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SEC Voting On Flash Ban Today
It is very likely that today could mark the end of the Flash trading market manipulation phenomenon. The SEC will vote later today on a "proposal barring exchanges and trading platforms from letting clients see information about stock orders a fraction of a second before the market." This vote will likely not be followed by one in which the SEC votes to disband itself for having allowed Flash trading to continue as long as it did.
From Bloomberg:
The SEC is considering the ban on flash orders after lawmakers including Senator Charles Schumer questioned whether it gives some traders unfair advantages. Direct Edge Holdings LLC has used the practice to take market share from NYSE Euronext. Nasdaq OMX Group Inc. and Bats Global Markets voluntarily stopped using flash orders last month.
The SEC’s proposal would require a second vote and a later public meeting to become binding.
And in further bad news for rating agencies, the Commission is also considering a significant overhaul to disclosure rules for the raters which would require them to announce revenue collected from their biggest clients. Some other considerations included on today's docket:
The SEC proposals include forcing banks selling securities to disclose any ratings received while shopping among credit- rating companies, according to people familiar with the matter. Such information would tell investors whether a competing ratings firm thought there was a greater risk of default.
The SEC will seek additional comment on a proposal, issued in June 2008, to drop requirements that the $3.5 trillion money- market mutual fund industry rely on assessments from ratings companies for purchase decisions, according to the people. House Financial Services Committee Chairman Barney Frank, a Massachusetts Democrat, says including references to ratings in federal rules leads to undue reliance and deters investors from doing independent research.
Then again, seeing how this is the SEC voting after all, the same agency that will soon be forced to drop its charges against Bank of America for violating securities laws, it would be no surprise whatsoever if the vote were to turn out to be a dud and the current system is perpetuated. Although in the case of Flash trading, with the NYSE complex firmly against Flash, it would be rather difficult to see how at least this part of the vote is not enforced. We will provide the outcome as soon as we get it.
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wow, you're optimistic. don't you think that those really running the SEC will declare another three month "study" period?
I think that's what happens. Cuomo is tied up on other stuff....so i'm sure they are going to try this one.
WTF with a public meeting?!? So it should go into effect sometime in the fall of 2012...
It will go into effect whan Goldman Sachs and JPM says it will. Personally, make it effective immediately and fry the b@stards dead in their tracks.
It's interesting to note that the SEC had no problem side-stepping a public review period for NYSE's SLP rip-off scheme-- even though the NASDAQ had plently of compelling arguments against the program. In other words, the SEC has set their own precedent that public review isn't necessarily a requirement here.
Which gets us to the SLP. The main rationale for the creation (as NYSE explained to the SEC) was to provide a mechanism to compete against Direct Edge in the HFT marketplace. If the flash trading ban becomes real, how much advantage does Direct Edge really have? And does restricting HFT comes next?
And how long will it take Goldman and the cabal to think-up a new scheme, that will be allowed.
I don't know if it will be live but it's at 2:30 today
Given the SEC's history, sounds like it might be just for show.
Thanks ZH for shining light on this scandalous practice. Hopefully, the playing field is beginning tip in favor of fairness for all
President Obama....Mary Schapiro is making your "reform wall street" words look very, very shallow.
Please get rid of her....now.
Another useless non event which will actually pump stocks higher.
Given SEC's history...all this would result in a sternly worded letter.
Off Topic: Just saw on MSNBC they are forming a "Financial Meltdown" Commission patterned after the 9/11 Commission. The commission will be funded with a whopping $5M for its investigation. Maybe they will get Kissinger to head the panel.
Nothing to fear, justice just around the corner. Holding breath starting now.
Heard that too on NPR...thought I heard report out in Dec 2010.
I guess the next crisis cannot happen until 2011.
Pete
I always thought frontrunning was already illegal....
When large banks and brokerages get information before everyone else, it's not frontrunning. Frontrunning laws only apply to small fish. That way, enforcement won't cause any "awkwardness" at cocktail parties.
And the market rallies get stronger and last longer.
You say:
"the same agency that will soon be forced to drop its charges against Bank of America for violating securities laws."
Unlikely, but we'll see. The more likely, but satisfying result will be a prolonged public humiliation of Mary Shapiro and the SEC in Rakoff's courtroom.
He's going to be huge. It should make for great theater.
They have to take a vote to ban electronic front running? Yikes.
GS investors don't seem to be concerned about this. In fact, they seem to like the news by looking at GS stock today.
Ron Paul is advocating to end the fed. Can we end the SEC? they are useless douches anyway. I guess this whole government is corrupted to the core (except a few judges). It won't really solve anything to just end the SEC.
The US government reminds me of Douglas Adam's description of an alien planet that was a democracy, but the leaders were all lizards. The people hated the lizards and the lizards hated the people but since it was a democracy the people assumed that this was the government the majority wanted. They kept voting to make sure the wrong lizard didn't get in.
Its time to stop voting lizards into power
Sweet.
Kind of funny Goldman Sachs is bankrupt ten times over, and yet they reported a profit of 3 billion last quarter
Then we learn they are making 100 million a day on this front running.
So what is 100m*22 (which is the approximate number of market days per month) and you get 2.2 billion
So in essence, they made roughly 6.6 billion PROFIT from front running, yet only report a 3 billion profit.
Does anyone else see that means they REALLY had a 3.6 billion dollar LOSS. (on top of mark to fantasy, bailouts, and every other advantage they have)
So the whole reason their stock soared was BECAUSE of THIS manipulation.
Can anyone guess what happens next?
Oh and it seems they've been used as a bell weather by many. If they go up, the rest of the stock market goes up.
But when it goes down, the market also goes down.
So if it went up on fantasy and illegal front running. Then when this golden goose is taken away, Goldman Sachs might drop like a rock.
Along with the rest of the market. (not counting anything else that could and probably will happen independent to this)
Assuming the SEC actually do their damn job and ban flash-trading. If we then see GS's statistically impossible trading success drop away, what is the chance of success of a huge class action launched against the corrupt sons of bitches who allowed this to happen / participated in it? Sign me up to that.
While on this thread, why the hell isn't there a class action with a couple of hundred million signatures being launched against the Fed? Destroying the purchasing power of the dollar by 95% seems like something worth sticking them for.
Next up will most likely be a dropping of the BofA case by the SEC rather than following flash with a long look at dark pools. The SEC no longer has a reputation worth mentioning.
It's really hard for me to believe that the SEC could be so utterly incompetent. The only other option is that they are actively corrupt. The truth is probably somewhere in between. Regardless, put Markopolos in charge, fire 95% of the useless wasters, hire people with actual talent / experience, run it as a for-profit organization with commision from fines going to informants / agents.
More people need to get more angry about this crap so that something actually gets done.
Unlikely that it will be banned. GS makes too much money from it.
Mediocritas,
We are progressing. TPTB have spent decades, perhaps centuries establishing their positions. It will take time and resolve to dislodge them.
Just keep plugging away at your CongressCritters. Take time to educate friends and relatives who don't really understand how they have been screwed. The politicians have to be made understand that money cannot buy enough votes to offset the rising tide of informed citizens.
fotokemist
I don't get it.
If they had to pay $7.99+ a trade, like we do, they wouldn't trade so much in 100 the shares blocks that hide their activity and create such a competitive disadvantage on many different levels, not just the flash trades of a few.
If you were an entity that is getting screwed by the front runners wouldn't you sue to have the machines immediately unplagged as soon as the rule passes today?
Especially since it looks like volatility could ramp up any day now.