The ONE Revelation About HFT Programs That Truly Scares Bankers (It's Not Stock Market Rigging)

smartknowledgeu's picture

Last week, the big story was how bankers use HFT (High Frequency Trading) algorithmic software not only to rig markets but also to commit theft on a daily basis (Frontrunning, like Quantitative Easing, is just fancy Wall Street lingo to disguise its true meaning of theft).  Though many in the public blogosphere expressed shock that stock markets are
rigged and that regulators like the Securities Exchange Commission willingly allow this theft to occur, the only thing shocking about this story was how long it took this story to reach the mainstream and that people were crediting Michael Lewis with uncovering this story with his book “Flash Boys” when in reality this story had been discussed in detail on independent financial media sites for more than five years already.


For example, an accounting professor at the Yale School of Management, X. Frank Zhang, calculated that HFT trading was responsible for a minimum of 70% of all daily trading volume in US stock markets and possibly for as much as 78% of the volume in 2009. And HFT algorithmic trading was already dominating daily trading volume on US stock exchanges prior to 2009.  Thus one can clearly see that the only thing “new” about HFT algorithms is that this old news has finally moved into mainstream media headlines.


BATS CEO William O’ Brien, when confronted on MSNBC last week with the fact that HFT algos
commit millions of acts that are specifically prohibited by the US Securities and Exchange Commission’s Regulation NMS, a regulation that requires brokers to guarantee customers the best possible execution of price on orders, ludicrously argued that HFT programs have no clients (David Cummings, a computer programmer that worked at the Kansas City Board of Trade, founded BATS, a stock exchange located in Lenexa, Kansas. The core code of BATS was derived from tradebot, a computer program that engages in algorithmic trading). There is only one possible way that O’ Brien’s claim that HFT programs “have no clients” can be true. If the HFT programs were artificially intelligent self-aware programs that made all decisions independent of the interests of the people that coded them and the bankers that used them, then perhaps O’Brien’s claim could be partially true. Otherwise, as
long as bankers hire programmers to code HFT algorithms and employ them for their benefit and to the disadvantage of their competitors as well as the disadvantage of their clients, then the obvious clients of HFT programs are bankers and the companies that entice bankers to use them. To claim otherwise is simply a flat-out lie.


In any event, the Holy Grail that the bankers are seeking to protect is not that they use HFT programs to rig stock market trading.

The real truth the bankers wish to conceal from the public is that they use HFT programs to suppress gold and silver prices.

If this truth made it into the mainstream news and was being discussed at the same level at which HFT programs being used to rig millions of stock trades is being currently discussed, bankers would have a heart attack. However, do not let the complete media blackout of the banking cartel’s use of HFT algos to control gold and silver prices in the paper derivatives markets lead you to falsely conclude that the use of HFT programs are not critical to gold and silver price suppression.


There have been many instances in the past several years when it has been crystal clear that bankers were using the processing speed of HFT algorithmic programs to create waterfall declines in gold and silver prices that would have been impossible to create without them. In fact nearly six years ago, in 2008, I sent then US CFTC Commissioner Bart Chilton evidence of gold price slams in the New York market that would have been impossible for bankers to create without the use of HFT algorithms. Click on the following link to see the evidence I provided to Bart Chilton back then, in which gold prices literally were slammed at market open in New York in a matter of minutes by $30, $40, $60 and even more, almost always at the same exact time in New York, as well as his reply.


It was Bart’s reply in 2008 in the above link that led me to write him off as possibly being someone that would take action against the bankers’ immoral and unethical use of HFT programs to suppress gold and silver prices in paper derivative markets, and his retirement in December 2013 without any inroads being made to prevent bankers from using HFT algos to artificially slam gold and silver prices confirmed that my assessment six years ago was the correct one. In any event, though back then I couldn’t prove beyond a shadow of a doubt that bankers were using HFT algos to slam the price of gold and silver on the particular days of steep price declines that I presented to Chilton, NANEX has provided data in recent years that have confirmed my previous suspicions.  Let’s take a look at a couple of scenarios in which evidence is clear that bankers are using HFT algos to manipulate gold and silver prices, and I will further explain how bankers use HFT algos to create unnatural and artificial, non-free-market rapid waterfall-like declines in gold prices similar to the ones that I presented to Bart Chilton in 2008. Since I am not a coder that designs HFT algorithms, there may be some finer details in the process that I may not explain perfectly correctly below, but from my experience in tracking gold and silver prices for over a decade and the research that I have done, I believe that the bulk of my description is accurate.


On February 29, 2012, at 10:47:21 the GLD dropped by about 1% in less than 1/3 of a second, and on March 20, 2012 at 13:22:33 (1:22:33 p.m. ET) the quote rate in the ETF symbol SLV sustained a rate exceeding 75,000/sec (75,000 quotes per second) for 25 milliseconds (25 thousands of one second) and also dropped by a significant amount in less than a second. (Source: The Gold Cartel: Government Intervention on Gold, the Mega Bubble in Paper, by Dmitri Speck).   To put this in perspective, if the US S&P 500 index drops by 1% over the course of an entire day’s trading session, this event makes news on the headlines of every mass media US financial website. Now imagine if the S&P500 lost 1% in less than 1/3 of a second, how widely covered such an event would be? So why did these events in the gold and silver markets receive a total blackout from the US mass financial media? And why would artificial quote stuffing rates of 75,000 quotes per second executed by bankers using HFT algorithms allow the price of silver to be manipulated and suppressed? First, consider if humans, and not supercomputers, provided all trade quotes in the SLV. The quote rate would have been less than one every few seconds, and nowhere close to the HFT program rate of 75,000 per second. So what is the purpose of  HFT algo quote stuffing?  To explain it as simply as possible, bankers that use HFT algos to produce quote stuffing events provide quotes that they never expect to execute. In other words, bankers produce quote stuffing events to serve as exploratory probes to see if anyone reacts to the false quotes they produce that are never even real orders. Since bankers use supercomputers located right next to the stock exchanges to run their HFT programs, their goal of providing fake bids (or asks) is to see if there is anyone trying to sell (or buy) at that price.


As a hypothetical example, if the price of silver were falling on a particular day, and the bankers wanted to see if anyone wanted to sell any silver futures contracts at the silver equivalent price of $20.10 an ounce, they could produce a fake bid that amounts to a price of $20.10 per ounce per futures contract. This fake bid then may produce a sell order for 10 contracts and another one for 20 contracts. Since each futures contract represents 5000 ounces of silver, the nominal amounts represented by 10 and 20 contracts are respectively over $1MM and $2MM. So now that the banker run HFT algo knows that a couple of parties are interested in selling a large amount of silver derivatives at $20.10 an ounce for silver, the HFT algo would immediately withdraw or cancel all of its “exploratory bids” and use this information of selling interest in silver futures contracts to immediately re-price its bid to the silver equivalent price of $20.05 per futures contract. The HFT algo can then “see” if sell orders come back on line reduced to a price that amounts to $20.05 per ounce of silver. However, if the HFT algo spots 1,000 silver futures contracts that exist with orders to sell if silver hits $20 an ounce, the HFT algo will attempt to trigger all the stops if the bankers’ aim is to cause a waterfall price decline in the price of silver and will execute the wash, rinse and repeat cycle time and time again.  In other words, once they know the sellers are chasing the price lower, the bankers would program the HFT algo to again immediately withdraw the bid at $20.05 and re-set it at $20 an ounce knowing that 1,000 more contracts will be automatically triggered to sell at this price and consequently  send the silver price plummeting much lower than $20.  How? Because as the stop losses are triggered, the banker programmed HFT algo can play the same game with those 1,000 orders and make every subsequent sell order chase the price of silver lower. Of course, these HFT algos have been programmed to make these decisions  in milliseconds of time, faster than a human eye can see, and do not have a banker literally instructing the algo to pull bid quotes once a sell order that matches that quote comes in.  Still, a real person had to program an HFT algo to make split-second decisions based upon information it gathers with a specific goal in mind, either to ratchet down gold and silver prices or to ratchet them up higher depending on their clients' (the bankers) motives. Furthermore, since HFT algos are quote stuffing at rates in the tens of thousands per second, I realize that the step down increments in reality may be smaller but this is just a hypothetical example to provide an idea of how bankers can use HFT algos to rig gold and silver prices lower.


And the beauty of this entire HFT algo scam? Bankers can create a waterfall decline in the price of silver in the above hypothetical scenario before possibly even having to execute a single trade and trigger massive declines in price just by triggering a couple of trades!
Thus, in the above scenario, once the orginal two selling parties take the bait and move their sell orders down to $20 an ounce per contract, the silver rout would be on. Using a poker analogy, trading in gold and silver paper derivatives against bankers that use HFT programs is like showing the bankers all of your cards every hand. You simply cwill not win against such a rigged system as long as you fail to realize that the bankers can see your hand through the use of fake quote stuffing. Or in other terms, the rigging is so egregious in gold and silver derivative markets, that if bankers were rigging a poker game in Las Vegas to the degree that they rig gold and silver futures markets, they would be taken into a back room in Vegas by casino security and well, you know the rest of what would happen next.


I suspect that this method of using HFT algos to quote stuff and pull bids (which is illegal for a human to do, but acceptable for a human employing an HFT algo to do, if that makes any sense) is the primary method by which bankers create vacuums in gold and silver derivative markets to create the types of artificially-induced, non-free-market waterfall price declines evident in the charts I sent to Bart Chilton in 2008, and that have happened every year since, especially with great frequency again in 2013. In fact, prior to last year, 2008 was the last year in which the Western banking cartel interfered with gold and silver markets to an excessive level, as can be seen in the below chart in which daily declines in gold’s paper price over 2% in less than 20 minutes spiked to 12 days (chart courtesy of Dmitri Speck of GATA). Again, this happened a dozen times in 2008 and yet was never covered one time by the mainstream financial media. Imagine if the FTSE 100 or the S&P 500 declined by 2% in less than 20 minutes just one time? This would be the lead story of every financial site around the world (this oddity alone should clue you as to with exactly whom the allegiances of the mainstream financial press lie).



So now we know why bankers use HFT algos to create fake quotes in gold and silver derivative markets to artificially move prices, but why would bankers have to create 75,000 fake quotes per second? Think of massive volumes of quotes as traffic on a two-lane highway. If there are not many cars, you can get from point A to point B fairly quickly. However, if I wanted to prevent you from reaching your destination and could re-route 75,000 cars to occupy the lanes in front of you, it would obviously take you much longer to reach  your destination. Bankers that use HFT programs to quote stuff essentially have the same goal, but think of the destination in the stock market as the ability to process information. When bankers use HFT programs to create massive volumes of artificial traffic, not only do they effectively slow down the rate of processing information down for all others, but it also raises the cost to process information as well as masks the fraud committed by the HFT programs as no information can be obtained while they provide tens of thousands of fake quotes per second. Thus, the use of HFT algos to quote stuff makes it much more difficult for competing algos, and certainly human beings, to understand that their buy and sell orders are being skimmed for illicit profits by bankers. In other words bankers can use HFT algos to create waterfall declines in gold and silver prices in a step-down manner when they are buying and likewise, when selling, can use them to get traders to chase prices higher in a step-up manner, all without a single trade even executing before prices have been moved well lower or higher.


I have laid out in the graphs below provided by NANEX, evidence of bankers that have used HFT algos to create a step-down price decline in the price of gold on January 6, 2014   $1245 to below $1215 in less than a minute. In fact, one can clearly see the HFT algos in action in the step-down price action that happened in gold derivative markets this day as the algo was so precise that it caused the exact same number of total trades in each step-down in price. Furthermore, one can clearly see in the below charts that algo quote stuffing can sometimes cause trading platforms to completely breakdown and come to a complete halt in trading.






I want to make it crystal clear to people that the bankers using these algos and the firms employing these algos are the ones that are stealing from people and profiting from the losses they artificially inflict upon their clients. Bankers always try position all blame for all uncovered fraud and immoral activities solely on "out-of-control" technology as if the technology is somehow beyond their control. The meme that all the mass media has used last week when discussing HFT algos is that it is really not that bad because if it were, it would not be “legal”. Forget about the fact that banking and finance industry lobbyists spent nearly a quarter of a billion dollars in 2013 alone to influence law making and that much of this money is spent to make once illegal behavior legal if it benefits the banks.


In the end, it is not the speed of trading that is the problem, but rather how bankers use supercomputers that process and execute information at super speeds to create artificial, fake quotes and steal from people.  Thus the problem lies squarely not with out-of-control technology but with out-of-control unethical bankers that are merely crooks in $3,000
Armani suits. Furthermore, it is not the revelation that bankers are using HFT programs to rig stock markets that scares bankers, but the possibility that the current scrutiny on immoral HFT programs may reveal that bankers use HFT programs to rig the prices of gold and silver that truly puts the fear of God in them. For if this revelation goes mainstream and gold and silver prices are freed from banker executed HFT manipulation, every asset bubble that bankers have created since 2008 will come tumbling down as rapidly as their artificially-created waterfall one-minute price declines in gold and silver futures markets. However, as long as scrutiny remains high on the Western banking cartel's use of HFT trading algorithms, their ability to use these algos to slam gold and silver prices may very well be temporarily impeded.


Hopefully, the class-action anti-trust lawsuit against the five international banks that set the London daily gold price fixings that was filed the last week of March, 2014 in the 
US District Court of New York by the Philadelphia law firm of Berger & Montague and the New York law firm of Quinn, Emanuel, Urquhart, and Sullivan will shed some light on how big global banks have colluded with Central Banks to additionally use HFT programs to fix gold and silver prices lower.


Recent SmartKnowledgeU videos that may interest you:

How in the World We Came to Value Cotton More than Gold

The Real HFT Story that Frightens Bankers to Death

The Five Elements to Understanding Truth About Everything


Coming later this week...Government Lies and the Boiling Frog Syndrome



About the author: JS Kim is the managing director of SmartKnowledgeU, a fiercely independent consulting and research firm that strategically focuses on the best ways to buy gold and silver as an important hedge in the ongoing currency wars.

Republishing Rights: All original content is owned and fully copyrighted by SmartKnowledge Pte Ltd. You may republish the first paragraph of this article with a link back to the original article here. You may not republish this article in its entirety on another website without the expressed written consent of SmartKnowledge Pte Ltd.

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ebworthen's picture

That's right; true valuation for Gold and Silver sooner or later.

Hold tangible, and be patient.

Ban KKiller's picture

Meanwhile sharpen the pitchforks and stock up on empty wine bottles.

Long lead, gasoline and portable ion beam lasers. (At army surplus stores)

El Hosel's picture

Don't forget the most obvious .... $VIX rigging, fear/selling has not been "allowed" for years, for the good of the people. Confidence restoration by blatent market rigging is the mothers milk of the new normal. Larry,Curly and Mo-ar.

Quinvarius's picture

This is all true.  It is also why gold and silver are the cheapest they have ever been in history and a fantastic steal.  As long as there is even one paper market, that forces physical delivery, hooked into the global paper book, it can't last.  It will get arbed into physical  Right now the entities that tried the rigging to stupid low prices are realizing they screwed up.  They can say whatever they want.  They are losing massive tonnage that they simply don't have.  When Goldman ended up buying hundreds of tons of GLD, I don't think it was for a trade.  I strongly believe it was to deliver it to people who just backed up the truck on their wannabe paper only trade.  I really don't know if they even made a profit on their whole campaign overall.  This will not last.

ebear's picture

Even if everything as stated is true (and I've no reason to doubt it) I'm not so sure gold price supression is the big story here.   That 70% of volume is HFT somehow seems like bigger news.  

Puzzle it out.  Gold suppression affects a relatively small segment of the market.  Now picture what happens if 70% of volume on the big board were to suddenly disappear.  That's what would happen if HFT were banned entirely, or so the article suggests.   That's got to make a big difference to just about everyone that trades, since much technical analysis is based on price vs volume and you've just effectively removed one half of that equation.

I'm no expert, but if the true state of market liquidity (or lack of) were revealed, it seems like that would have a greater impact than revelations about gold manipulation.

NotApplicable's picture

I don't think the HFT market size is any secret. When hedge funds return investor funds due to the lack of opportunities... well, that there is a tell.

Ban KKiller's picture

Lack of victims, more like.

Lugnut's picture

I think the Fed is in collusion with the US banks to help surpress gold prices as part of a currceny war effort to prevent gold China's holdings from appreciating as they would in a 'free' market environment.

Timebandit-44's picture

The Fed supports gold price suppression to keep dollars from running to gold and that's the big story we can't talk about.

MillionDollarBoner_'s picture

I get your argument but have to disagree.

I believe that China is behind the suppression of gold/silver prices. They are backing up the truck and don't want to pay a premium - and why should they, when our .govs are selling us down the river?

So, they sponsored the runup in gold/silver prices to 2012, via ETF purchases. They have since used ETF liquidation to slam the phyz prices whilst buying hand over fist. They will continue this until 1) ETF holdings are exhausted and/or 2) they have the bulk of phyz in their possession.

Then they will dump UST/USD positions, generating a Western market rout.

Next: mop up the residue of Western assets at bargain basement prices (aka Carpetbagging).

Finally: show their hand as the New World Order. For a spoiler of what this means for the "lound eyes":


Lux Fiat's picture

Excellent job of translating important info into a format that lay people should be able to understand.  Loved the debunking of the "it's the fault of technology" meme.  A computer does what it is programmed to do - not sure why many seem to fail to grasp this. In this case, the computers are programmed to pick pockets, but leave the wallet and most of the money behind, hoping that most will scratch their head and say "Huh, thought I had another 20 with me...." and be none the wiser.

lasvegaspersona's picture

If Rob Kirby and fofoa are  correct, this will continue until the major producers of the world cannot be supplied gold. Until then the entire system will all pull together to keep the dollar and other things (paper and real) be damned....they must be sacrificed for the good of the dolla.....

nightshiftsucks's picture

Maybe the US govt put the bankers up to it,the govt thinks it can control the price so no need to own gold/silver.

DoneThis2Long's picture

If we are to belive the reports, the Chinese are the biggest buyers, so it stands to reason they'd benefit most (see my above rambling), unless .... the fed is buying gold with the printed $$, but I highly doubt that for any number of reasons, not the least of which, cuz it would be to our nations' benefit, which would go against this administration's core view, sentiment, goal and attitude toward this nation.

But I could be wrong.... Nah .... :)

Dewey Cheatum Howe's picture

Tax every transaction take it right of the top digitally when it is executed. That will stop alot of this in it's tracks. If it was a bad trade let them go back and defend why to get a refund later on.

Dewey Cheatum Howe's picture

This is how crypto-currency block-chain based exchanges including decentralized ones work. Every transaction has a there is a fee on it, cuts out the middle men and the fee helps keep this very sort of problem in check while incentivicing the community working on the it to continue keeping the upkeep and improving it since that is how they get paid. If people use it they get paid if they don't they don't, the more volume the more pay and in turn the more support and upkeep. It has always been a winning formula as for revenue generation for a free market financial product or service people actually want to use.

You make a bad trade, fuck you tough shit that is how moral hazard and keeping the system free and functioning works when it is not rigged.

All these systems though ultimately need QOS filtering into them to eliminate speed arbitrage like a governer on an engine and that QOS has to be built into the protocol itself and be self adaptive to deal with speed fluctuations to smooth it all out for every trade fired off and organize the traffic in a FIFO manner.

Unfortunately algorithmic trading is here to stay as long as these exchanges run digitally regardless of who runs them or what technology is underpinning them. This now a network optimization problem to deal with the volume of traffic. It needs to built into the protocol itself to ensure unriggedness. And opensource block chain exchanges allow for just that because of the transparency of being able to see the underlying code that regulates it.

Lux Fiat's picture

As others have suggested, just make every bid or offer have at least a .5 to 1 second life before it can be cancelled.

ebear's picture

or slow it down even more so retail investors way out at the end of the chain have a fighting chance.  Just guessing, but I'm sure the latency of my broker is greater than 1 second. 

Pemaquid's picture

Information, like that contained in this post, will ultimately unravel the banker bastards book and bring back free markets.

mccvilb's picture

Not until the DOJ goes after the Shapiros, Blankfeins nd Dimons for collusion and RICO statute violations. Anybody who thinks otherwise is CA dreaming in a NY lower Manhattan minute world.

DoneThis2Long's picture

Not until the DOJ goes after the Shapiros, Blankfeins nd Dimons for collusion and RICO statute violations

Not so long as Holder is AG and his actions/decisions would, in anyway, benefit this nation and /or us, American. His track record is there, and it speaks volumes. And if he to be replaced, I'd not cound on his replacement to behave any better if he was to be nominated by the "WH Cureent Resident". IMHO.

DoneThis2Long's picture

what is there to stop the chinese - or proxy there of - to manipulate the futures POG? We know it is SOP with the currencies which are far bigger, therefore harder (at least were while there were more players of nearly equal strength). They stand to benefit most from this scenario. So would the Indians, but, IMO, they are not as organized/centralized as the chinese.

I am surprised the producers/miners themselves are not screaming bloody murder, and monitoring the markets a hell of a lot closer, since they stand to loose most, and for that matter so would governments which get a % of the sales.

Technology was supposed to "level the playing field" .... yeah .... my ass. more like "steam-rolled our asses into the filed, where the big boys (aka USSA/NWO Oligarchs) are playing".

Cpl Hicks's picture

"Bring back free markets"....good one.

StychoKiller's picture

What makes you think that this isn't going on in ALL commodities?  How about the bond markets?

mayhem_korner's picture



No doubt it is.  But sugar doesn't stand to supplant the fiat currency system the bankers so desperately need to maintain their .001% status.

p.s. one of the best posts from a ZH contributor ever.

Central Wanker's picture

HFT is a temporary phenomenon, gold is not.

Bro of the Sorrowful Figure's picture

im fine with the ag/au paper market manipulation for now. gives me more time to keep stacking.

Cpl Hicks's picture

Here comes the big melt down!

And I'm not talking about Grandma's silverware.

johnnyarrowmaker's picture

Hey that's one one of the best examples I've seen about how TPTB rig the market.

But .....  how can something be done about it?

TheReplacement's picture

Keep suiciding bankers.  Eventually they will all be dead and that particular problem solved.  We also have to look at the HFT firms and coders... they are not innocent either.

Save_America1st's picture

after all the bankers have been suicided can we start on the lawyers and politicians next?  Or can we do it simultaneously along with the bankers to speed up the healing process?  lol

Bankstein Swissgoldberg's picture

thanks smartknowledgeme.

it takes a lot of courage to do what you do, reminds me of don quixotte, exept that he was wrong and you re right.

TideFighter's picture

Frick'in unreal.

Xploregon's picture

Good grief...I never really thought about that.

toys for tits's picture

Shh, don't tell anybody that gold and silver are currently discounted.

Save_America1st's picture

right?  I have lots more stacking to do before Xmas and TEOTWAWKI.  I don't want silver to bust 22 for as loooooooooooong as possible.  Let the criminal scumbags continue to fleece the paper players so that we can continue to stack cheap phyzz.  Sure wish I had started stacking when silver was in the single digits, but I was not in the know back in those days.  Been trying to play catch-up since 2010 and don't want to see the rocket blast off for as long as possible.

Thomas's picture

Not altogether convinced. I think the algos game the price, exploit air pockets, move it around. I am not convinced, however, that they move it in more than high-speed (spasmotic) ways. That is not to say that it isn't being dealt with by other forces and the algos aren't exploiting the moves, only a doubt that the algos themselves are used to suppress. Somebody seems willing to put big money on the line for more than just microseconds to move the price around.