Here Come The Feds: FBI Probing HFT

Tyler Durden's picture


It is perhaps little wonder that Virtu was in such a hurry to use the cover of the JOBS Act to IPO itself before the whole HFT 'game' was exposed. Just 5 years after we first drew the world's attention to the potential damage that HFT could do; and mere minutes after we posted our article on how HFT is being set up to be the scapegoat for all that is broken with the market and conveniently distracting from the Fed, and god, or perhaps his agent on earth Goldman Sachs, 'completely unexpectedly' sends in the FBI:

  • *FBI Working With SEC, CFTC in High-Speed Investigation
  • *FBI Investigating Whether High-Speed Firms Trade on Nonpublic Information

Now, the question is: how many HFTs will stop trading for fear that any further trading on 'non-public information' will be deemed criminal from this point... or keep trading and lobby/hope that "a reasonable man" will believe their liquidity-providing lies.

Bloomberg reports,

Federal agents are investigating whether high-frequency trading firms violate U.S. laws by acting on nonpublic information to gain an edge over competitors, according to a person with knowledge with the probe.


The Federal Bureau of Investigation’s inquiry stems from a multiyear crackdown on insider trading, which has led to at least 79 convictions of hedge-fund traders and others. Agents are examining whether traders abuse information to act ahead of orders by institutional investors, according to the person, who asked not to be named because the probe is confidential. Even trades based on computer algorithms could amount to wire fraud, securities fraud or insider trading.

And since the FBI can't be expected to know much about what it is actually investigating, considering the entire farcical investigation apparently was triggered by a Michael Lewis book and/or an anonymous phone call from Goldman Sachs, it would be nice if traders actually did the FBI's work for them. Pretty please:

That's right: if you or your loved ones have been hurt or injured by HFT, please call 212-384-1000212-384-1000 . How would you know if you have been hurt or injured by HFT? Don't worry, you will - it's like porn.

Basically the Feds just asked anyone who has lost money in the last 5 years to give them a ring.

To quote Hans Gruber, "You ask for miracles, Theo, i give you the FBI."

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Mon, 03/31/2014 - 18:03 | 4612040 GrinandBearit
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Mon, 03/31/2014 - 18:06 | 4612056 ArkansasAngie
ArkansasAngie's picture

They have been defrauding the public.  


Mon, 03/31/2014 - 18:10 | 4612067 camaro68ss
camaro68ss's picture

i hope to see more bankers trying to fly tomorrow morning

Mon, 03/31/2014 - 18:16 | 4612089 Bindar Dundat
Bindar Dundat's picture

Bullish for nail guns!

Mon, 03/31/2014 - 18:21 | 4612119 waterhorse
waterhorse's picture

I think its time for a bankster belt-sander "accident"

Mon, 03/31/2014 - 18:27 | 4612140 Jlasoon
Jlasoon's picture

Banker suicide by GM power steering failure in 3, 2, 1 ...

Mon, 03/31/2014 - 18:49 | 4612178 SoilMyselfRotten
SoilMyselfRotten's picture

Whats a harmless penny or two among friends?

Tue, 04/01/2014 - 00:32 | 4612978 Blues Traveler
Blues Traveler's picture

HFT has been around a long time, wonder why they are doing this now, something is going on

Tue, 04/01/2014 - 11:18 | 4613796 XitSam
XitSam's picture

I'm waiting for the drill press suicide

Mon, 03/31/2014 - 18:17 | 4612098 SilverIsKing
SilverIsKing's picture

Heard from just outside the HFT data center:

"Quick, turn those machines on low speed!  They'll never suspect us if we disguise ourselves as an LFT shop."

Mon, 03/31/2014 - 18:18 | 4612105 fonzannoon
fonzannoon's picture

"As Obama says, “Let me be clear.”. I am glad 60 Minutes decided to take a look at this issue. It deserves a lot of media attention and questioning. However, 60 Minutes failed to look deeper into why things were the way they were. They gave the SEC a pass. Senator Ted Kaufmann did make some good points, but again, failed to get to the meat of the matter."


Mon, 03/31/2014 - 18:32 | 4612157 NoDebt
NoDebt's picture

This is the most scripted shit show yet.  Info has been out there for YEARS.  Now there's a 60 Minutes segment (MSM) and an FBI investigation the next day.  It's like they're just rolling out their new marketing campaign or something.

Yeah, let's NOW, AT LONG LAST go after the guys scalping a penny a trade, while diverting attention from the REAL problem.  Fed wasn't mentioned, SEC wasn't mentioned, CFTC wasn't mentioned.  No government agency or their policies that allowed and ENCOURAGED HFTs to exist in the first place.

Mon, 03/31/2014 - 18:48 | 4612204 hobopants
hobopants's picture

I think it just no longer serves their purposes. Virtu IPO makes this game avaliable to everyone and they either want to prevent that, or now that it's becoming less profitable use it as a nice distraction and good PR for the SEC / FBI. "see we're on your side, promise" 

Mon, 03/31/2014 - 18:56 | 4612223 NotApplicable
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As Tyler has mentioned, the Golden Age of HFT is over, having run all of the carbon-based traders away.

Mon, 03/31/2014 - 19:04 | 4612243 ultimate warrior
ultimate warrior's picture

In the year 2014

The Fed's will extort fine Goldman Sachs $3 Billion and they will happily pay the extortion fee fine. What's a $3 billion dollar loss when you make trillions of HFT.

Tue, 04/01/2014 - 01:09 | 4613030 StychoKiller
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Time to put yer avatar to good use! :>D

Mon, 03/31/2014 - 19:30 | 4612327 EggSlayer
EggSlayer's picture

Does anyone even expect any politicians to understand this shit anyway?

Mon, 03/31/2014 - 18:25 | 4612110 VD
VD's picture

More importantly, who does one call if injured by The Federal Reserve? BC that's almost everyone!

Mon, 03/31/2014 - 18:59 | 4612231 GeezerGeek
GeezerGeek's picture

Call Vinnie or Mario. They and their friends are good at 'fixing' things. 

Mon, 03/31/2014 - 19:56 | 4612388 Dickweed Wang
Dickweed Wang's picture

Fuckin' A!!!!

Tue, 04/01/2014 - 11:19 | 4613804 XitSam
XitSam's picture

"Um. Hello, Vinnie? I have a problem."

Mon, 03/31/2014 - 18:49 | 4612187 hobopants
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It's all about the Virtu IPO "Can't have the little people having the same odds as the house, shut it down boys."

Mon, 03/31/2014 - 18:57 | 4612229 NotApplicable
NotApplicable's picture

Ummm... no. The IPO is out due to the fact that the scam isn't working anymore.

IPOs are NEVER for the little people.

Mon, 03/31/2014 - 19:17 | 4612281 hobopants
hobopants's picture

IPOs are NEVER for the little people.

I would say they aren't good for the little people, but they most certainly are for the little people. Look at the the bubble when even grandma was buying IPO internet stawks. Good idea? no, but that seems to be what regular people get excited about, look at facebook and twitter.

And HFT is becoming less profitable, but still out there. Although I agree they are probably starting the investigation at this late date because it's nearly a dead horse. 

Mon, 03/31/2014 - 18:28 | 4612142 Stoploss
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*FBI Working With SEC, CFTC in High-Speed Investigation


Will they all share the porn sites, or fight for them??

So who's monitoring the SEC, FBI and CFTC??????????

Mon, 03/31/2014 - 19:09 | 4612259 Bangin7GramRocks
Bangin7GramRocks's picture

It's official! Goldman Sachs rules the world! I bow down to you Lord Business. I hope my loyalty will result in extra allotments of gruel.

Mon, 03/31/2014 - 18:08 | 4612061 camaro68ss
camaro68ss's picture

WOW, there just starting to look into HFT, maybe they should go on to ZH for all the evidence the Tylor’s provide on a hourly bases.

these .gov types are all ass hats 

Mon, 03/31/2014 - 18:19 | 4612107 Nikki Alexis
Nikki Alexis's picture

Commence hard drive purges in 3... 2... 1

Mon, 03/31/2014 - 18:23 | 4612124 NihilistZero
NihilistZero's picture

The bear market is coming and a scape goat must be found!

HFT in 2016= Subprime in 2008

Tue, 04/01/2014 - 01:55 | 4613071 Colonel Klink
Colonel Klink's picture

I'm sure HFT is well contained and won't affect the broader markets or eCONomy.


Mon, 03/31/2014 - 18:29 | 4612148 FuzzyDunlop21
FuzzyDunlop21's picture

Someone needs to call the tipline and give them the 5-year old ZH article

Mon, 03/31/2014 - 20:53 | 4612506 Freddie
Freddie's picture

Anybody get a feeling this Michael Lewis book launch and story is manufactured?  I like him and I think he is pretty honest but this is how I see this going down.

Uncle O Sam obam has known since 2008 that the public is getting ripped off.  The public gets fleeced in the markets for tenbs of billions.   Then a clever Royal Bank of Canada trader figures out what EVERY hedge fund manager already knew.   They come up with a clever way to go around the HFTs and put them in a loop.  The reality is they just stop sending their orders to BATS. 

Small fish will be indicted, lawsuits where investors get a certificate for a free Big Mac, Uncle Sam Obama gets $3 billion in fines that go around the Treasury to his retirement plan and the DNC.  Attorneys suing the HFT firms get tens of millions in fees. Michael Lewis book goes to Number 1, the Canadian Asian guy who "figured it all out" along with his Mick telecom pal are Heroes!  Yeah!  In the background, the real face behind this exchange (Goldman) stays hidden. 

Meanwhile, the public aka small investors are still f**ked.

Tue, 04/01/2014 - 01:03 | 4613023 StychoKiller
StychoKiller's picture

So, I guess the FBI finally reviewed ALL the pr0n on the intertubez, and are now zipping up and getting back to what the taxpayers pay them for! :>D

Mon, 03/31/2014 - 18:03 | 4612042 salvadordaly
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Oh they are going to investigate. Never said they will do a thing about anything that they find. Party on Garth!

Mon, 03/31/2014 - 18:04 | 4612048 El Vaquero
El Vaquero's picture

It depends.  Is this kabuki theater, or is somebody getting thrown under the bus?

Mon, 03/31/2014 - 18:17 | 4612094 john39
john39's picture

sounds like HFT gets to be the problem that gets fixed...  after that, everything back to normal.  go back to sleep little sheeple.

Mon, 03/31/2014 - 18:38 | 4612139 SilverIsKing
SilverIsKing's picture

FBI: <knocks on door> What's the frequency Kenneth?

HFT guy: I'm a High Frequency Trader.

FBI: You're the guy we've been looking for.  We're investigating High Frequency Trading.

HFT guy: I just smoke some weed and trade a lot.  Is that illegal?

FBI: How frequent do you trade?

HFT guy:  Like two or three trades per day...when I'm not smoking a joint.

FBI:  You do know that smoking marijuana is not very good for you.

HFT guy: Yeah I know but it's the only way I can keep my sanity since I keep losing money to these firms that do computer trading using algorithms.

FBI: Understood.  Have a nice day.

FBI: <on phone> Hi Boss, we just finished our investigation.  Nothing to report.  Just a guy who gets high who trades pretty frequently.



Mon, 03/31/2014 - 18:03 | 4612043 El Vaquero
El Vaquero's picture

Sounds like somebody may be having an uncomfortable encounter with the tires of a bus here.

Mon, 03/31/2014 - 18:08 | 4612062 ArkansasAngie
ArkansasAngie's picture

Gives a whole new meaning for dropping like flies.


Mon, 03/31/2014 - 18:04 | 4612046 ebworthen
ebworthen's picture

Oh sure, Top Men on it, the guys who found the Ark of the Covenant.


Mon, 03/31/2014 - 18:04 | 4612049 disabledvet
disabledvet's picture

I'm shocked!
(your winnings sir.)

"Round up the usual suspects!"

Mon, 03/31/2014 - 18:04 | 4612050 Stanley Lord
Stanley Lord's picture

If this is true, that the FBI is investigating HFT after a short story author goes on TV to promote a book, the USA is dead as we know it.

This is laughable.

Tue, 04/01/2014 - 01:06 | 4613026 StychoKiller
StychoKiller's picture

Wait a sec, WHAT does HFT have to do with "National Security?"

Ya know it's bad when even the FBI can't keep their story straight!

Mon, 03/31/2014 - 18:07 | 4612059 Winston Churchill
Winston Churchill's picture

Did Uncle Scam just pull the plug out from the punchbowl ?

Mon, 03/31/2014 - 18:20 | 4612113 Nikki Alexis
Nikki Alexis's picture

I hope so but I'm thinking Eric Holder will save their arses


Mon, 03/31/2014 - 18:20 | 4612116 waterhorse
waterhorse's picture

I wouldn't hold my breath that Uncle will be plucking any turds out of the punchbowl.

Mon, 03/31/2014 - 18:13 | 4612078 Smiley
Smiley's picture

Oh look a "special investigations" unit has been formed and fully funded by an undisclosed outside entity.  Looks like we do not need to look any further into this silly HFT business...

Mon, 03/31/2014 - 18:14 | 4612085 fonzannoon
fonzannoon's picture

The SEC issued this statement in response to the Fed's investigation.

Mon, 03/31/2014 - 18:18 | 4612090 buzzsaw99
buzzsaw99's picture

the squid told the fbi to do this. the fbi works for the squid. free sergey. bitchez.

Mon, 03/31/2014 - 18:17 | 4612101 Uncle Remus
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