drop in between, as long as they prop it up again before the next bond offering. I think this might be a pattern that we could exploit for trading?

Wed, 07/29/2009 - 17:35 | 18661 Miles Kendig
Miles Kendig's picture

With the added plus for China that pressure on commodities pressures iron ore pricing, the Aussie and redirects some of the froth from their lending activities...

Wed, 07/29/2009 - 17:59 | 18676 deadhead
deadhead's picture

What a treat....a great post by TD and excellent, excellent memorandum to Sen. Schumer and the Robo daily summary.

Alas, I stimulated the economy today by buying a Compaq 15.7 laptop at WalMart (they were $298, a genuine steal in my opinion).  Naturally, will purchase spy during the a.m. low tomorrow and sell at 3:59 p.m. to pay for said computer.




Wed, 07/29/2009 - 19:21 | 18739 Ags Nightmare
Ags Nightmare's picture

Hey, Wndy...been a long time. It's still all about "words". I'm blown away how quick the crooks are back to chasing trash can lids down the street. Jimmy Jones could wave a bag of dog poo over his head and the Cramericans would line up to buy it and four months ago he was curled up in a fetal position.

This is gonna end badly...again.....


Wed, 07/29/2009 - 17:08 | 18632 curbyourrisk
curbyourrisk's picture

Excellent work...but definitely above his pay grade!!!!!

Wed, 07/29/2009 - 17:08 | 18633 Anonymous
Anonymous's picture


Wed, 07/29/2009 - 17:11 | 18635 Anonymous
Anonymous's picture

e^x= (EUR/DXY)-[DXY/(JPY?EUR)]+?UST?^3/(3*OIL!)+?,-?

Where e^x = consistent illogic AND today’s S&P close

With today's correlations, its all one trade.

Nice work ZH

Wed, 07/29/2009 - 17:11 | 18636 Anonymous
Anonymous's picture

Trusting Chuck Schumer is a mistake. He is out in front because GS knows this is going to be trouble and as the senior Senator from NY, he is Goldman's man.

Nevertheless, nice work. Hammer away!

Wed, 07/29/2009 - 17:17 | 18648 buzzsaw99
buzzsaw99's picture


Wed, 07/29/2009 - 18:10 | 18684 deadhead
deadhead's picture

I've commented about the senior Senator from NY custom previously and I certainly cannot disagree with your thought.  As has been said before, politicos like Schumer will absolutely eat their own if the momentum shifts enough and Schumer will start chomping like a homeless guy on a tenderloin at Sparks.  The key is for the momentum to keep moving and from where I sit, I cannot read any liberal blog/Obama worshipping/Democratic junkie site that doesn't bash the shit out of wall st., banks, with GS being the poster boy.  Hell, one little proof of the fact that the light is too bright on GS is the price they paid for TARP warrants vs. their peer group.  They have massive PR problems, they know it, and are very concerned.

I meant to add from a NY perspective, there are lots of NYers who detest Wall St. and understand the havoc that they have caused.  Those folks are Schumer's ticket and he knows it.

Keep fightin' TD.

Wed, 07/29/2009 - 22:10 | 18902 Miles Kendig
Miles Kendig's picture

Time for some folks to begin linking the real estate market in NYC to GS and like firms as the summer turns to fall turns to winter.  A steady stream of articles remining folks that the reason the just lost another 8-10% in the just passed quarter on their property is because of THEM...

Your are quite correct that on all of the pro administration sites there is an ever growing chorus of GS bashing and this needs to be fostered, supported and enhanced.

Thu, 07/30/2009 - 04:07 | 19059 Anonymous
Anonymous's picture

not financially by any means, but stirring a bit of spice into the stew stock waiting for GS & friends

Thu, 07/30/2009 - 04:09 | 19060 Anonymous
Anonymous's picture

not financially by any means, but stirring a bit of spice into the stew stock waiting for GS & friends

Thu, 07/30/2009 - 04:14 | 19061 Anonymous
Anonymous's picture

not financially by any means, but stirring a bit of spice into the stew stock waiting for GS & friends

Wed, 07/29/2009 - 19:04 | 18722 GoldmanSux
GoldmanSux's picture

An astute comment.

Wed, 07/29/2009 - 19:58 | 18761 Anonymous
Anonymous's picture

my thoughts exactly. why not copy all relevant regulators?

Wed, 07/29/2009 - 17:15 | 18645 Anonymous
Anonymous's picture

Sigma X is brought to you by the old Speer, Leeds, and Kellog--bought by GS.

They were at the forefront of the frontrunning investigations right before Walt Kellog sold the firm to GS for 5 Bil.

Their offices at 30 Hudson, Jersy City, NJ have the same security as a US Gov't building.

They ahve been humping world investors for sixty years.

Why stop now?

Thu, 07/30/2009 - 02:45 | 19051 Anonymous
Anonymous's picture

They should stop for this dude

Wed, 07/29/2009 - 17:21 | 18651 Anonymous
Anonymous's picture

BlackRock, Goldman Fund Contracts Pulled by U.S. Pension Agency

Wed, 07/29/2009 - 20:41 | 18794 Alexander Supertramp
Alexander Supertramp's picture

Brilliant find, thanks.  Sweet to see "the market" itself starting to do some of the work.  More of this + ZH + a whistleblower or two = just maybe a snowball's chance in hell after all.  This GS spokeswoman Andrea Raphael was a busy lady today, also crafting the corporate line for the GS compliance attorney arrest in buzzsaw99's post 18693 below.  Come on Andrea, punch the clock for the day and go off-line and share some of the real deal with TD.  Please?

Wed, 07/29/2009 - 17:24 | 18652 Anonymous
Anonymous's picture

Excellent letter. Well articulated. Senator Schumer's initial request had the appearances of perhaps eliminating competition for Goldman Sachs rather than fixing the problem of front running orders. I sincerely hope this catches fire with the MSM and others across the spectrum.

Wed, 07/29/2009 - 17:24 | 18653 Soldier of Fortune
Soldier of Fortune's picture

The hilarity of TD's post script is timeless........P.S. FU Goldman you can view it on

Wed, 07/29/2009 - 17:26 | 18654 buzzsaw99
buzzsaw99's picture

From acrossthecurve:

Goldman Sachs ( purportedly a well connected and well informedand powerful bond firm domiciled in lower Manhattan) put out a piece today in which the firm called for higher bond yields.

They suggest that relative to other asset classes that the risk premium built into the Treasury market is too high and should decline to reflect less risky conditions. Here is a relevant excerpt:

* UST yields have room to rise.  Financial conditions have eased
> significantly over the last month.
> * Risk premium on the UST curve is high relative to other asset
> classes.  As a result, flatteners may be attractive.
> * The strong participation in June’s front-end auctions is likely not
> the start of a new trend.

I would humbly suggest that it is possible that the Treasury market has the correct story and the other markets are wrong.

Talk about sniveling duplicitous drivel! Waa! We need bigger yields for the bonds that are getting stuffed down our gullets. Waa! Somebody buy these equities!

Wed, 07/29/2009 - 17:38 | 18663 Anonymous
Anonymous's picture

I support your decision to remain anonymous TD - you're going after the jugular of some very powerful interests, and the information you provide is incredibly damning. I third the commenter above who opined that this is the most important and relevant financial commentary on the web. Keep up the good work. If nothing else, you've put the financial world on notice. All the street boys know your name.

P.S. - I was at Bellagio last month for a friend's bachelor party. 4 am rolls around, and I'm sitting at a blackjack table with some loud mouth 25 year old prick from Georgetown who won't stop running his mouth about how amazing he is, and that he works for GS. I started asking some pretty pointed questions about GS's SLP trading and associated BS (he supposedly worked on the equity deriv. desk) and he goes "You're ridiculous, you just believe everything you read on Zero Hedge!"

I got a kick out of that one :) I wonder how many internal memos have been circulated about ZH...

Wed, 07/29/2009 - 18:13 | 18688 deadhead
deadhead's picture

Great story! 

Wed, 07/29/2009 - 21:44 | 18878 SWRichmond
SWRichmond's picture

now THAT is fucking funny.  thanks for sharing this!

Wed, 07/29/2009 - 22:12 | 18904 Miles Kendig
Miles Kendig's picture


The deep strike is hurting em.... Hit them harder and harder...

Wed, 07/29/2009 - 17:43 | 18664 Anonymous
Anonymous's picture

Everybody in here needs to cut and paste this article and send it to your local politician and DEMAND that they ACT ON YOUR BEHALF!!!

Wed, 07/29/2009 - 22:59 | 18943 agrotera
agrotera's picture


Wed, 07/29/2009 - 17:47 | 18668 Anonymous
Anonymous's picture

Richard Nixon, President of the United States, was brought down by two reporters, Woodward and Bernstein.

I hope to live to see the day that Goldman Sachs, the most prestigious investment bank (or bank holding company nowadays with a lot of exemptions), is brought down by a dedicated blogger.

George Orwell

Wed, 07/29/2009 - 18:17 | 18690 deadhead
deadhead's picture

18668....a great reminder, particularly for those who might be too young to have lived through this.

I would add that the crucial matter was the fortitude and patriotism of 'deep throat' and the risks he took to assist W&B. Deep throat is a hero in my book.

For those potential 'deep throats' out there, just go to your public library, get a gmail account, and send what you know to  tips at zerohedge dot com


Wed, 07/29/2009 - 22:19 | 18913 Miles Kendig
Miles Kendig's picture

Better yet, buy a netbook with cash and use it in a public, or better yet an open "private" WiFi zone... Library usage is more easily traceable... Keep it generic and use it only for the task at hand. Protect yourself from those that would destroy free markets and you for the commission NYSE will give them for transacting a share on their exchange.

I remember delivering the Seattle PI during those days and the should never be forgotten.

Wed, 07/29/2009 - 22:21 | 18915 Anonymous
Anonymous's picture

It has been a while since I've been to a library. Don't you need to scan your library card before surfing the net?

Wed, 07/29/2009 - 23:05 | 18950 agrotera
agrotera's picture

You took the words out of my mouth--i was going to say that Tyler and Marla are our modern day Woodward and Bernstein!!! This is not just a political and moral crime, it is exponentially larger in that it also involves a dollar value bigger than any crime (other than the big bank bailout heist that is in process )

Wed, 07/29/2009 - 17:47 | 18669 Anonymous
Anonymous's picture

More sensationalistic BS for the masses to eat up and feel better about themselves for participating in a witch hunt. Why single out Goldman? Every bank has internal pools of liquidity which can provide a better execution and reduced execution costs for ALL participants. Why assume that the prop desks are the only ones benefiting? Besides, order flow from Mom and Pop doesn't end up in these dark pools, it's institutional order flow. Are you now sticking up for the Hedge Funds? How noble. Those that participate are well aware of the risks/rewards of trading in a dark pool and they accept them. Why can't you? Keep in mind they are not forced to participate in such a manner, they elect to. That's because they see a benefit. If you want to make a case against market fragmentation, then fine, that's a different story. But open your eyes and remove yourself from the GS lynch mob.

P.S. I am not, nor have I ever been, an employee of GS.

Wed, 07/29/2009 - 17:53 | 18674 kote
kote's picture

order flow from Mom and Pop doesn't end up in these dark pools, it's institutional order flow.

So... dark pools remove liquidity from where Mom and Pop have access to it, and they segment it off to where only institutional players have access (for a premium).  You're right.  Nothing to see here.

Wed, 07/29/2009 - 18:30 | 18697 Anonymous
Anonymous's picture

Like I said, if you want to talk about market fragmentation then that's a different story. Your concern about access to liquidity is the same as telephone brokers trading in the "upstairs" market and that has been a standard practice for god knows how long. Two people can't trade with each other without first alerting the public?

Wed, 07/29/2009 - 18:02 | 18677 Veteran
Veteran's picture

Maaaan, you may not work for GS but you have the same elitist prick mentality.  JPM?

Wed, 07/29/2009 - 19:23 | 18742 Anonymous
Anonymous's picture

Wow. Thanks for offering a point of view. Its easier to sling insults than to counter with a rational thought. Tell me where I am wrong instead of resorting to name calling. What is this the 3rd grade? (Same goes for the post below.)

Thu, 07/30/2009 - 09:29 | 19150 Veteran
Veteran's picture

Here's where you are wrong, tough guy.  Labeling the people of America as 'lynch mob' masses spoon fed garbage as they are cleary too unintelligent to understand the issues at large.  Your pretentious attitude lies at the heart of all that is wrong with the financial industry writ large.  Wall Street did more to destroy this country than Al Qaeda.  Think the gubment sent me to fight the wrong enemy. . .

Wed, 07/29/2009 - 18:36 | 18700 Anonymous
Anonymous's picture

Nice disclaimer FUCK OFF....

Wed, 07/29/2009 - 19:10 | 18728 Alexander Supertramp
Alexander Supertramp's picture

So testy elitest Anon guy!?  This is about much more than just dark pools, dim wit.  "Everybody needs a bosom for a pillow," Fatboy Slim advises.  Just take it easy man, and see if maybe you can't get lucky tonight.  Perhaps that'll help with your nasty little case of myopic pathologies, or at least enlarge and clarify your sorry-ass perspective. 

Wed, 07/29/2009 - 20:51 | 18824 Cheeky Bastard
Cheeky Bastard's picture

+ 100 million

Wed, 07/29/2009 - 21:57 | 18888 Anonymous
Anonymous's picture

You struggle so hard to sound both cool and wise. Less is more if you want to influence this crowd. It's apparent who has horses in the races.

Wed, 07/29/2009 - 22:22 | 18918 Miles Kendig
Miles Kendig's picture

The fact is that this track will let anyone race including you on the same terms.  Can you say the same for the track you are advocating?

Wed, 07/29/2009 - 19:13 | 18733 Anonymous
Anonymous's picture

You obviously are also short a moral compass...either that or logic. Take your pick.....

Wed, 07/29/2009 - 19:31 | 18747 Anonymous
Anonymous's picture

I am part of no lynch mob, and you are grotesque.

Wed, 07/29/2009 - 20:20 | 18785 Alexander Supertramp
Alexander Supertramp's picture

Is this Anon "Tell me where I am wrong instead of resorting to name calling" the same one who also posted "FUCK OFF"?   Register and log-in please so we can avoid this identity confusion.  Until then, let's go bowling.

Wed, 07/29/2009 - 21:07 | 18844 Anonymous
Anonymous's picture

No not me. That was someone else's advice for myself which is why I said "same goes for the post below."

I do apologize for not logging in, I forgot and then it was too late.

Wed, 07/29/2009 - 21:46 | 18880 SWRichmond
SWRichmond's picture

Like the institutions that manage Mom and Pop's 401(k) funds?  Yeah, really, I mean, who cares?

Wed, 07/29/2009 - 21:58 | 18891 Anonymous
Anonymous's picture

Yes, you took the words out of my mouth..exactly

Wed, 07/29/2009 - 23:34 | 18984 Anonymous
Anonymous's picture

Few, if any 401k funds are executing through prime broker arrangements and almost certainly are not participating in the banks' dark pools, rather they execute themselves or trade tranches of their portfolios with portfolio trading desks.

Wed, 07/29/2009 - 23:18 | 18965 agrotera
agrotera's picture

Your leave off significant details and glibly dismisses this discussion without any reason other than that you don't agree with it and you back your objection singularly with a statement that you are"NOT a GS employee", and throwing this entire discussion into the category of "GS lynch mob"--how unfortunate for you to be so blind-sighted as to what is right and wrong.

Market fragmentation is also an issue, and not necessarily separate.

Wed, 07/29/2009 - 23:50 | 18997 Deferred Comp
Deferred Comp's picture

It is all part of the same set of forces that have contributed to the current unstable structure of the equity marketplace.  The very systems that were sold to everyone as the ultimate means to provide investors with natural liquidity and reward displayed interest have proven to be an abject failure.  Instead, average lot size is now smaller than many years ago.  Liquidity providers are incented to game a rebate structure for their own reward at the expense of their clients.  Pure buyers and sellers are now subject to predatory bots generating trades and quotes in computer time .  And to top it all off, for a nominal fee, exchanges are offering preferential data streams .  How is dark liquidity better when it is not represented in the NBBO ?  If interest can no longer be displayed, how can you argue that internal pools provide better execution ?  Goldman Sachs is a hedge fund a bank and an SLP .   How can you defend them when it is obvious that they position themselves as an agent of change at everyone's expense ?  Market fragmentation has been created to benefit certain interests at the expense of the greater good of the marketplace.

Wed, 07/29/2009 - 18:02 | 18678 Anonymous
Anonymous's picture

Madoff cannot believe his fraud lasted so long

This is what happens when fradulent activity is not fixed soon and the tentacles spread further into the system

Wed, 07/29/2009 - 18:25 | 18693 buzzsaw99
buzzsaw99's picture

[GS lawyer accused of being a perv.]:


Degenerates all.

Wed, 07/29/2009 - 18:28 | 18696 Project Mayhem
Project Mayhem's picture


Wed, 07/29/2009 - 18:52 | 18710 Arm
Arm's picture

Actually that is entrapment.  The police setup a dummy account and sent her into chatrooms to bring in men. 

What charge exactly do they hope to bring?  Sex chatting with a police officer posing as a minor?

Wed, 07/29/2009 - 19:01 | 18718 buzzsaw99
buzzsaw99's picture

It looks bad for GS, that's all I care about.

Wed, 07/29/2009 - 19:06 | 18725 deadhead
deadhead's picture

buzz...while respecting your free speech rights.....

1. it is an allegation and means nothing until final adjudication.

2. the accused's employer has nothing to do with this.

3. this type of "goldman" or "wall street" story has so very little to nothing to do with the issues being discussed on this and other financial blogs.  If TD ran this as a headline story, I suspect he would be laughed at and taken much less seriously.  I would join that crowd in a moment and at this juncuture I have a very high degree of respect and esteem for TD.


Wed, 07/29/2009 - 19:37 | 18749 Alexander Supertramp
Alexander Supertramp's picture

Disagree, (though totally agree it'd be silly for ZH themselves to post as they doubtfully would).  Anyway, anyhow ("legally") to get a peek behind the the GS curtain is the gainer here, entirely seperate from this GS VP dude being an apparent spineless tird.  Before this article you knew this?

Goldman’s global compliance unit has more than 500 professionals including lawyers, accountants, financial analysts, information technology specialists, regulators, management consultants, sales professionals and traders, according to Goldman’s Web site.

(BTW, what the hell are "sales professionals and traders" doing in a compliance department?)

Interesting also how an attorney with the title of "vice president in the compliance division" and three years tenure would not have any "legal duties" according to GS spokeswoman.  All simply adds to our growing pool of reconnaissance, thanks for posting Buzz. 

Wed, 07/29/2009 - 19:56 | 18760 Anonymous
Anonymous's picture

I might expect this from a trader, but someone in the compliance department? What is GS coming to?

Wed, 07/29/2009 - 21:48 | 18882 SWRichmond
SWRichmond's picture

"(BTW, what the hell are "sales professionals and traders" doing in a compliance department?)"

Selling compliance?

Wed, 07/29/2009 - 22:51 | 18933 buzzsaw99
buzzsaw99's picture

Cut me some slack deadhead, it's a bloomberg link.

Wed, 07/29/2009 - 18:36 | 18701 Anonymous
Anonymous's picture

No surprise the Nasdaq is endorsing this, they don't want to lose liquidity to alternative venues posting better prices than them.

Wed, 07/29/2009 - 21:59 | 18892 We Are Legion
We Are Legion's picture

Why would they want that?

Wed, 07/29/2009 - 18:41 | 18703 Cheeky Bastard
Cheeky Bastard's picture

You are trusting the wrong guy ... and if you do not no why ... ask yourself ... who is Chuck Schumer ... i have a bad feeling about him leading the crusades against GS and HFT ... a real bad feeling ..

Wed, 07/29/2009 - 18:54 | 18712 lizzy36
lizzy36's picture

Since you already know i can be a bit bitchy, i will say this (with respect).

Nobody trusts a politician and if they do, they are an idiot.  Does Tyler seem like an idiot to you?

Sending a letter to Schumer, stating your concerns, backed up with facts is a prudent thing to do.  You cannot equate prudence with trust. 

Tyler is but one voice (loud as it is). He is just making sure it is heard.  As far as i can tell he is not getting into bed with anyone, let alone Chuck Schumer.

Wed, 07/29/2009 - 19:10 | 18729 deadhead
deadhead's picture

well said lizzy.  as one who has enjoyed your comments for quite some time, I have found you to be direct, honest, and forthright.  Certainly not bitchy.

Wed, 07/29/2009 - 19:14 | 18734 Cheeky Bastard
Cheeky Bastard's picture

she is not bitchy, she is just a Grammar Nazi ( just kidding Lizzy )

Wed, 07/29/2009 - 19:12 | 18732 Cheeky Bastard
Cheeky Bastard's picture

Lizzy, baby, you misunderstood me .. i was not replying that Tyler is getting into bed with anyone, nor did i write my comment having Tyler's letter to Schumer in mind. I was generally expressing my doubt about Schumers intentions, not Tyler's, nor was the main point of my comment to say that Tyler is so naive that he would trust Schumer or any other politician ( RP excluded ). And the comment was more of a thinking out loud than a valid analysis. And i surely do not imply that there are people here who are stupid to believe a politician ( again RP excluded ) ... So, baby, don't go hard on me, i had the best intentions, although to be fair, poorly expressed ..

Wed, 07/29/2009 - 19:44 | 18754 Alexander Supertramp
Alexander Supertramp's picture

Bless the wisdom of feminine reason and perspective.  Bring it on Lucy/lizzy, you make this dance floor happen!

Wed, 07/29/2009 - 22:28 | 18922 Miles Kendig
Miles Kendig's picture

Yes indeed Lizzy. 

Besides now that TD has done the deal Chuck Schumer, the esteemed gentleman from New York that he is will be unable to say that he had never been provided with credible, factual information on the subject.  TD waited until Schumer stepped out front first.  Exquisite.

Wed, 07/29/2009 - 22:36 | 18926 Daedal
Daedal's picture

Chuck Schumer is just shooting at random targets -- he is definitely NOT the go to guy on these matters. Check out Wiki:

Excerpt: "On April 6, 2005 Alan Greenspan testified to Congress about the enormous portfolio of Fannie Mae and Freddie Mac. Schumer responded to the testimony "I see an analogy to Social Security," Mr. Schumer said. "Social Security has a problem and there are ideologues who want to undo it. Fannie and Freddie have problems, and there are ideologues who want to undo them. But there are ways to fix the problems short of what's been proposed. When the sink is broken, you don't want to tear down the house."

Without identifying anyone in particular, Schumer also suggested that some people who have advanced tougher regulation of the two housing finance companies were really pushing a broader agenda to eliminate the companies and their mission of providing affordable housing. He proposed that the OFHEO raise Fannie Mae and Freddie Mac's conforming loan ("affordable") limits from $417,000 to $625,000, thereby allowing these GSEs to back mortgages on homes prices up to $780,000 with a 20 percent down payment.

Following the meltdown of the subprime mortgage industry in March 2007, Schumer proposed a federal government bailout of subprime borrowers in order to save homeowners from losing their residences.

Schumer's top nine campaign contributors are all financial institutions who have contributed over $2.5 million to the senator."

Wed, 07/29/2009 - 18:42 | 18704 Anonymous
Anonymous's picture


Wed, 07/29/2009 - 18:49 | 18708 Anonymous
Anonymous's picture

For all of you that use REDI(Goldman's electronic order entry system) - STOP IMMEDIATELY!!! Change to a broker neutral platform.

Wed, 07/29/2009 - 21:04 | 18838 ToNYC
ToNYC's picture

When GS bought SLK in 2000, I ran a Nasdaq server farm using TradeCast.

I saw GS running the REDI book and could not understand why anyone would have used it.

knowing that..looks like some took longer to get it.

Wed, 07/29/2009 - 18:58 | 18714 Anonymous
Anonymous's picture

Sending a letter to the sen really is a good idea. Ever play chess? Sen you are now in check what will you do?

Wed, 07/29/2009 - 19:02 | 18719 Anonymous
Anonymous's picture

So when will the class-action lawsuit against Goldman Sachs by investors and investment firms be initiated?

Goldman has stolen billions of dollars through this flash trading fraud - stolen from investors.

Wed, 07/29/2009 - 19:03 | 18720 Anonymous
Anonymous's picture

So when will the class-action lawsuit against Goldman Sachs by investors and investment firms be initiated?

Goldman has stolen billions of dollars through this flash trading fraud - stolen from investors.

Wed, 07/29/2009 - 19:08 | 18727 Anonymous
Wed, 07/29/2009 - 19:12 | 18731 Anonymous
Anonymous's picture

Kudos sir.

Wed, 07/29/2009 - 19:17 | 18736 Anonymous
Anonymous's picture
Bashing Goldman Sachs Is Simply a Game for Fools: Michael Lewis

Wed, 07/29/2009 - 20:04 | 18772 Alexander Supertramp
Alexander Supertramp's picture

"And nothing that happens at Goldman Sachs -- nothing that Goldman Sachs thinks, nothing that Goldman Sachs feels, nothing that Goldman Sachs does --ever happens by accident."

May they go on believing exactly this, and to the sound of cannons!  Indeed, Compensated Psychopath's are so dimented that they're absolutely incapable of believing anything else.  Lewis, you pompous ass, thank you for so gracefully cementing the real issue at GS that is (note, not "will be") their demise.  It's just a matter of time, Dude...

Wed, 07/29/2009 - 20:34 | 18807 Anonymous
Anonymous's picture

Michael Lewis? Is this the same guy who wrote that hit piece on Iceland in Esquire a couple of months ago? Apparently being Icelandic and having a degree in financial engineering makes you incompetent, but when you're Michael Lewis and your Uncle Hyman has an "in" at Salomon Brothers, suddenly you're exactly where you need to be.

Wed, 07/29/2009 - 23:12 | 18957 CD
CD's picture

I think some of you may be missing the slight sarcasm in the Bloomberg article/op-ed. Read through, it's worth it, funny as hell.


A longer quote from the piece should clarify:

"For starters, the vampire squid doesn’t feed on human flesh. Ergo, no vampire squid would ever wrap itself around the face of humanity, except by accident. And nothing that happens at Goldman Sachs -- nothing that Goldman Sachs thinks, nothing that Goldman Sachs feels, nothing that Goldman Sachs does --ever happens by accident."

Wed, 07/29/2009 - 19:18 | 18737 Anonymous
Anonymous's picture

CNBC has the be hurting they are running ads for Female Pattern Baldness during Kudlow's show tonight.

Wed, 07/29/2009 - 19:31 | 18748 djchill2
djchill2's picture

Shit least they' ve got their target audience nailed...since women with balding problems are the only ones still watching their bullshit programming.

Wed, 07/29/2009 - 19:19 | 18738 RobotTrader
RobotTrader's picture

No doubt, those papers are going to be well beyond the scope of comprehension by Schumer or anyone on his staff.

No different than trying to explain moving averages, RSI, stochastics, etc. to Rodney King or Mike Tyson.

Schumer will simply hand it off to "experts" to handle, more than likely that will be somebody at Goldman Sachs.


Wed, 07/29/2009 - 19:37 | 18751 djchill2
djchill2's picture

LOL...good one....btw like your that chick on CNBC?

Wed, 07/29/2009 - 20:12 | 18779 Anonymous
Anonymous's picture

Yeah on CNBC, with female pattern baldness.

Thu, 07/30/2009 - 00:17 | 19011 djchill2
djchill2's picture

As long as she is going bald in the right spots....fuckin' awesome! 

Wed, 07/29/2009 - 19:24 | 18743 seedyrum
seedyrum's picture

although Schumer made be helping in this little fiasco what about the others which gave birth to this problem and the many other problems Wall Street had perpetrated on the American population

Wed, 07/29/2009 - 19:43 | 18755 Ags Nightmare
Ags Nightmare's picture

I hope this goes beyond sending a sternly worded letter to GS given the track record of the SEC enforcing rules that are on the books.

I will say this. Two weeks ago I was talking to my know it all brother in law day trading junky tying to explain to him how high frequency has been corrupting the markets. He told me to take off the tin foil hat. Two weeks later it's all over the news thanks in part to ZH and he's sending me linked articles about HFT ( so much for the foil ).

Hopefully this gets legs.




Wed, 07/29/2009 - 19:59 | 18768 Anonymous
Anonymous's picture

I have two words for all of you: Eliot Spitzer. You know he may be the only one who could get the job done, and maybe, even from the outside looking in.

Wed, 07/29/2009 - 20:40 | 18815 deadhead
deadhead's picture

18768...I agree that Spitzer could make an enormous dent in the Wall St. crap. 

I would be interested to see the opinions of ZH readers as to who they think would make a great SEC commissioner.

Maybe Marla will refresh the gs/sergey poll and throw one up there with some names that come up going forward.

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