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Is Goldman Legally Frontrunning Its Clients?

Tyler Durden's picture


Everyone who is anyone on Wall Street has at some point used the Goldman 360 portal whether for research, news, keeping a track of prime brokerage portfolio or, disturbingly, for trading, via the REDI Plus 9.0 platform (now loaded with enhanced algo trading features to make life for you, dear soon to be frontran Goldman client, so much easier). A second widely accepted Wall Street concept is that a disclaimer is the last thing that anyone reads, if ever. Yet after taking a close look at the Goldman disclaimer for the 360 portal, which is an umbrella waiver or all downstream websites, including REDI, one discovers the following gem:

Monitoring by GS: Your use of the products and services on this Web site may be monitored by GS, and that the resultant information may be used by GS for its internal business purposes or in accordance with the rules of any applicable regulatory or self-regulatory organization.


One second: by using Goldman 360 a client voluntarily allows Goldman to provide keystroke by keystroke data of everything the client does, even if that includes launching trades via REDI, to Goldman for the internal business purposes? The third thing everyone on Wall Street agrees on is that "internal business purposes" usually (and in Goldman's case, almost exclusively) means proprietary trading.

Are Goldman 360 clients (in)voluntarily signing off a release to be front ran by Goldman on any portal-based trade? Could Goldman please clarify just what "internal business purposes" means in the context of this overarching disclaimer, and also whether Goldman has ever actually used 360 submitted information in the decision making process of its prop trading desk? Lucas Van Pragg: the floor is yours.

Update: several readers have presented some other Goldman Sachs and Spear, Leeds and Kellogg form documents that contain an even more crypitc warning in section 4(f) in Use Of Services:

You acknowledge that we may monitor your use of the Services for our own purposes (and not for your benefit). We may use the resulting information for internal business purposes or in accordance with the rules of any applicable regulatory or self-regulatory body and in compliance with applicable law and regulation.

NOT FOR YOUR BENEFIT? I mean, come on, how more clearer does it need to get.



hat tip Greg and Richard


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Wed, 07/01/2009 - 11:02 | Link to Comment Anonymous
Wed, 07/01/2009 - 11:33 | Link to Comment Anonymous
Fri, 07/03/2009 - 13:33 | Link to Comment Ben_the_Bald
Ben_the_Bald's picture

Are you of the type that wants to see the SEC abolished because of its ineffectivennes?

Sat, 07/04/2009 - 14:43 | Link to Comment Socrates
Socrates's picture

The SEC should be replaced with a true Elliott Ness (Mark Haynes, full-time CBNC shill, hillariously stated that Geithner looked like a young Elliott Ness (Robert Stack)) that has a collection of judges on call such that a forth-with subpoena can be issued and the individual(s) then starts producing the requested data without the benefit of a lawyer stating "He's not here now" when "here" means he's not in that room, but in another room acting like Chloe on "24" and destroying evidence.

The SEC, like the rest of government save for the military, is useless.

Socrates - It's the bottom line...your money is their money. "This town needs an enema."

Fri, 07/10/2009 - 08:00 | Link to Comment Anonymous
Mon, 08/08/2011 - 05:52 | Link to Comment mediahuset
mediahuset's picture

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Fri, 07/03/2009 - 13:30 | Link to Comment Ben_the_Bald
Ben_the_Bald's picture

You are correct. The disclaimer is boilerplate and can't be used to justify illegal acts. The most important question remains on the role of the regulators in making sure the big players don't get away with this type of illegal activities. And this is not an issue specific to Goldman Sachs, you've got to look at the entire spectrum of major players in this game. Just getting fixated by GS size and power and not looking at the overall problem of ineffective enforcement will get you to fight the wrong fight.

Thu, 07/09/2009 - 19:47 | Link to Comment aminorex
aminorex's picture

What law would be broken if GS used customer transaction data in proprietary trading?

Thu, 07/07/2011 - 01:41 | Link to Comment mediahuset
mediahuset's picture

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Wed, 07/01/2009 - 11:08 | Link to Comment Keyser Soze
Keyser Soze's picture

Well, we can be sure there's no revolving door between ZH and GS!

Wed, 07/01/2009 - 21:38 | Link to Comment agrotera
agrotera's picture

wait til the shills fly in to infest the site.

Sat, 07/04/2009 - 14:57 | Link to Comment Socrates
Socrates's picture

"An whhhh (breath of air blows out a match) that, they (GS) were gone!"


May the public backlash against Goldman Sachs begin. We could use a modern Nuremberg trial with Barney Franks and Christopher Dodd in cages that hold Paulson, Geithner, and Summers in one across the room. I realizes that short nooses haanging from inside them make it unlikely, so I'll take the orange jump suit. There are few things in life that would aallow me to say I can now die a happy man. I have to say Barney Franks in jail may well be one of them. For those who do not know, while Franks was saying "all is well", an upper eschelon individual at "Fannie" Mae had been his "lover" a few years before and said individual did not need to squat when they peed.

Be sure to tell your friends at any party this weekend that GS made over $100 million on 34 of 58 trading days in the 1st Quarter. I did last night and I assure you, people get steamed. One man's son joined the Marines as he graduated from college and has looked for jobs since March and it is hopeless. He's hoping to get into Officers Candidate School and is now in Okinowa training. The economy is in many wways a zero-sum game. The oligarchs at GS are sucking the life out like that slat creaature in Star Trek (the TV show) and their tentacles are everywhere. I'm hoping a G-7 opposition type movement floods their offices so they can't work.

Semper Fi


Wed, 07/01/2009 - 11:13 | Link to Comment Hondo
Hondo's picture

These guys are dogs

Wed, 07/01/2009 - 11:30 | Link to Comment Keyser Soze
Keyser Soze's picture

We don't know what it's used for yet. Maybe they were just covering themselves so they knew they wouldn't get nailed if they found a use for the data, even in aggregate.

Tyler - if you were as smart as them you wouldn't ask this, obviously.

Wed, 07/01/2009 - 11:23 | Link to Comment Hondo
Hondo's picture

Read this article in BB and tell me that the Banks are scamming again with the help of the


Wed, 07/01/2009 - 11:32 | Link to Comment Anonymous
Wed, 07/01/2009 - 11:48 | Link to Comment Intuition
Intuition's picture

It's utterly amazing how far the cabal is willing to stretch the law in pursuit of short-term gain. How anyone still has any trust in the system is beyond me.

Thu, 07/02/2009 - 00:02 | Link to Comment NorthenSoul
NorthenSoul's picture

It's not that there is any trust left in the system. We're (as a society) at this painful stage of recognizing there is deep need for meaningful change but can't see how to do it without acting outside the usual channels. More importantly, we very much fear the unknowns that would come with change. A known unhappiness still appears preferable to an unknown happiness.

Which means that more pain and suffering shall be necessary to overcome fear.

Wed, 07/01/2009 - 11:50 | Link to Comment Anonymous
Wed, 07/01/2009 - 11:55 | Link to Comment Undertaker (not verified)
Wed, 07/01/2009 - 12:00 | Link to Comment quant-this
quant-this's picture

I've been saying this for a while and people think I'm nuts but if we give it a name like "Latency Arbitrage" it makes it ok.

I place a large buy order at the same time they lift the offer and place an offer a penny above and sell to me there. They do this all day long and while they are not creating momentum in this particular scheme, they are helping it along.

Wed, 07/01/2009 - 12:34 | Link to Comment wiskeyrunner
wiskeyrunner's picture

Keep at em , keep hitting them, don't back off. The way to beat Goldman is from the inside out, from the inside out.

Wed, 07/01/2009 - 12:48 | Link to Comment channel_zero
channel_zero's picture

TD: IMHO, that disclaimer is used to allow them to create PHB reporting. For example, 3200 customers visited last month, a 10% decline Y/Y, etc.

Going further than that is a long, shaky, bridge no one in GS's IT/programming departments would want to go over. GS would be able to build it, but it would be a large, unwieldy project that probably doesn't integrate with their trading platforms.

If I follow your suggestions correctly, there would be a timing element involved between what's happening on the web site and GS trades. This is very unlikely.

Typically the trading stuff is more than one very complicated hardware/software silo and the web interface stuff is another slightly less complicated silo. The typical IT mindset is never the two shall meet. Ever. So, the web site somehow updating a trading platform would be a big infosec no-no and software-wise very, very difficult.

I recommend demoting this story. You post interesting stuff. But this one is improbable at best.

Wed, 07/01/2009 - 12:55 | Link to Comment Arm
Arm's picture


Wed, 07/01/2009 - 12:53 | Link to Comment Arm
Arm's picture

I agree that this disclaimer could be used for legitimate business purposes. This, even though, there are very clear standard disclaimers available for the aggregation of data.

However, I do find your IT approach naive. You are basically saying that GS (or anybody for that matter) would lose out on a multi-billion dollar revenue stream in exchange for system stability/reliability? Does not seem likely. If they need to buy a more robust architecture to filter, and leech the data in real time, they would simply invest the money.

Couple dozen million in IT vs a couple billion in profits? I would sign that check

Wed, 07/01/2009 - 13:01 | Link to Comment ShankyS
ShankyS's picture

Respectfully to Channel_zero - A big IT no-no? A long, shaky bridge? This bridge is just on a tiny little path on a side road. If it makes millions and the SEC is in the bag, then you get a fine and admit no wrongdoing. This is how the system works. Exploit it till profits run dry or someone catches on, pay the 10% penalty to the man and admit nothing, move on to the next scam and get big bonus in the process for the scammers. Wash, rinse and repeat. Just MHO.

Wed, 07/01/2009 - 17:55 | Link to Comment FischerBlack
FischerBlack's picture

You make some decent points, but all orders flow to the floor, no matter the source. It's really not inconceivable that a program could see an order that meets certain specifications and trigger one or more other orders based on it. The reason front-running rules exist is because front-running is and has always been trivial (and widespread). The digital age and program trading make it much more efficient.

I don't know that Goldman really needs to be singled out, since any broker could front-run ther clients. But I hate Goldman and accusations of frontrunning are mild in comparison to how evil that firm is. So this post has my support.

Thu, 07/02/2009 - 14:26 | Link to Comment channel_zero
channel_zero's picture

Arm: the risks/benefits on the project would not be clear. Also keep in mind in the rank-and-file no one wants to be on the failed end of a project. This one is too risky as TD lays it out. A career-minded dev would do their best to stay away from this one.

Shankys: I cannot briefly describe how complex an undertaking writing front-running software would be.

FischerBlack: It's not inconceivable, but there have to be cheaper ways to make more money cheating.

Wed, 07/01/2009 - 12:47 | Link to Comment wiskeyrunner
wiskeyrunner's picture

It’s bothersome when I hear people say, Goldman is just smarter then everyone else. That’s simply not true. What is true is Goldman has insiders in every form of government. They buy influence. They are indeed the smartest crooks on the street.

They play to win, but they cheat!

Wed, 07/01/2009 - 12:57 | Link to Comment Arm
Arm's picture

Agreed. Don't get me wrong, I have met great people working at Goldman, however I have also met some of the worst there also. There is a quiet arrogance to many goldmanites who actually drink the Kool-aid and believe they have superior skills.

Wed, 07/01/2009 - 13:04 | Link to Comment ShankyS
ShankyS's picture

Sounds like some of the ex Notre Dame football players I know LOL. god - I think NOT.

Wed, 07/01/2009 - 13:19 | Link to Comment Arm
Arm's picture

The best way of detecting a rotten goldmanite (or most rotten ibankers for that) is by the strength of their tan... I am only partially joking.

Strangely enough, all the bad bankers seem to work on their tans more than they read books. I guess it is a give away to superficiality and conceit.

Wed, 07/01/2009 - 15:57 | Link to Comment Anonymous
Wed, 07/01/2009 - 16:48 | Link to Comment Anonymous
Wed, 07/01/2009 - 16:59 | Link to Comment Anonymous
Wed, 07/01/2009 - 18:51 | Link to Comment Anonymous
Wed, 07/01/2009 - 19:13 | Link to Comment agrotera
agrotera's picture

Dont forget the other scam that is in full operation-- simply knowing what the PPT is up to, and they probably write the PPT agenda thus used it for their inside advantage...but since they have immunity the SEC, FBI, CIA,and (all other government acronyms) wouldn't care, that is, they've got full protection....unless the federal reserve system is exposed and revoked as a privately held corporation.

This is your friendly broken record signing off...have a nice day.

Thu, 07/02/2009 - 03:08 | Link to Comment Anonymous
Sat, 07/04/2009 - 19:55 | Link to Comment Anonymous
Sun, 07/05/2009 - 19:03 | Link to Comment Anonymous
Mon, 07/06/2009 - 22:35 | Link to Comment Anonymous
Mon, 07/06/2009 - 22:36 | Link to Comment Anonymous
Mon, 07/06/2009 - 22:36 | Link to Comment Anonymous
Mon, 07/06/2009 - 22:38 | Link to Comment Anonymous
Mon, 07/06/2009 - 22:40 | Link to Comment Anonymous
Fri, 07/10/2009 - 08:01 | Link to Comment Anonymous
Fri, 07/10/2009 - 08:02 | Link to Comment Anonymous
Fri, 07/10/2009 - 16:36 | Link to Comment Anonymous
Mon, 11/09/2009 - 02:20 | Link to Comment Anonymous
Thu, 12/31/2009 - 07:15 | Link to Comment Anonymous
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