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Senators Kaufman And Warner Demand SEC/CFTC Investigation Into Causes Of May 6 Market Crash
Computerized trading platforms and various algos are entering the biggest frenzy over assorted technological gimmicks since the October 1987 crash. And the public demands their blood. Or as the case may be, Lithium Hydride. Alas, the agency that is supposed to protect investors from abuses of HFT and various other newfangled technologies is woefully stupid to be able to deal with this great issue. Nonetheless, Senators Ted Kaufman (D-DE) and Mark Warner (D-VA) on Friday proposed an addition to the Senate’s Wall Street reform bill that would direct the Securities and Exchange Commission and the Commodity Futures Trading Commission to report to Congress on several key issues surrounding the May 6, 2010 market meltdown, which sent the Dow Jones Industrial Average tumbling dramatically in minutes. High-frequency-trading algorithms have been the initial focus of questions concerning the collapse. We hope Kaufman is successful. On the other hand, the most likely product of the SEC's work product will be a 1 million page printout of all the jpegs in www.underagetransvestitesforregulators.com, better known in SEC circles as due diligence output. As usual, we hope we are wrong. As usual, we suspect we aren't.
"A temporary $1 trillion drop in market value is an unacceptable consequence of a software glitch," said Kaufman and Warner in a joint letter to Senate Banking Committee Chairman Chris Dodd (D-CT), requesting that their directive to the SEC and CFTC be inserted into the Manager's Amendment of the Wall Street reform bill. “We are concerned that as markets rely on and entrust such a high percentage of the capital management of the market to black-box trading systems that systemic problems may be created,” added the two Senators.
The Kaufman-Warner addition would direct the SEC and CFTC to report to Congress within 60 days of the enactment of the Wall Street reform bill the following:
- The causes of the May 6 market dive;
- How the SEC can evaluate whether the proprietary trading activities of major banks employ algorithmic trading practices that represent potential systemic risks to the markets;
- The potential need for industry-wide pre-trade operational risk controls that would minimize the incidence and magnitude of any trading errors;
- How the agencies can gain analytical assistance from academics and private analytic firms under controlled conditions to conduct analyses on whether certain algorithmic trading strategies are harmful to the interests of long-term investors; and
- How the agencies intend to “tag” high frequency traders over a certain volume threshold and use the data collected to gain a better baseline understanding about high frequency trading activities.
The Kaufman-Warner addition would also direct the SEC and CFTC to report to Congress within 180 days on the following:
- Whether the agencies should insist on “shock absorber” or circuit breaker mechanisms to prevent computer-driven trading from running amok without the intervention of human judgment;
- How the agencies intend to “tag” high frequency traders and use data collected about high frequency trading activities, along with a consolidated audit trail, to detect any manipulative trading strategies; and
- Whether certain electronic liquidity providers which are currently unregulated but purport to be acting like market makers should be required to maintain “fair and orderly markets.”
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Man, that was just the banks flexing their muscles because JP Morgan is being investigated for silver manipulation and Goldman is being publically crucified. The banks had to show the politicians who the real boss is.
actually you are correct....there was no accidental keying error or any other type of accident.....it was calculated and deliberate....anyone knowledgeable about IT practices for this type of software knows that safeguards are part and parcel of the software to say nothing of procedural checks....
i am amazed at how many people believe the lies in the state controlled press about "accidents"....
Only Fat Finger's the Power Elite buggerin' me Arse.
12:48 - AP reports Fed Audit making headway in Senate
2:30 - 1,000 point roller coaster ride starts
4:30 - Bernie Sanders is now reformed by the Fed and agrees to water down the bill
yuck yuck, fat finger indeed, the Fed gave us the finger again.
No more investigations, just ban flash and high frequency trading:
1. Bid/Ask data will be updated on every second.
2. All investors will receive the same information at the same time.
3. No orders with fractions of a penny will be accepted.
4. Some form of penalty for orders cancelled in too short of a time frame.
Refer to 1. in that your order will also stand for that second and can not be updated for that current "auction" second.
The bad humagos behind the alogos were punished for misbehaving yesterday, and put into slogos mogos.
Plenty of volume today but no craziness. Bad alogos go to ur harddrive and take it up ur software.
Was yesterday just a dummy run?
Don't you know, Senator Kaufman? You are the cause of yesterday's collapse. They pulled the plug to send you guys a message. Market participants were just caught in it. They showed you what happens when you question their power. There is no error here. They pulled the plug for just a few minutes and $1 trillion disappears. That's how it works.
A great idea Senator - unfortunately this textbook remedy of "shoulds" and "must nots" won't fly in the real world where banking dollars buy influence and votes.
nothing to see here until there be torches.
Politician, heal thy self.
http://online.wsj.com/article/SB2000142405274870387190457521649149513564...
http://finance.yahoo.com/tech-ticker/congress-refuses-to-outlaw-insider-...
Lose all hope, ye who enter here...
Blackrock spending millions to fuck you over:
http://www.bloomberg.com/apps/news?pid=20601087&sid=aKVR12NOI6.Q&pos=4
good catch.
"A measure requiring swaps dealers to treat clients as a fiduciary, or to act in their best interest, would effectively bar retirement plans from buying derivatives they use to manage portfolios, BlackRock and the groups say."
This is a lie. They are scum. Running down your clients is how they make money. A fiduciary duty would apply to even skimming their pennies. It would be the greatest thing allowing any client to have an attorney review their "relationship". It's the ULTIMATE check on fraud.
my money is on a cyber attack....disrupted or manipulated order flow...or backed up order flow that got released at once, as the trigger
Great article by Mike Whitney with appropriate credit to Ty and crew...
http://www.counterpunch.org/whitney05072010.html
Save the bucks... no investigation required... ZH says it all!
One broker I talked to said Goldman was on 100% of the buy side of the lowball trades that the Nasdaq cancelled for them. I am not saying that this may be the case for the whole street but It would be interesting to hear from others if they also had large ratios .
I'm so sick of the Senators and their grandstanding. We all know who signs their paycheck, but until we put the clamps on lobbying they don't work for us ... they just pay us lipservice.
second line: "in a manner of minutes."
Dumbasses cannot even spell. It is ironic that the "n" key is between the "b" and the "m."
Not to worry. DC is on the job. Here is beginning of the story:
(and no, it is NOT straight from The Onion ....)
Obama: Authorities investigating wild market swingWASHINGTON – President Barack Obama said Friday that regulatory authorities are evaluating the "unusual market activity" on Wall Street this week in hopes of keeping such a sudden, violent drop from happening again.
(An AP story today:
http://news.yahoo.com/s/ap/20100507/ap_on_bi_ge/us_obama_wall_street)
that's what they said in '87.........same-0, same-0...........
Ted Kaufman (D-DE) ß---------- new guy with his hand out to the Lobbyists.
http://www.opensecrets.org/politicians/summary.php?cycle=Career&type=I&cid=N00030767&newMem=N
Mark Warner (D-VA)
http://www.opensecrets.org/politicians/industries.php?cycle=Career&cid=N00002097&type=I
Chris Dodd (D-CT)
http://www.opensecrets.org/politicians/summary.php?cycle=Career&type=I&cid=N00000581&newMem=N
The minute I saw Dodd's my blood pressure went up. What a fucking crook.
In "Freakonomics" they show that it has been proven that contributions are not even close to being the deciding factor in winning an election.
The biggest factor is what you look like compared to the other canidates.
this is a repost... but it will help you Love Dodd even more... forgive the length...
Sen. Chris Dodd is retiring at the end of the 111th Congress
Career Fundraising 1989 - 2010
Total Receipts: $48,528,008
(or $2.3 million a year not including his pay check, which is only $100k(ish) a year... so we the people pay him $100k and his master pay him 23 times that amount ($2.3 Million), annually... but Lobbying is Legal, but bribery isn’t? Why can’t I lobby my way out of a speeding ticket? O yeah! I can by supporting the Judge (for re-election), but not the Police Officer... so the further up the ladder you go the more the Bribery is ok, just not for the common folks... its to, too difficult for us to get our head around, we ain’t that smart to be able to understand such complex issues.)
1989 - 2010
Total Spent: $48,570,877
Debts: $335,361
Last Report: Wednesday, March 31, 2010
http://www.opensecrets.org/politicians/summary.php?cid=N00000581&cycle=Career
Top 5 Contributors, 1989 – 2010 Contributor *Total* “Individuals” (PACs)
Citigroup Inc *$427,694* “$381,694” ($46,000)
United Technologies *$387,900* “$352,700” ($35,200)
Bear Stearns *$347,350* “$337,350” ($10,000)
ActBlue *$303,150* “$303,150” ($0)
American International Group *$285,238* “$242,618” ($42,620)
&........
Top 5 Industries, 1989 – 2010 Industry *Total* “Individuals” (PACs)
Securities & Investment *$6,221,307* “$5,455,317” ($765,990)
Lawyers/Law Firms *$3,218,475* “$2,761,631” ($456,844)
Insurance *$2,431,646* “$1,395,775” ($1,035,871)
Real Estate *$2,041,073* “$1,719,067” ($322,006)
Commercial Banks *$1,333,463* “$918,044” ($415,419)
The lobby pays more than his pay check... it is the money used to buy ad time in his home state so that he can smile pretty and dance for the dumbass locals who don't know any better... This picture is repeated, over and over again in our Federal Government. These people are bought and paid for whores; they are willing to do whatever is needed to have the ability to raise Cash so that they can stay in office. No matter who gets Voted in, the Lobby will get to them because at some point the other guy running against them will use Lobby monies for Air Time and that means the other guy wins. Everyone is doing it, how can someone not...
Best question? How can a real person, not a Lobby Money Whore... win against a Money Machine? A real person cannot. Money equals the Air Time needed, it equals the Bought and Paid for Dirt on the other guy and it equals pay offs or whatever is needed to keep the scumbag in the race.
Until the lobby monies are stopped… nothing will change.
Your Vote, for whomever does not fund the campaign needs of your elected official.
An income 23 times larger than your pay check will affect how you think and act and dare I say vote.
Dodd-ster the Fraudster
Appoint a Special Prosecutor to investigate fraud, bribe taking, treason and criminal douche-baggery.
You can't investigate THIS without auditing the Fed, which makes this investigation kinda funny
"...is an unacceptable consequence of a software glitch," said Kaufman and Warner in a joint letter to Senate Banking Committee Chairman Chris Dodd (D-CT)..."
Complaining to "Dumb as a Doorknob" Dodd
Complaining to Dodd about Wall Street fraud is like complaining to "Dick" Cheney about torture.
The wretched, worthless, bought off, bribed, douche bag Dodd has only 6 and a half months left to finish lining his wife's grubby little purse and Dodd's fat corrupt pockets...
...before this cheese dick scurries out of Dodge...
Here's to hoping the incumbents that get thrown out are replaced by people willing to do the peoples work. Cheers.
This was posted on May 1st - a week before the crash.
'11,250 / 300 is an area of significant resistance and if this level can’t be breached it should signal the end of the March 2009 bear market rally - the weekly DOW chart shows an expanding wedge indicating a significant move is probable - this remains an overbought bear market rally and the uptrend could falter at any time - the VIX index continues to give bullish warnings which is bearish for equities - long term charts of key equity indexes continue to give bearish warnings and the March 2009 lows will be breached in my opinion - USD Index bullish warnings since 2009 on the weekly and monthly chart have not changed and further USD strength and thus EURO weakness is still expected '
http://www.zerohedge.com/forum/latest-market-outlook-0
http://stockmarket618.wordpress.com
I want an investigation in how housing prices were allowed to increase as much as 5-10%/year from 2000-2006 and why there's no similar circuit breaker on upside asset appreciation. Here's to some healthy and needed deflation. No one "lost" anything real in the so-called 2008 crash-it wasn't there in the first place. Just cheap FED money leading to malinvestment and "paper" gains from 2003-2007. The dominance of the FIRE economy is the problem but the government needs the banksters to fund its debt just as much as the banksters need the cheap FED funding for their speculation.
Because "bubbles" are a part of capitalism and what you advocate is more government control. We need less government intervention. Bubbles like this must, I repeat MUST, be allowed to burst. It is the only way to maintain a healthy capitalist economy.
I agree that the bubbles must be allowed to burst. However, certain controls to prevent fraud are necessary like controls on:
-contributions by corps and individuals to politicians
-front running algo trading
-periodic full audits of the fed (prefer to eliminate fed)
-size of banks + bring back Glass/Steagall
Yes, "control" "intervention" and "regulation" are all different concepts. We need less "intervention" but more control. A few regulations need to be amended as well.
+1
The only problem is the bad actor's, with the exception of the regular Joe, didn't pay the price for failure.
we have sociopathic banksters running the country with the help of their sock puppet congress and these morons want an investigation?? the circuses died with rome....and the stupid whore running the sec won't investigate anything but the size of blankfein's dick while he is doing the lord's work....
+1
Your probably correct
These plunges were common back in the 30s crisis. Nothing really new. Fear.
'For in much wisdom is much grief: and he that increaseth knowledge increaseth sorrow. Sorrow is better than laughter: for by the sadness of the countenance the heart is made better. The heart of the wise is in the house of mourning but the heart of the fools is in the house of mirth. For wisdom is a defence, and money is a defence, but the excellency of knowledge is, that wisdom giveth life to them that have it. For God shall bring every work into judgment, with every secret thing, whether it be good, or whether it be evil.'
-Ecclesiastes 1:18, 7:3-4, 12:14
5am central time on a Saturday with Barron's, just delivered, in hand.
The dots on the cover; 'expect a bottom soon', 'bull will regain his footing', 'make money on Old World's woes', 'flock to the dollar', 'get very defensive'.
Inside Honest Abe channels Bill King (proprietor of the best daily newsletter on the planet), Santoli does his typical if-but, the letters to the Editor beat up on Goldie, there's some pablum hand-wringing on the 'Flash Crash', and an interesting chart comparing this 'recovery' to past recoveries.
The 2 year percentage change of the S&P from the market bottoms of October 1974, August 1982,December 1987, October 1990, and October 2002 were 67%, 62%, 57%,36% and 44% respectively. Currently we stand at 64% from the March 2009 low.
The number of 5% plus corrections during these previous recoveries were 3,3,6,6, and 3 respectively.
Currently, we stand at 5.
The gist of the jibe?
Steady as she goes, pay no attention that the market action this week was, per every 'established' financial model, absolutely impossible. Choose mirth over sorrow.
Your humble blogger would rather mourn the loss of all rationality.
Back when I was a pup and making my way in this world came across counsel that had been the editor of the Harvard Law Review. Would watch this fella give a deposition and as he did, as his 'subject' offered up a lengthy word in rebuttal, he would take that word, and on his yellow legal pad he would proceed to jot down every four letter word that he could create from the lengthy one, all while continuing the deposition. Freaky brilliant he was and one bit of advice he shared that always stuck with me was 'imagine your future self, what advice would he give your current self?'.
This anecdote came to mind when a commentator to a previous post asked me 'Could you do a post for the young, or those with enough fire in the belly to try something new, about what industries/jobs look interesting going forward?'
Most all of us want a glimpse into the future, but counter intuitively our arrogance regarding our dominion over our environment dismisses our ability to perceive tomorrow.
We are fooled by self-determination over ingemination, viewing the past as more primitive than similar, and the future as more unique than repetitive.
So to answer the 'going forward' query made would offer to the next generation the most penitent apology.
For my generation 'it' started with Reagan, ideology ascendant over reality, we could grow out of deficits, we could cut taxes, and providence would trickle down. True there were remedies called for after Carter, most certainly, but the mantra became inviolate and was taken to the extremes that provided the germination of the crisis we are living through now. This 'ideology of the rich' hallmarked by folks voting against their self-interest given the inculcation that someday they too would be rich or at least entitled to it, was accompanied by an 'ends justifying the means' mentality that morphed the political 'manufacture of consent' into an economic 'manufacture of content', i.e., the slow and insidious debasing of almost every government statistic to maintain the illusion of prosperity. It is no coincidence that we have had bubbles and crashes over the last decade, for ephemeral undertakings and their resultant creative destruction would seem to go hand in hand with a Potemkin prosperity.
Now we stand at a crux; deficits without end, income growth due to government transfers and temporarily pumped by counterproductive government policies, an eroding tax base with increasing? GDP , an unemployment level empirically WORSE than the WORSE levels of the Great Depression, a fervent desire to obviate the requisite and inevitable creative destruction of scores upon scores of festering bad speculative bets ... and a perpetual motion machine in Washington that seems hell bent to legislate bigger shovels to dig out of a hole.
The models of course say that recovery is 100% assured. Unfortunately the models also were 100% sure that the 'What Just Happened Crisis' could never happen and neither could the May Trix 'Flash Crash'.
Perhaps our assumptions are wrong.
In choosing 'prophetic' models with a track record of failure we are mortgaging the ability to be masters of our fate. To foresee a future that rhymes with a past is not, as the pablum narrative whines, to refute self-determination but ironically such recognition would harness the same to shape the unknown to a more benevolent conclusion.
Deficits do matter, belief in a random deliverance is foolish, better to accept a mandatory across the board cut and employ a fair and flat tax.
Free market statistics that are transparent and real allow the free market to allocate resources productively and intelligently.
Creative destruction is the progenitor and the instigator of the wealth creating mechanism of capitalism.
Empires are not eternal. The hard fought blessings of liberty are secured by the prudent not the profligate.
Years from now all this, and most assuredly more, will be obvious and this chapter in history, marked by excesses and folly, will be seen as similar to the ones preceding.
There is nothing random about that.
Nice AM. Smart people create complex problems with debt that distorts capitalism from manageable bubbles to mushroom clouds of destruction.
One does not have to be very smart, but needs to be very wise to realize that:
avoiding debt is sensible
treating others as you would like to be treated is paramount for the inner peace of individuals, society, business and civilizations.
I gotta admit, this Kaufman and Warner piece is the closest thing I've seen to politicians 'getting it right', and they did it within ONE DAY. Bravo! I have added both your states to my travel / business list. Democracy is a humongous ship of fools, but maybe, just maybe we'll be able to figure out how to regain control of the vessel.
http://www.marketskeptics.com/2010/05/euroccp-fraud-continues-with.html
Personally, I'd like to see a 100% tax on all financial institution proprietary trading profits on the day, distributed as a stimulus to all Americans. A windfall profits/financial terrorist tax.
I've uploaded a new DOW chart.
http://www.zerohedge.com/forum/latest-market-outlook-0
http://stockmarket618.wordpress.com