Mary Schapiro

Ever wonder why the final SEC report on the flash crash doesn't match up to the forensic evidence found by Nanex? It seems the SEC/CFTC failed to disclose they didn't get around to interviewing the traders that actually executed the algorithm blamed for dumping 75,000 emini contracts on the market "without regard to price or time" until 2 weeks after publishing their final report on the flash crash! Apparently, they were making a lot of things up to fit a foregone conclusion. According to the media, it was Waddell & Reed who executed those trades right? Well, no. Barclays executed the contracts using their time tested algorithm called Participation. You simply can't crash a market with the Participation algorithm. This is an algorithm that in fact has sophisticated price and time components. This is an algorithm that would only sell at the offer -- and never at the bid. This was discovered and pointed out by Nanex after just one day reviewing the actual 6,438 eMini contract trades (75,000 contracts) which ZeroHedge helped obtain. But the media was happy to hang the guilt on an out of town mid-west Mutual Fund company, and besides all this stuff was getting way too complicated. After all, when it comes to such complexities, it is only economy PhDs who are fit to opine at will. Only the SEC/CFTC wasn't counting on anyone double checking their work..

Flashing headlines:

• GRASSLEY ASKS SEC TO ACCOUNT FOR ALLEGED DOCUMENT DESTRUCTION
• SENATE'S GRASSLEY MAKES REQUEST IN LETTER TO SEC'S SCHAPIRO
• GRASSLEY: WHISTLEBLOWER CITED `UNLAWFUL DESTRUCTION' OF RECORDS
• GRASSLEY CITES ALLEGATIONS IN LETTER FROM SEC WHISTLEBLOWER

As a reminder, Grassley is after Stevie Cohen. If Mary Schapiro indeed willingly destroyed docs that exposed SAC as a criminal organization, she is going to prison. And if indeed this is true, in the aftermath of Madoff, that is where she belongs.

Dear Mrs. Schapiro,

We would like to thank the SEC for implementing the Stub Quote Rule in December of 2010. While stub quoting did not cause the Flash Crash of May 6th 2010, it was a contributing factor and we welcome the stub quote ban.

However, after studying four recent trading days, we have a question. Is there any intention of enforcing the stub quote rule? If so, can you please tell us when?

How can the SEC's Office of Risk, Strategy, and Financial Innovation "provide the Commission with sophisticated analysis..." when there's no one running the Office of Data & Data Analysis?

And she is so worth every sub-penny of it.

This was just forwarded to me by a close friend howling in a fit of rage. She is normally quite reserved, so I thought I'd better share this with all of you fanatical ZH Mary Schapirophiles!

Mary Schapiro is making some waves at the Economic Club of New York, where for the first time ever, she has given some indication she is only two decades behind the curve when it comes to a market that now has a 5 to 1 ratio of HFT to retail participation (yes, you are all not only frontrun daily, but also surrounded by Sky Net). Here is a summary of her key points from the Economic Club speech earlier, courtesy of Themis Trading.

The Syndicate Encouraging Corruption lately has been far more busy begging for money from the Tim Geithner's gargantuan budget than performing any enforcement, analysis, or regulation, case in point today's second attempt to kill any investigation into the ML/BAC merger. We hope some Congressional or Senate committee will finally find the guts to subpoena any and all communication between BACML, or any other banks, and the SEC related to this proposed settlement, to uncover just what the SEC's motives are to fast-lane yet another case involving the endless corruption on Wall Street. Luckily Cuomo is still there to pursue the punishment of real wrongdoing, since America is now completely unable to rely on the $1 billion publicly funded organization, which, at least on paper, "works in American investors' interest"... and by American investors we assume the agency does not refer to Goldman Sachs or Bank Of America. Yet judgment day for Mary Schapiro may soon be coming. Larry Doyle at Sense on Cents notes that next week FINRA's board of directors will finally address alleged wrongdoings by Schapiro. We join Larry in asking: "Will the Board realize it ultimately needs to be accountable to ALL its member firms and, by extension, to the American public at large? Will the Obama administration compel the Board to provide the transparency America so badly wants?"

From Mary Schapiro's speech at the 37th Annual Securities Regulation Institute at the Hotel del Coronado, California, surely a very much deserved, and taxpayer sponsored boondoggle, on the changing landscape in financial markets. Presented without expletive filled commentary.

Don't forget, the FCIC panel continues today with Sheila Bair, Lanny Breuer, Eric Holder and, somehow, Mary Schapiro talking. How the last person on this list is considered an expert in any topic is the only issue that should be debated. At least being away from her 80286-based "enforcement-special" mainframe, justifies the lack of an SEC response on the ESH0 incident. Granted, nobody expects the SEC to opine on blatant market manipulation when the profits made are more than a few thousand dollars.

Live hearing can be found here.

The degree of insider trading in this market is getting ridiculous. And the strangest thing is those who are executing on blatantly obvious material, non-public insider information, are no longer concerned the least bit about getting caught as they realize that the "mighty" SEC will do nothing against them, courtesy of the example the SEC has set by finding absolutely nobody "responsible" (except, of course, the regulator's own future employers who thus get immunity from prosecution) for the greatest market heist in history in which over $5 trillion has been transferred from the middle class to the Wall Street oligarchy (future providers of paychecks for SEC staffers).

Today's grotesque example of the SEC's futility to act as even a modest deterrent to insider trading activity: New York Community Bancorp (which, just so happens, is a $602 million recipient of TLGP debt), whose stock surged in the final minutes of trading for reasons (then) unknown. As reader QevolveQ pointed out at 5:30 pm, the activity in both the stock and the calls of the company was many standard deviations away from average and raised major red flags. Those questions were quickly put to rest when it became known at 6:33 pm that NYB would in fact receive FDIC subsidies to acquire newly failed AmTrust Bank in a transaction that would be "immediately accretive to earnings."

We will post this without much commentary as the probability we would otherwise be sued for grossly indecent language in a public venue as well as libel and slander is very, very high.

"As the Commission considers the treatment of ATSs, at this week’s open meeting and beyond, I respectfully ask that you consider the proposals outlined below to ensure that ATSs, while continuing to provide beneficial competition to registered exchanges that directly and indirectly benefits retail investors, do not undermine the fairness, transparency and integrity in our markets that the Commission has worked for so many decades to foster." - Sen. Chuck Schumer

One of the pieces we highlights in today's frontrunning was commentary by Susan Antilla at Bloomberg, discussing the perfect world in which the SEC wasn't merely yet another tentacle of the Wall Street syndicate, slapping wrists and issuing statements now and then to remind of its worthless existence. One of Susan's points brilliantly Swiftian in its simplicity: "Considering the blinding evidence of dysfunction, it occurs to me that enough is enough. Why not just shut the place down?" Many would say this is such an obvious observation that it has escaped the thinking of the majority. Yet when this market bubble pops, which it eventually will, unless the Fed can somehow find a way to bring the value of the dollar to 0, a furious America will once again demand the heads of those who were supposed to oversee the irrational exuberance in progress. At that point Mary's tenure will be over, yet the travesty that is the SEC will likely continue in some form. However, there is a chance for an earlier resolution. Judge Rakoff, who so far has been the critical voice of sanity in a corrupt world, may cross paths with Mary even before her ultimate downfall. And he is not happy with the "regulators"

As a reminder, The SEC's budget is nearly $913 million dollars, spread over 3,600 people, or over $250,000 per person. Judging by the SEC's phenomenal historical performance of achieving absolutely nothing aside from catching one plane-jumping self-admitted ponzier, and allowing the Bank of America bonus lawsuit to take a few too many turns for the surreal, it is a practical certainty that Wall Street will make sure D.C. allocates a few extra billion to keep the SEC happily efficient in its track record of catching exactly zero notable Wall Street based criminals. After all, that's what shareholder/taxpayer subsidized fines are for.

Also the below interview with the head of the SEC has exactly zero mention of instituting the downtick rule for buying stocks, or the fact that 4 stocks now account for 30% of the NYSE volume: a perfectly normal occurrence in the eyes of former FINRA head