Levitt, Advisor To Goldman And Getco, Voices For HFT

Tyler Durden's picture

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RobotTrader's picture

BB&T floats its secondary.

Check out the volume.

Hi-Fi boxes must be having a field day with this one.

flaxpin's picture

Fix: Levitt voices for--not against--HFT.

iphone's picture
iphone (not verified) flaxpin Aug 18, 2009 4:14 PM

think how easy you could make money with Goldman's money.....You buy materials, shippers, drillers, oil service stocks,

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

RobotTrader's picture

Wonder how the HFT gamers are handling this one.

Some enterprising daytrader is up 74% already....

No More Bubbles's picture

Art Levitt should be in jail for his monumental failure to do ANYTHING while head of the SEC.  This man sat idly by while massive fraud was committed on a regular basis and he did NOTHING about it.

HE IS A FRAUD!

Sqworl's picture

I agree completely, this will surely scare that crap out of everybody...Mary Shapiro was appointed to SEC by Levitt!!!!!

lizzy36's picture

Tyler, you forgot to mention his "special advisor" status to AIG (starting in 2005).

Why Levitt's opinions carry even a minimal air of legitimacy is beyond me.

 

Green Sharts's picture

I guess Goldman hired him because he did such a great job as an advisor to AIG:

http://www.businessweek.com/bwdaily/dnflash/jul2005/nf2005077_3942_db049.htm

 

Q: Why are you taking on this job?

A: I've known [interim AIG board chairman] Frank Zarb for nearly 40 years, and AIG is one of the great American companies. It's fundamentally sound, and I hope I can be constructive with respect to governance there.

 

Q: What do you hope to accomplish?

A: Clearly, I would hope that AIG emerges as a model of good governance. It's hard to be formulaic about that. What may be good governance for one company may not be for another. I'm going to help them find the kind of independent directors who have the talents to complement the board as it exists today. I want to examine the committee structure and make recommendations [to AIG CEO Martin Sullivan].

Anonymous's picture

NEW YORK (Reuters) - Mohamed El-Erian, the chief executive of bond fund manager Pacific Investment Management Co, said on Tuesday that the rally in U.S. stock markets has topped out, as valuations are running ahead of fundamentals.

"Valuations are running far ahead of where fundamentals are," El-Erian told Reuters Television. The Dow Jones Industrial average .DJI declined 186.06 points, or 2 percent, on Monday, sparking doubts about the sustainability of its recent rally.

El-Erian said corporate profitability has been driven by cutbacks in layoffs and capital spending.

http://tinyurl.com/qjjmev

Ya think?

peterpeter's picture

> Furthermore, where is the defense of dark liquidity and actionable IOIs

Tyler,

What is your beef with dark pools, and actionable IOIs?

The users of dark pools (primarily large funds) are certainly aware of the risks and rewards (highlighted in the recent Pipeline paper that you posted) of dark pools... and yet you keep taking vague shots at dark pools and IOIs.

Just what is it about them that you don't like, beyond the fact that companies that you despise are making money trading with small arbitrages in them?

Tyler Durden's picture

Pretty sure ZH has clarified its position on this matter before many times, but here goes again: In 1985 every trader on wall street was making money from inside information: it was accepted and it was the status quo. Nobody was complaining - it was the norm, and even the SEC repeatedly turned a blind eye to blatant abuses of this practice (Madoff is not a new development). Companies were making money trading "with large arbitrages" in smaller volumes... now it is merely flipped and the arbitrage is smaller but volumes are much larger. The fact that current technology has gotten to its advanced stage is not a reason for worry - it is welcome. The abuse of it however, by select entities, who have achieved an oligopolistic status and economies of scale is what should be the primary concern. Furthermore, the fact that there is virtually no directly observable correlation between banks extraction of slippage from the market and your blank argument that everyone who participates is for this, is additionally troubling. (Do large funds have actionable alternatives to the current market landscape - the answer is an emphatic no, by dint of incremental costs suffered if one bypasses the oligopoly - thus the opportunity cost goes straight into the top line of the several large vendors). Granted Rentec and Getco are private and as such one does not have access to their books (although the P&L of medallion and other flash users will be an interesting data point to follow), companies such as Goldman which have steamrolled into PT and dominate it should at least carry an associated P&L item.

This is, and increasingly will be, an anti-trust issue. To the last point - I am sure nobody was worried about the Bells monopolizing telephony when they did (your argument). Yet the breakup permitted a huge technological wave of innovation: the opportunity cost of Bell's reduced profitability was significant capital allocation for other initiatives by market participants, and in many ways permitted technology to get to a point where we debate the propriety of HFT.

peterpeter's picture

So you would like GS, GETCO and a few others to be broken up, so that I can step in and execute the same arbitrage with 2ms latency instead?

I'm all for that!

> Do large funds have actionable alternatives to the current market landscape

Do you hear anyone who uses dark pools calling for an alternative?

The DP operators are creating a system tailor made to the needs of the large fund manager.  If the funds stopped using dark pools and they were only used by HF traders, there would be no volume... so the fact that there is substantial volume on dark pools is evidence of fund managers finding them to be useful tools.

The ZH position that dark pools are bad is as you say well established.  I just have never understood (and still do not) what your beef with them is, and who you think benefits and suffers from their abolition.

Shutdown dark pools and you just make it easier for computers to profit from the order flow of funds (my own included).

Tyler Durden's picture

I am surprised i have to explain to you how the "preferential system" of capital markets works:

dark pools (via IOIs) are nothing more than a group of select customers getting courtesy treatment. the analogy is if a big B/D has a size buyer or seller in any security, they will always come to preferred accounts first (with expectations of increased order flow, closing dinners, pretty canvas bags). This becomes a race of pandering to the top which is true not only in OTC (bonds, CDS) where thanks to the implosion of BSC and LEH, there is just one real monopolist with the largest inventory of securities. And absolutely the same is occurring in a non-transparent marketplace such as dark liquidity. Does that mean either of those systems is correct and fair - no. Does it mean anyone wants them abolished - of course, not. It merely becomes a competition of who can curry the most favor with the established dominant market maker. We all know how the system works. Yet the only reason you have not seen such an outcry against OTC and bond trading (TRACE was a joke) is because so few retail investors participate in those markets (and none do in CDS). If the market were to be truly free and expanded to all (in our manifesto our primary driver is a belief in efficient markets) all these artificial constructs would have to be eliminated. And eventually, they will as the SEC and the politicians realize i) just how behind the curve it is w/r/t free market treatment and ii) how the big monopolists generate outsized returns as a function of this (dark pools being merely a subset).

I appreciate your desire to maintain the status quo - all we do is present the status quo to the general public so that more people than merely those who benefit from it can do their own diligence (we hope people don't just take our perspective on things) and come up with their own conclusions.

KidDynamite's picture

but Tyler, in a perfect world, wouldn't EVERYthing be one big dark pool?  You'd submit the price you'd be willing to transact at, and either the counterparty exists, or it doesn't.  Don't lump IOI/FLASH/Dark pools into the same pool - they can be related, but are not equivalent.  The reason a trader can't just blast the whole world with an IOI "I"M BUYING 5MM GOOG" is because others would try to profit on that information.  If the entire market was one great big dark pool it would be ideal in terms of equality and minimizing information leakage/slippage.  Everyone dumps their demand into one big black box that no one else can front run or profit from.  Dark pools are the FUTURE, not the past. 

Tyler Durden's picture

"You'd submit the price you'd be willing to transact at, and either the counterparty exists, or it doesn't."

how is that any different from any open exchange?

why do you need to bring tiering into it? and the dark liquidity is only provided by those who understand they are getting fringe benefits by not representing the liquidity on exchanges. the real question is what are the benefits to them (aside from how those who actually run the ATS benefit from monopolizing any given liquidity arena)

KidDynamite's picture

because the entire point of an open exchange is to profit from your perception of aggregate supply and demand.  You can never eliminate that (even in dark pools - if i continually get my buy orders filled, I might decide that there is a big seller out there, and hold off), but I think the perfect marketplace would show either just a last price, or an inside market (without size) - that way you get people to submit their picture without fear of being frontrun. It should massively IMPROVE liquidity - no one needs to play games and break orders into little pieces.  Essentially, like if the whole marketplace was one big iceberg order. 

 

In other words, the question each market participant should be asking himself is "Do I want to transact at this price?"  and NOT "How can i best execute my order at this price."

 

peterpeter's picture

KD - well put.

Not sure why people understand a silent auction with a reserve price, but can't understand the utility of a dark pool, nor how a fragmented universe of dark pools could require things as scary as IOIs.

Ducky's picture

I'm with you if there was an oligolpoly with huge barrier to entry but aren't more people entering this game all the time? Several posters here have explained how large companies are becoming interested and one explained how he built a system with a $10K computer and <$100K account.

I'd like to see a dark pool aggregator much like Arca was to the ECN's.

JohnKing's picture

I suppose the WSJ could now be classified as captured, another win for our new overlords!

Howard_Beale's picture

The WSJ has been captured for years, way before Rupert came to the party.

Cheeky Bastard's picture

+1 Howard, and its funny to me how the Bancroft's were expressing concern that RM would " subjectivize " the content, when the content has been pure propaganda for years.

Green Sharts's picture

Some good content still manages to get through at the WSJ.  They were the first I'm aware of to document the corporate thefts from shareholders via stock option backdating, yet another thing a competent SEC should have been all over.  Today's WSJ has an article citing an academic study documenting that stock option backdating was far more widespread than the cases that have already been disclosed.

But I agree that the WSJ is no more than a shadow of what it used to be.

Stuart's picture

Have always thought Levitt personifies the stereotypical conflicted, useless shill.  Skip him and move on. 

Anonymous's picture

Have you ever noticed that almost always when the market starts the day in the green it stays in the green till the finish. Likewise for red. Why??

Anonymous's picture

Have you ever noticed that almost always when the market starts the day in the green it stays in the green till the finish. Likewise for red. Why??

deadhead's picture

the yellow light is broken.

Anonymous's picture

Leavitt obviously showed his true colors when he moved from SEC to GS (albeit via Bloomberg). Obviously he has no respect for regulators and is in-synch with Blankfein who prefers lose regulators who are there for "consulting" purposes rather than doing their real job.

Anonymous's picture

Have you ever noticed that when the market starts green it stays green? Likewise for red. Why??

Anonymous's picture

Sad. Mr. Levitt also sits on Bloomberg's board, and he regularly appears on Bloomberg tv & radio to appear like a voice of reason.

Almost as conflicted as Stephen Friedman of GS/Federal Reserve stock-buying fame...

Milton's picture

Let's not forget the Carlisle Group, they deserve honorable mention.

Levitt has quite a track record: exemptions for Enron; no need to expense stock options; sniff, sniff, Madoff is A-Okay.

Now he's in favor of HFT.

Houston, we have a problem.

Sqworl's picture

Appointed by Slick Willy Clinton, allowed Glass Stegal to be dumped, worked to consolidate SROs into what eventually became finra then went back to hawking insurance and now getting Max graft from GS...

Anonymous's picture

Transaction technology is nothing more than a electronic time stamped label changer....

The electronic exchange should offer price discovery to both Grandma or Pimco....

The exchange should not be gamed by black pools or flash trades....

Mr. Levitt is the perfect example of a failed SEC....typical double talking paid from both the govt./corp. side....the police policing the police....

Technolgy...and the BATS model.....are already here to make the direly needed required changes ....

Anonymous's picture

Well in most households a dual income is through wife/husband both holding down jobs...in a pseudo regulators household a dual income is from the govt/corp linked roles they play in holding down the populace...what a system! Too bad aneurysms cant be planted....

iphone's picture
iphone (not verified) Aug 18, 2009 4:15 PM
Anonymous's picture

His hat rack is immense..which one is he wearing today?

peterpeter's picture

> Keyword here being "unable to compete" - just how does that tie in with Mr. Levitt's thesis that all of this is merely a service for the common good

He never said that HF was a service for the common good.  It is a means to make money, which happens to make the markets more liquid, which as a by-product is a common good.

Being unable to compete with someone/something does not mean that that someone/something is not ultimately providing a service that those unable to compete will profit from.

You may be entirely unable to compete with municipal water services, and yet you're not going to rail against that form of liquidity...

I guess we would all be better off if we went back to using the telephone to place orders with brokers, specialists and market makers - trading thin volumes with large spreads measured in fractions, using quotes coming from a cute machine in a glass jar top that spits out a long roll of tape.  With a system like that, what could possibly go wrong with bubbles and busts?

Cheeky Bastard's picture

can you stop being so goddamn apologetic to these thieves; its fucking disgusting to read your crap, when 12 TRILLION dollars has been looted, and another 23 trillion are at stake, when cap and trade will destroy the little that is left of the economy. You are not fooling anyone, and no one here will change his/hers mind when it comes to the leeches that inhabit top floors of Manhattan buildings.

Milton's picture

They in Greenwich and Kansas City too.

peterpeter's picture

> You are not fooling anyone

Nor am I trying to, but I am curious as to what foolery you believe I am up to.

Feel free to ignore my comments and stay in your echo chamber.

 

Ducky's picture

PP- agree. Blanket hatred of HFT is silly. I spent 10+ years standing in a trading pit and having those more emotional than I jump in front of me to get out. It led to others jumping in front of them to get out and sometimes me as well.

The computerization of trading led to people doing the same thing with algos. I don't know what is avail for the individual in equities but in the futures biz in 2004 it cost a princely $40/mo for ninja trader which would allow you to join and remain on the bid or jump in front.

It allowed you to not execute a stop order until most of the bid traded away. $40 a month for what used to cost $3K and standing in a pit all day.

All of this led to algos that raced the ninja racers, which set off stops which created arb for large brokerages that previously phoned in and constantly changed large orders. Now they do it electronically and can move the arb bands in an instant.

What is funny is yesterday's post by Tyler on when the HFT guys are going to get in the corporate bond market made me wonder why it would be so horrible.

I moved an account from a investment bank to IB a few weeks ago because there was no abililty to place a limit order as a retail customer. Since then I've watched FINRA prints above my GTC offer price every day. I'd love for an HFT to take my offer out. If they were playing corporate bonds I'd have been filled two weeks ago!

 

Anonymous's picture

A L ????? Another holier than thou fucking liar. Mary Shapiro ????? I think we are clear on her role going forward ... and it ain't good.

Anonymous's picture

"Mr. Levitt does not disclose these conflicts of interest in his piece - perhaps the information would be seen in a slightly different light were that to be the case."

Tyler,
One could easily criticize you for failure to do the same. You even mention the following (which I agree with) in your non policy on disclosure:

"The only fashion in which such "conflicts" could in some way mislead or deceive the reader is with the reader's tacit or criminally negligent acquiescence."

So it would seem that this is quite a hypocritical way to discredit this author's statements.

Green Sharts's picture

It is inexcusable for the WSJ to publish a piece from this failed regulator turned lobbyist without disclosing that he wrote the piece on behalf of his client Goldman Sachs.

 

 

Sqworl's picture

I sent an email to Arianna..hopefully she will highlight this fraud.

NumisEX's picture

Nice to see the AIG HFT algo from last week is all over TGT today. Level 2 looks like an oldschool train schedule flipboard

Anonymous's picture

think how easy you could make money with Goldman's money.....You buy materials, shippers, drillers, oil service stocks, and then with less money u just buy the oil futures which u can manipulate a ton. Sell the stocks then sell the oil after. too easy

Anonymous's picture

think how easy you could make money with Goldman's money.....You buy materials, shippers, drillers, oil service stocks, and then with less money u just buy the oil futures which u can manipulate a ton. Sell the stocks then sell the oil after. too easy

Anonymous's picture

think how easy you could make money with Goldman's money.....You buy materials, shippers, drillers, oil service stocks, and then with less money u just buy the oil futures which u can manipulate a ton. Sell the stocks then sell the oil after. too easy

Anonymous's picture

Levitt slave for GS, should be investigated for his any illegal activity he did for GS as the SEC head.

America WS is dirty as hell.

Anonymous's picture

think how easy you could make money with Goldman's money.....You buy materials, shippers, drillers, oil service stocks, and then with less money u just buy the oil futures which u can manipulate a ton. Sell the stocks then sell the oil after. too easy