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SIGMA X Rarely If Ever Discloses VWAP "Child" Orders To The Market

Tyler Durden's picture


Following up on yesterday's piece, demonstrating the SIGMA X Advance look (Flash order) nature, I would like to present the following research piece, once again written by GSES, which is even more self-incriminatory and demonstrates why the SEC should immediately ban SIGMA X, or at least should undertake a thorough investigation into the propriety of Dark Pools, especially those controlled by equity market monopolist Goldman Sachs.

Senator Schumer, Mary Schapiro, if nothing else, please take a look at the highlighted areas.

The increasingly disenchanted American investors thank you in advance.


hat tip SB


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Thu, 07/30/2009 - 18:50 | 20051 Anonymous
Anonymous's picture

Highlights on PDF don't appear well on scribd

Thu, 07/30/2009 - 20:06 | 20124 Anonymous
Anonymous's picture

Blah, Blah, bla... High Frequency this and that... Do you really think all this blather will scare away real traders?

46 days till BLACK MONDAY (Sep. 14th, 2009). You better pour it on TD. Get more articles on here to scare the traders away from short selling.

Get on it Bubba and stop spending all your time paroozing

Thu, 07/30/2009 - 20:45 | 20162 Anonymous
Anonymous's picture

Not really. The remaining traders do not play with their money. They play with their clients money.

Thu, 07/30/2009 - 18:52 | 20053 Anonymous
Anonymous's picture


This is excellent, do you think the same HFT / Bid-Rigging / Front Running exercise is being performed on fixed income securities?

Thu, 07/30/2009 - 21:21 | 20208 Larry Doyle
Larry Doyle's picture

I worked in fixed income for 23 yrs and left JPM in 2006. The debt markets dwarf the equity markets. I both traded and sold (MBS), for a Fresh Perspective on Technology and Electronic Trading, 

Thu, 07/30/2009 - 19:03 | 20072 Anonymous
Anonymous's picture

Why has no one filed a lawsuit against Goldman or the exchanges for allowing this to happen? We sue over everything else? Can a legal expert or ZH clarify this for me. It appears any one who does not trade via SigmaX has been harmed and I received no disclosure from the exchanges that allows Goldman to siphon off a piece for a trade I may make.


Thu, 07/30/2009 - 19:10 | 20079 Anonymous
Anonymous's picture

Not too many protestants as lawyers, they have a conscience.

Thu, 07/30/2009 - 19:58 | 20118 Eagle
Eagle's picture

The mother of all class action suits! 

Thu, 07/30/2009 - 19:59 | 20119 Anonymous
Anonymous's picture

nor is it a sense

Thu, 07/30/2009 - 19:13 | 20082 buzzsaw99
buzzsaw99's picture

Death to GS!

Fri, 07/31/2009 - 01:15 | 20377 Anonymous
Anonymous's picture

The 5 biggest banks - it's a 5 headed monster... you should know ;)

Thu, 07/30/2009 - 19:32 | 20094 Anonymous
Anonymous's picture

The SEC's Mary Schapiro said in a speech on June 18 that dark pools are a concern:

Thu, 07/30/2009 - 19:34 | 20095 Anonymous
Anonymous's picture

Tyler did I get this right?

Market going up on "NO VOLUME?" HMMMM....ANY BLOCK TRADES (parent orders)split into CHILD ORDERS then ARE ROUTED THROUGH THE DARK POOL FIRST ....if executed it is NEVER DISCLOSED TO THE "FREE MARKET".....if not EXECUTED (or frontrun whatever word you want to use) then it is kicked out to the rest of the public (who has financed GS trading account and bailout) who has no idea (or political influence to change anything)that this is going on.

Funny about the timeline ah, TD...AUGUST...Hmmm when did the markets start crashing???? Hmmmmm

You know what if the Schumer, the SEC or Barney Frank don't pick this up they are ABSOLUTELY INVOLVED NO QUESTION!!!

If they don't pick this up then I can almost be certain that there will be political unrest in this country the likes of which we haven't seen in 200 years......china will look like f*&king candy land once we get our hands on these MF's throats....first the banks and then the politicians if nothing is done....

Perhaps a little "BoonDock Saints" is in order

Thu, 07/30/2009 - 19:35 | 20097 buzzsaw99
buzzsaw99's picture

Those mofos could gang rape little orphan annie on the white house lawn and get away with it.

Thu, 07/30/2009 - 19:44 | 20105 Anonymous
Anonymous's picture

Could you elaborate on the timeline statement.

Thu, 07/30/2009 - 19:43 | 20102 PragmaticIdealist
PragmaticIdealist's picture

Holy shit, the "evidence" they are using to prove the efficacy of their VWAP algo is on the order of 3 bps.

26.8 bps cost versus 23.6 bps.

And this is a regression analysis where they use multiple control factors and might have missed some, so it's almost as much art as science.

So bearing this in mind + data mining likelihood, its prob in the range of 1 to 2 bps.

Nice bang for the buck, eh tax payer / home owner?

Thu, 07/30/2009 - 19:51 | 20113 Anonymous
Anonymous's picture

Help me out here. I'm trying to understand this. Are you that by trading in their SIGMA X dark pool they are able to pick up 3 cents per share? Thanks if you could explain in plain english.

Thu, 07/30/2009 - 20:29 | 20147 Anonymous
Anonymous's picture

Yes and no. The no argument which GS will make is the order receives a 3 basis point price improvement which they will use as evidence that they are helping create a more efficient market place.

But if Sigma X is the route they use for their SLP trading GS takes the other side of the trade and ends up owning or selling the shares in their prop/algo trading account. Then GS can route out to the prevailing market and sell or buy the shares for a profit or loss. It's similar to market making but they don't have the regulations market makers do. Not a bad gig if you are the one running it.

Thu, 07/30/2009 - 19:54 | 20114 Anonymous
Anonymous's picture

Glad you cleared that right up for us...100M a day on 3 bps spread? Wow you are a genius... well said ....Thanks for lowering the average IQ of the readers of this bloq.... GS would never be able to flourish without people like you..

Thu, 07/30/2009 - 20:14 | 20130 PragmaticIdealist
PragmaticIdealist's picture

whoops meant to say it could be anywhere, not in 1-2 bp, regression analysis is pretty flawed a lot of time

Thu, 07/30/2009 - 23:05 | 20289 Anonymous
Anonymous's picture

When you turn over $100M+ every day, as many hedge funds do, a few bps goes a long way. And that isn't meant to prove the efficacy of their vwap algo, its the price improvement they "claim" to offer customers in sigma x with the vwap strategy merely used as an example (probably due to its longer execution horizon on average, which makes analysis easier). With that being said, George Sofianos is a total hack when it comes to TCA. His position at GS is in direct contradiction to the 'best and brightest' stereotype. Try to find his paper on their piccolo algorithm. Its good for a few laughs.

Thu, 07/30/2009 - 19:43 | 20104 Anonymous
Anonymous's picture

7:38pJapan monthly household spending down 1.7% in June

8c077dc4-5ad2-4f73-b9c3-a381c5fece05:635067:34pJapan's June jobless rate 5.4%, vs. 5.2% in May

8c077dc4-5ad2-4f73-b9c3-a381c5fece05:635057:33pJapan's June CPI deflation fastest ever: reports


Japan's June core CPI falls 1.7% on year



Thu, 07/30/2009 - 19:47 | 20110 Printfaster
Printfaster's picture

Actually I don't see the concern.  It is no different than all the current exchange routings.  My broker does not display all my orders to all the various exchanges.  Sigma X acts like a proprietary exchange.  Free enterprise.  Why should all exchanges have names?

I applaude GS for its ability to arbitrage and create exchanges out of thin air.

This is just like the mutual funds that yield 5.5% for accounts of $1M, and 5.2% for accounts of $5,000 or more.  How is what GS is doing any different?  The rich get better margins, better clears in the market.  What is the point of being rich, if you cannot get a better deal than the little guy?  Hey Canada does it with our drugs?  Why shouldn't some rich SOB get a better deal through GS?



Thu, 07/30/2009 - 19:54 | 20116 Eagle
Eagle's picture

"What is the point of being rich, if you cannot get a better deal than the little guy?  "


Then don't come begging with hand-in-hat to joe little guy taxpayer when you BLOW UP!

Thu, 07/30/2009 - 20:00 | 20121 SloSquez
SloSquez's picture

No Shit.  GS would have been gone back in October.  Suck it till it's dry Printfaster.  AIG anyone?

Thu, 07/30/2009 - 20:01 | 20122 Printfaster
Printfaster's picture

You just made my point.


Thu, 07/30/2009 - 20:08 | 20126 SloSquez
SloSquez's picture

Oligarchy in force.  No DOUBT.  Nice.

Thu, 07/30/2009 - 19:48 | 20112 SloSquez
SloSquez's picture

Tyler's like a freight train.  You can see it coming, but no way in hell can you stop it.  LMAO!

Fri, 07/31/2009 - 00:26 | 20353 Anonymous
Anonymous's picture

He may well stop himself when he gets found out for blatantly manipulating the truth. Read the document.

Thu, 07/30/2009 - 20:20 | 20133 gammaman
gammaman's picture

TD, I am still trying to figure out when executed cross-trades (dark pools) transactions are suppose to be reported (ie, "diseminated") into "consolidated tape" (time between transaction and requirement to report transaction quote to public). Back in 2000-01, based on fidessa implementation, I recall cross-trades not being required to be reported by firm until later in day. I assume this has changed under new rules.

Can anyone provide clarity on this question?

Below is closest paragraph I came across within new rules:

SEC Regulation NMS Final Rules (523 pages)

For the reasons discussed above in section V.A.1, the Commission is retaining the current consolidation model and adopting the consolidation requirements of Rule 603(b) as proposed and reproposed. All of the SROs currently participate in Plans that provide for the dissemination of consolidated information for the NMS stocks that they trade. The Plans were adopted in order to enable the SROs to comply with Exchange Act rules regarding the reporting of trades and distribution of quotations. With respect to trades, paragraph (b) of Exchange Act Rule 11Aa3-1 (redesignated as Rule 601(a)) requires each SRO to file transaction reporting plans that specify, among other things, how its transactions are to be consolidated with the transactions of other SROs. With respect to quotations, paragraph (b)(1) of Exchange Act Rule 11Ac1-1 (redesignated as Rule 602(a)(1)) requires an SRO to establish and maintain procedures for making its best quotes available to vendors. 

To confirm by Exchange Act rule that both existing and any new SROs will be required to continue to participate in such joint-SRO plans, adopted Rule 603(b) requires SROs to act jointly pursuant to one or more NMS plans to disseminate consolidated information for NMS stocks. Such consolidated information must include an NBBO that is calculated in accordance with the definition set forth in adopted Rule 600(b)(42).* In addition, the NMS plans will be required to provide for the dissemination of all consolidated information for an individual NMS stock through a single processor. Thus, different processors would be permitted to disseminate information for different NMS stocks (e.g., SIAC for Network A stocks, and Nasdaq for Network C stocks), but all quotations and trades in a stock must disseminated through a single processor. As a result, information users, particularly retail investors, will be able to obtain data from a single source that reflects the best quotations and most recent trade price for a security, no matter where such quotations and trade are displayed in the NMS. 

*Adopted Rule 600(b)(42) of Regulation NMS defines “national best bid and national best offer.

Sat, 08/08/2009 - 20:43 | 30582 Anonymous
Anonymous's picture

It looks like they report once a month: "VortExSM is a unique dark liquidity pool...", that uses BNY Convergex whose report is at under

"Dark pools must report trades monthly on SEC Rule 605" p. 7

The Thomson site does not list Goldman's dark pool, however.

Thu, 07/30/2009 - 20:29 | 20146 Pizza Delivery Man
Pizza Delivery Man's picture

Signs of an Economy Destroyed;

Trains and Plane traffic down 10% to 50%.

Gambling, casinos, cruise ships, hotels are slammed 20% to 70%.

GM and Chrysler (manufacturing) slammed--BBBBOOOOOOOOOOOOOOMMMMMMMMMMM!!!!!!!!!!

FEDX and UPS down 50%--pppppplllllluunnnnnnnggggggeeeeeeee.

Banks---now 7 to 10 each week get FDIC' ed and big banks are broke and not lending.

Media companies & newspapers are going broke.

Glut of oil on the market--people are not traveling.

All of the Consumer sectors are destroyed and smoking.

The only thing up is the stock market------don't cry bulls--you had a chance to run.

Thu, 07/30/2009 - 20:32 | 20149 Anonymous
Anonymous's picture

Why are these private exchanges legal?

Thu, 07/30/2009 - 20:55 | 20171 Anonymous
Anonymous's picture

So OK.

Goldman Sachs runs a dark pool, a proprietary trading desk where they speculate for profit, manipulates oil prices, recieves rebates from the official exchanges for the trades their bots make, gets a free 13 billion from AIG, and free capital from the Fed to do all this.


Fri, 07/31/2009 - 00:36 | 20358 agrotera
agrotera's picture

..and perpetual immunity

( unless we can all change that major detail, and their crimes are finally brought to the Hague for trial, as Max Keiser insists.)

Thu, 07/30/2009 - 22:49 | 20261 aldousd
aldousd's picture

I think a private exchange should be fine, so long as they don't come asking for tax payer bailouts. I mean, listen, you can sell whatever you want in your basement to whomever you want, as long as you don't come and get in the unemployment line and collect my tax money because you made a bad deal under the stairwell.

Thu, 07/30/2009 - 23:07 | 20293 DebtorShredder
DebtorShredder's picture

As a gambler, would you have had a more fair chance gambling in Vegas during the 60's or today?

Why or why not? (Think about the casino owners at the time)

Therefore, you may change your answer to public/private exchanges.

Thu, 07/30/2009 - 20:39 | 20155 kote
Fri, 07/31/2009 - 08:18 | 20457 zeropointfield (not verified)
zeropointfield's picture

Funny, street smart issue 28, 29, 30 seem to be missing. wonder where they went...

Thu, 07/30/2009 - 20:51 | 20167 Hank Rearden
Hank Rearden's picture


Either I'm missing something or you need to have another look at the document you posted. The title of your post is "SIGMA X Rarely If Ever Discloses VWAP "Child" Orders To The Market", but at the bottom of the first page I read this quote:

"In August, Goldman Sachs introduced its new Liquidity Enhanced VWAP algorithm and SIGMA X crossing jumped to 30 percent. The Liquidity Enhanced VWAP algorithm looks to execute targeted volumes by placing non-displayed child orders in SIGMA X at the mid-point prior to going out into the displayed market."

So, 70% of the child orders are going to the market place. What gives?


Fri, 07/31/2009 - 00:19 | 20345 Anonymous
Anonymous's picture

Tyler is not really playing fair. He doesn't know what he is talking about, but if you notice his rabid pitchfork posters know much much less. Stay away from this place.

Fri, 07/31/2009 - 07:51 | 20440 Anonymous
Anonymous's picture

Sorry those posters are tax payers...

Fri, 07/31/2009 - 10:49 | 20581 Anonymous
Anonymous's picture

First, you missed the line previous, which says:
"Until August 07, the average crossing rate was 11 percent."

It also says:

"To quantify the SIGMA X crossing benefit, we use a sample of client VWAP algorithm orders executed by Goldman Sachs between August and December 07. Our sample consists of VWAP
orders and excludes orders where the client specified a limit price.
For each parent order in our sample, we calculate its actual execution shortfall and SIGMA X crossing rate. Some orders have zero SIGMA X crossing, some execute 100 percent within SIGMA X and some execute partially within SIGMA X."

That tells me 30% is the average of orders sampled between August and December 07. It doesn't say anywhere that only 30% of all child orders cross over to Sigma-X.

And the document also qualifies what can cause lower shortfall, which means it increases the Sigma-X crossover. So there are orders that can cross at a much higher rate than the average rate back at the end of '07.

Thu, 07/30/2009 - 20:58 | 20176 PragmaticIdealist
PragmaticIdealist's picture

GS trader reads this document: "Hmm... 'Child' orders streamed into the market... *creates algo to monitor flow of small order flow and front-run the back/mid end chunk of the order flow*

And that's without being able to access the dark pool info, which they possibly can (at least historical data and then guestimate which sectors/equities are prone to child order routing).

Ofc I may be entirely off base, I'm not actually in the trading business.

Thu, 07/30/2009 - 21:06 | 20187 Project Mayhem
Project Mayhem's picture

Project Mayhem Reserach has just released a new dark-pool financial trading program titled 'VampireSquid.c'.  Harnessing the seething energies of Lucifer -- using the patented Dark Squid Liquidity Engine™ -- our program is the first specifically designed to compete with billion dollar funds with an initial trading balance of only $1000 USD.  This is a beta version we are releasing for testing among the wonderful audience of Zero Hedge.  VampireSquid.c is designed to directly compete with Sigma X for global market liquidity.  Via the network-enabled 'Dark Squid' engine, our program issues fraudulent bearer bonds in the denomination requested by the user -- which are then posted as collateral for zero-interest loans in either Yen (BOJ option #1) or Yuan (BOC option #2). You can download VampireSquid.c from  Feedback appreciated. 

Thanks in advance!

Thu, 07/30/2009 - 21:39 | 20216 Anonymous
Anonymous's picture

GS+JPM, the twin horns of THE SATAN.

Thu, 07/30/2009 - 21:58 | 20224 Quackking
Quackking's picture

Off topic, but my classy Zero Intelligence t-shirt just arrived (early!) and I must say, this is a fine addition to any wardrobe. I plan to wear it exclusively as I host numerous future Beer Summits.

Thu, 07/30/2009 - 22:52 | 20267 aldousd
aldousd's picture

Beer summits for the win! We need to have some of these with Iran and North Korea, right? ... What do you mean Iran doesn't drink? What do they do while they're watching Letterman?

Thu, 07/30/2009 - 22:57 | 20279 Anonymous
Anonymous's picture

Shop online for goofy jackets?

Thu, 07/30/2009 - 22:55 | 20271 Dr Hackenbush
Dr Hackenbush's picture

"reduce execution shortfalls"

Mobspeak for: "we insure that nobody else makes a damn dime"

Thu, 07/30/2009 - 23:04 | 20285 Anonymous
Anonymous's picture

Where does it say these orders are 'hidden' from the tape.

They may well print LATE, not sure how late, thought I saw up to 90 seconds somewhere, but they are supposed to print ALL executions to tape no matter where they occur.

Simply offering flow at the midpoint is NOT crooked, they are simply trying to cross buys and sells at a better price than the inside b/a.

wtf are you idiots ranting about.

The focus should be on co location, flashing, and obvious manipulation, not this crap.

Thu, 07/30/2009 - 23:05 | 20287 Anonymous
Anonymous's picture

Where does it say these orders are 'hidden' from the tape.

They may well print LATE, not sure how late, thought I saw up to 90 seconds somewhere, but they are supposed to print ALL executions to tape no matter where they occur.

Simply offering flow at the midpoint is NOT crooked, they are simply trying to cross buys and sells at a better price than the inside b/a.

wtf are you idiots ranting about.

The focus should be on co location, flashing, and obvious manipulation, not this crap.

Fri, 07/31/2009 - 07:49 | 20439 Anonymous
Anonymous's picture

Man can you hear them fighting for those bonuses?

Fri, 07/31/2009 - 10:53 | 20584 Anonymous
Anonymous's picture

You are spot on!!! Flashes and co-lo and HF's on Long Island and companies with names which are castle like are where the SEC should focus.
TD encourages debate and interesting documents but is often so off the mark (LIKE HERE!).
Definitely worth investigating the reciprocal relationships between all liquidity pools and there biggest liquidity providers.
Clearly flash orders all over the place which SHOULD BE BANNED as they are manipulative without question...but these topics should not fall under GS bashing.

Thu, 07/30/2009 - 23:06 | 20290 Anonymous
Anonymous's picture

Yep that was a double print there, and right at the midpoint.

Another satisfied customer!

Thu, 07/30/2009 - 23:15 | 20302 Anonymous
Anonymous's picture

Mr. Durden,

You reference the following quote from the attached GS document which you assert "demonstrates why the SEC should immediately ban SIGMA X":

"If the child order executes within SIGMA X then it is never displayed to the market ahead of the trade."

First of all that sentence (written by GS) suffers from a severe lack of logic and awareness of chronological order as it attempts to utilize an if/then statement where the "then" portion occurs before the "if" portion. If the trade is executed then how can you go back in time and display it to the market ahead of time.

Regardless, the point is if the trade executes in SIGMA X then it will not have been shown to the market, because it is no longer a pending order but rather an executed trade done internally. What's the problem? It's not a NBBO or Reg NMS issue as the VWAP orders are done at the mid point.

If you read further down in the document you will see that only 30% of the VWAP child orders are executed in SIGMA X and the rest are displayed in the market. Thus 70% of GS VWAP orders are displayed in the market which completely debunks your assertion that "SIGMA X rarely if ever discloses VWAP child orders to the market"

Thu, 07/30/2009 - 23:17 | 20305 Anonymous
Anonymous's picture

Durden posts headlines like this on purpose.

He knows damn well its bullshit.

Fri, 07/31/2009 - 01:04 | 20370 Project Mayhem
Project Mayhem's picture

People come to Zero Hedge because they are tired of the drivel we are fed day in and day out from the garbage media syndicates like CNBC, Bloomberg, etc.  Anyone with a brain and a pulse knows there is no recovery and things will get worse before they get better.  The only question really is the nature and chronology of the future problems.


If you have a technical issue with Tyler's post here (regarding Sigma X), as it seems you may -- then by all means expound upon your objections, and make them clear to the audience.  But please don't denigrate the discussion (calling headlines 'bullshit' etc). This just makes you look like an ass.  How about you explain WHY it's bullshit? Write a clear and concise explanation why -- for example, draw up a sequence diagram for Sigma X trade execution. Write a rebuttal paper or extended post and email it in. I have no doubts Tyler will post it. He posted my rough analysis even though it was both controversial and disputed.


People come here because it is intelligent and edgy -- and an open forum for discussing finance at a high level.  Please let's keep it that way so we get an assortment of minds to analyze what is going on these days in the markets. 


Fri, 07/31/2009 - 07:47 | 20438 Anonymous
Anonymous's picture

Tyler GS is not liking your posts...

Thu, 07/30/2009 - 23:28 | 20318 Anonymous
Anonymous's picture

I think what folks are saying here is if they see a big order they can hold it in sigma to buy up what's in the market and then choose not to fill it I. Sigma and then throw it outto the market knowing the buyers top limit...

Same on a sell

and if gs is on the wrong side of a big order they can execute it in sigma to keep the market from moving a direction they don't want and then work it out over the day or plY with the stock until they can draw other in to sell it to or shake folks out to fill a position they shorted...

Fri, 07/31/2009 - 00:42 | 20362 Anonymous
Anonymous's picture

Ok, but let's be clear, this post is about VWAP orders not big orders that may be front run. Don't confuse the two. Its unlikely any institutions would engage in a dark pool without absolute certification from an independent auditor that assures that no one can look into the the crossing engine and therefor be able to act on what is there. They are not stupid.

Fri, 07/31/2009 - 07:45 | 20437 Anonymous
Anonymous's picture

Please are you serious.....?

Thu, 07/30/2009 - 23:30 | 20321 Anonymous
Anonymous's picture

There is alot of systems now days where you can hide your order from level II I think thats no big deal... who check level II anymore anyways ....the game has been rigged for a while

Thu, 07/30/2009 - 23:34 | 20325 Anonymous
Anonymous's picture

So these fuckers introduce their vwap algo in august '07, right where I set a few trendlines ..

these assholes set up the top to their specs.

jail isn't good enough for 'em.

Thu, 07/30/2009 - 23:53 | 20336 Anonymous
Anonymous's picture

Dude, if you are getting beat by a VWAP algo (from 2 years ago nonetheless) than you need to re-evaluate your trading strategy

Fri, 07/31/2009 - 00:24 | 20352 Anonymous
Anonymous's picture

I was sending orders to their vwap algo in 2004 so.....WTF are you guys typing about? let's send all smart people or people wearing spectacles to Jail!!!! no, kill them!!!!

Tyler is actually the malefactor here. It is plain an simple. This is all a big fucking media swindle.

Fri, 07/31/2009 - 12:23 | 20704 Anonymous
Anonymous's picture

so, you can't read eh?

note 11

and no, I made lots of bucks off those trendlines since they pointed down and were confirmed repeatedly.

Fri, 07/31/2009 - 00:07 | 20339 Anonymous
Anonymous's picture

Re: Cause of Action

Isn't frontrunning in front of pension funds a form of financial elder abuse?

If GS breached a fiduciary duty to anyone over 65 in California, that falls under the Elder and Disabled Adults laws. Mandatory attorney fees, plus there are criminal sanctions if the judge refers over to the DA.

California budget crisis = solved.

Fri, 07/31/2009 - 00:42 | 20361 agrotera
agrotera's picture



And, Tyler, please do the same with this info, as you did with the info you sent to Schummer. 

Fri, 07/31/2009 - 00:44 | 20364 i.knoknot
i.knoknot's picture

To those that think this effort is a silly over-reaction to 'the way it is'... come re-join the ZH fight for honest markets.

ZH is simply providing more proof that the game rules are written one way out front, and played another way in the back rooms. Just because you are used to it and it's been going on for years doesn't mean it's ever been OK...

If average Joe tells the market he'll sell XXX for $100, and I say I'm willing to pay *UP TO* $101 for XXX, is it OK for some guy between us to secretly take my buck? Have I been robbed if I don't know it? I believe many out there really believe that the answer is "no, if you don't know, it won't hurt you...". In fact, to them, my trust in the broker's honest management of this transaction is my folly, and somehow for my trust, I deserve to be "taken"... some sort of 'price to play' sensibility.  By all moral standards, which are the backbone of voluntary transactions, they are wrong, even if they maintain the upper hand.

Sure, if 'extreme fees' are published as 'part of the deal', we can choose to engage in this sort of distorted transaction (e.g. shipping and handling charges...), but unless the middle-man (market-maker) provides value, transparency, and auditability that we can all see (and then decide if we wish to continue to use him as our transaction broker), he has the potential to rob all participants.

It's not the amounts, it's the lack of transparency. After-hours spreads run 50+% and folks still play, knowing full well the costs. All the power to them. This HFT dark-pool cruft seems to be enabling wholesale theft. Outing those who are actually stealing is both noble, and critical, to the survival of the markets.


I'm liking the Aynd Rand-esque protest to take my resources out of the game, and hope the rest follow. We don't need the NYSE. COMEX. CBOE... you may think we do...


Remember, "If you don't play, they can't win" - join us.

Fri, 07/31/2009 - 08:04 | 20451 Arm
Arm's picture

Exactly.  Just because you authorize your agent to pay "up to" a certain. It does not mean that you expect him to pay that price.  He has a fiduciary duty towards you, because you pay a fee for his services.

Of course don't say that on any trading floor.  They will laugh at you and make you buy the next round of beers.

Fri, 07/31/2009 - 01:20 | 20382 Anonymous
Anonymous's picture

Brokers have been trading as principal or matching orders off exchange and guaranteeing prices (using vwap or whatever) for ages, and "Dark pools" are just an automated high volume faster version of that. The problems associated with off-exchange trading (e.g. front running, masking insider trades, reduced price information etc.) have been also been around just as long.

People who have an issue with this are saying they have an issue with off-exchange trades. Fine. Then don't just pick on dark pools - pick on their sources!

Fri, 07/31/2009 - 05:22 | 20419 Anonymous
Anonymous's picture

I wonder how many of these posts are from employees or paid agents of GS? Not just the obvious ones I would guess, lookout for misdirection as much as ridicule.

GS are always proactive in defence and they are certainly aware of Zero Hedge and its position on GS. They will be responding.

Fri, 07/31/2009 - 07:54 | 20441 Anonymous
Anonymous's picture

By placing market orders into child orders timed out in horizon buckets and selling reduction in shortfall bps, GS can front run upto 30% of all volume it places to the public markets. This sounds like fraud to me.

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