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High Frequency Talking: Santelli Vs Pisani

Tyler Durden's picture


As the day began with every Joe, Jim, and Harry claiming to be an expert in HFT and having prophesied all of this long ago, we thought it would be intriguing to track just how well the retail investor was edumacated on the 'rigging of markets'. It didn't take long before Bob "I'm not trying to be an apologist for HFT, but..." Pisani explained that investors should not be concerned and another talking-head popped up on CNBC to proclaim, "being a little bit front-run is not a problem... remember, it's legal." Henry Blodgett made his 'takes one to know one' bubble perspective adding confidently that "the concept that the market is rigged is crazy." Crazy indeed - until the FBI gets involved. But we leave it to Rick Santelli who summed it all delightfully in a death-match with Pisani, "I'm sorry but if a large group of people can take that one cent all day long, day-in and day-out, then there's a problem."


Damage Control... begin... Cramer "we railed against them and we exposed them over and over" - hhm...not sure we remember the "railing against them" or the "exposing" of any negative implications of them but go on.... And then Cramer goes on to rewrite history...

"I had maybe 100 shows devoted to it on Mad Money saying it's wrong, saying basically it is rigged without using the word rigged. It's interesting it got on 60 Minutes with a powerful author, and people are shocked."



And The Appetizer... "Rigged? For sure it's an overstatement! ... it's only a penny..." Sure, it's only a penny - so just what is the size of arb that is illegal for front-running.. and of course here's the kicker, "we want more confidence in the US stock markets"


The Palate Cleanser - Pisani and Sully explain how it's all ok... "not that we're defending HFT or anything" but stay long and don't worry about that scary man on TV talking about rigging markets... (the caveats and qualifiers in each and every sentence alone are worth the price of admission)


And the main course of the evening! Beginning at around the 2:00 mark, Santelli has enopugh of listening and pitches in as Pisani and the crowd

Hey Bob, by the way, usually it's the Fed everyone has said rigged the market. What about the Lewis' allegations flying around?


Pisani: I have a laundry list of things I'd like to see change but that's different than claiming the market is rigged.


Santelli: You have been getting a lot of kudos and I thought what you wrote was phenomenal - BUT...


Santelli: When I listened to Michael Lewis, the implications he had was more on the side of the HFT. It is rigged for them to make money and skim that one cent just like you said. I didn't get the impression he necessarily said the whole system was rigged, but then again you can't be just a little pregnant...


Pisani/Other: But Rick, you're a sophisticated trader. That is slicing the onion too thin. That's not what the public is going to come away thinking. The public will say, honey, it's not safe to invest in the market. He told us it's rigged. The implications are somehow the average investor, it's not safer for them to be in the market. That's not true.


Santelli: But the average investor thinks the SEC is watching out for the marketplace. I'm sorry but if a large group of people can take that one cent all day long, day-in and day-out, then there's a problem.


And Scene...


It seems more damage control is coming... but don't worry retail investor, CNBC has your back...


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Mon, 03/31/2014 - 21:14 | 4612559 CrashisOptimistic
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I heard a discussion elsewhere.  It went like this.

"Sure.  This stuff can move the market over the course of a day.  But to suggest that it has lifted the market for five years is silly."

The reply was:

"If it moves the market over the course of a day, and then the next day does the same thing and the next day and the next day, every day -- doesn't that add up to five years?"

Mon, 03/31/2014 - 21:37 | 4612616 Serfs Up
Serfs Up's picture

It's really, really much did the HFT firms make over the past 5 years?

That is the cost of having them around.


They skimmed billions and added nothing useful to the ""markets"" (which now require double quotes because they bear no resemblance to the word associated with them).

They are allowed to exist by the regulators, and the owner class (who also pay for the usefully ignorant and distracting comments from people like Blogett) because TPTB can use them for their momentum ignition rallies out of nowhere, which would otherwise be difficult to perform using plan oild humans.

The cost of having a controllable market is a few billion skimmed each quarter.  It's a steal of a deal when you print money out of thin air.

Mon, 03/31/2014 - 21:54 | 4612656 Berspankme
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Haven't watched that channel in a long time. Still would like to schtickel that Mandy Drury but I digress. Pissani is a douchebag, Cramer is a douchebag and where is that little brit assclown Hobbs? Fuck Sully, he's a pindick little fuck. CNBC is like watching a cartoon on Saturday morning. Did I mention I'd like to play hide the weenie with Mandy?

Mon, 03/31/2014 - 22:26 | 4612739 barliman
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Billions? They wouldn't do this for billions ... they were making billions under W.

Their Chosen One was put in place so they could COLLECT (no risk involved) TRILLIONS from the Fed, ECB, PBOC, etc.

Pop Quiz: What's the interest on the Fed's $ 4.7 trillion at 5% versus the 0% they've been charging? That's their chump change.

Monkey spanking? Doesn't YouPorn have a comments section?

CNBC is in the propaganda business. If their propaganda continues to fail ... they will be replaced.

Tue, 04/01/2014 - 03:19 | 4613140 Sudden Debt
Sudden Debt's picture

1 cent may not look much








Tue, 04/01/2014 - 07:14 | 4613284 GetZeeGold
GetZeeGold's picture



Bob Pisani is still alive?


Well that's good.....I guess.

Mon, 03/31/2014 - 21:57 | 4612661 TruthInSunshine
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cnBSc Kabuki Theater for the ever shrinking pool of sheeple retail "stawk investors."

Tue, 04/01/2014 - 00:13 | 4612952 Philalethian
Philalethian's picture

Any one would be foolish to continue to play games of chance against machines. Time to just go home and say no more.

When the media and the system team up to cheat, steal, and repetitively harvest from the criminality and corruption, it is only an indicator of a larger problem. Until the head of the evil hydra beast is put to rest, the machines will keep on going, and someone will be counting.

Just look at the examples the supposed leadership sets down for any semi-conscious 12 year old to see plainly as the wickedness it is, yet the real problem is, there are no men left to stand up to the plate and DO THE RIGHT THING to stop the criminality. No one cares to end the evil that is ending them all.

Sad, darn sad to be a modern observer in the wacky-world where the money masters know the system is "rigged" and still play the daily griding game over and over that continues to perpetuate the cheating, which they are now complaining about. Who the heck wants to trade with a bunch a cheaters, and liars anyways?



Mon, 03/31/2014 - 21:56 | 4612658 Ironmaan
Ironmaan's picture

Pisani and anyone saying its only a penny is an ass. If its only a fucking penny then the HFT's should stop it ASAP so as to maintain confidence in the markets. Its only a penny. Fucking thieves.

Mon, 03/31/2014 - 22:51 | 4612792 TruthInSunshine
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It's "only" a penny multiplied by many billions of times per day, as in hundreds of millions of dollars per day, as in billions of dollars per month, as in tens of billions of dollars per year.

And besides, having a select few "market participants" be able to see the bid AND ask before orders are transacted, and then parastically shaving those trades is like, totally efficient & Kapitalism at its finest.

Mon, 03/31/2014 - 22:53 | 4612804 rbg81
rbg81's picture

From "Office Space":  It's like taking a penny out of the "pennies for everybody" tray--but we take it out of a much bigger tray and we do it a couple of million times per day.

Tue, 04/01/2014 - 00:22 | 4612966 Fred Hayek
Fred Hayek's picture

Oh, like Superman III?

Mon, 03/31/2014 - 21:15 | 4612561 10mm
10mm's picture

Two Italians.  One docile,  the other Siciliana. 

Mon, 03/31/2014 - 21:18 | 4612571 fonzannoon
fonzannoon's picture

OH. MY. GAWD... can we please put this issue to bed already? 

Nobody cares. As a matter of fact, this whole stupid hft story only proves one thing. As long as the market is rigged to go up, retail will happily get sexually harrassed on the way up. Just don't rig it and have it go down.


Mon, 03/31/2014 - 21:50 | 4612648 NoDebt
NoDebt's picture

I think it was about a year ago, maybe two, Sandy Weil came on CNBC and basically said "Break up Citigroup.  I was wrong, the model doesn't work, it's too complicated for anyone to manage"  Given he was the architect who built that Rube Goldberg monstrosity in the first place, everyone fell out of their chairs.  One of banking's own had turned on them!  (The horror, the horror!).

THIS is new.  THIS was a game changer.  NOTHING would be the same after that for the banks.

Flash forward a month from that point... nobody even remembers he said it.  It's total effect: ZERO.

Tue, 04/01/2014 - 00:37 | 4612987 NidStyles
NidStyles's picture

Words do little when the ones being opposed have the "legalized" control of everything that moves.  

Tue, 04/01/2014 - 00:44 | 4612999 Troll Magnet
Troll Magnet's picture

That's because back then, like now, nobody watched CNBC.

Tue, 04/01/2014 - 07:23 | 4613296 RaceToTheBottom
RaceToTheBottom's picture

Sandy Weil was having trouble sleeping that night.  Penance is a lot more than one interview.

Mon, 03/31/2014 - 21:16 | 4612566 homiegot
homiegot's picture

Kramer is a POS.

Mon, 03/31/2014 - 21:18 | 4612572 sunnyside
sunnyside's picture

He knows, and it gets him off.

Tue, 04/01/2014 - 12:37 | 4614030 JenkinsLane
JenkinsLane's picture

He's doing God's work.

Mon, 03/31/2014 - 21:20 | 4612579 FieldingMellish
FieldingMellish's picture

That is being unkind to shit.


Meanwhile. Gold spike down. BOOM! $1275 is the level to watch. Should that break meaningfully, say we close the week below that, then $1180 is on the cards. If $1180 does not hold for the triple bottom, $1050 is the target and Goldman Sachs wins. If that happens we should be back above $1100 very quickly. VERY quickly.

Mon, 03/31/2014 - 21:26 | 4612595 CrashisOptimistic
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Why do gold nazis decide in utterly bizarre fashion that articles having NOTHING whatsoever to do with gold deserve gold comments.

Mon, 03/31/2014 - 22:46 | 4612790 toys for tits
toys for tits's picture

Because it's fun to purchase when it's on sale.

Mon, 03/31/2014 - 23:33 | 4612885 KickIce
KickIce's picture

It has everything to do with gold, without the QE/HFT "markets" tank and there is a mad scramble for gold.

Mon, 03/31/2014 - 21:17 | 4612570 sunnyside
sunnyside's picture

So many of them believe that they are entitled to it.  Remember, its God's work.

Mon, 03/31/2014 - 21:19 | 4612575 Kaiser Sousa
Kaiser Sousa's picture

all day long i watched those piece of shit CNBULLSHIT cocksuckers attempt to dismiss the impact this HFT Fraud Market is having on all retail investor/the 401k trapped lab rat citizenry who never had a clue...

especially Bob PISSon - me Pissani constatly sayin how the mom and pop investor had nothing really to fear and that all is was fucking enraging...

too bad out of bag and has been but even  "Joe Q. Moron" is scratchin his ass now and sayin "what the fuck - man????"

told ya'll...the MoneyChangers CONfidence house of cards has fallen...tic, mother fuckin toc'............

keep stackin...i will be after the phony paper price attack - when tomorrow?????

Mon, 03/31/2014 - 21:25 | 4612590 gmrpeabody
gmrpeabody's picture


Mon, 03/31/2014 - 21:48 | 4612641 OldPhart
OldPhart's picture

Stopped ALL 401-k contributions in 2008.  Watched that nest egg swell from unbelievable rates, over 30% last year.  There is nothing real about this.

Mon, 03/31/2014 - 21:57 | 4612662 CrashisOptimistic
CrashisOptimistic's picture

Find a way to own farmland.

It may be confiscated like anything else, but at least it makes sense.

Mon, 03/31/2014 - 22:03 | 4612673 fonzannoon
fonzannoon's picture

I'm working on a plan to confiscate farmland. It just seems like a lot less work.

Mon, 03/31/2014 - 22:19 | 4612709 UselessEater
UselessEater's picture

You got some serious competition in high places, my friend.

Mon, 03/31/2014 - 21:20 | 4612577 WhyWait
WhyWait's picture

What effect would the "Robin Hood Tax", say 0.25% on all stock and bond transactions, 0.1% on all derivatives transactions, have on high frequency trading, assuming it could be effectively collected?

I would guess it wouldn't be a popular on this list, but it could raise a whole lot of money to spend back into the real economy, for example on infrastructure.

Just sayin'

Mon, 03/31/2014 - 21:23 | 4612581 FieldingMellish
FieldingMellish's picture

There would be an exemption for high frequency transactions. Only the little people pay tax.


PS The hummingbirds have returned!

Mon, 03/31/2014 - 22:44 | 4612782 Blankenstein
Blankenstein's picture

Yep just kill the private sector employees that have to save and invest because they have NO PENSION.  This wouldn't be applied exclusively to the 1%, it would be applied to all the rest of us who have to try and save enough to last throughout our senior years.  

Mon, 03/31/2014 - 21:20 | 4612578 Seasmoke
Seasmoke's picture

Now I understand why they never got rid of the penny !!

Mon, 03/31/2014 - 21:25 | 4612593 franciscopendergrass
franciscopendergrass's picture

There is always a penny to be made somewhere.


Mon, 03/31/2014 - 21:53 | 4612654 NoDebt
NoDebt's picture

Not when stocks traded in sixteemfs.  Not that many years ago.

Mon, 03/31/2014 - 21:22 | 4612585 Theta_Burn
Theta_Burn's picture

Sorry Rick.. another soundbite FAIL, this shits been going on for yrs. NOW you think its a problem?

Good news though Rick, of all the chodes in those vids you were the lesser jagoff..

Mon, 03/31/2014 - 21:28 | 4612599 gmrpeabody
gmrpeabody's picture

Actually..., he's been harping on it for years.

Mon, 03/31/2014 - 21:29 | 4612600 NDXTrader
NDXTrader's picture

Can your broker do it? Of course not, why? Because everyone who's not knee deep in conflict of interest knows it's wrong to trade on that information. The fact anyone can defend it shows how far into the Wall St matrix they are

Mon, 03/31/2014 - 22:01 | 4612669 NoDebt
NoDebt's picture

HFT exists because regulators ALLOW it to exist.

Regulators allow it to exist because they are lobbied by large financial interests to allow it to exist.

Large financial interests want it to exist because without it 70% of all trading volume on the exchanges evaporates.

Without 70% of the exchange volume existing, the exchanges all go broke.

Without the exhanges the big banks and other financial interests (The Fed) have no place to play the REAL GAME of "hide the sausage" that goes far beyond chiseling a penny off of every trade.

Mon, 03/31/2014 - 23:04 | 4612829 CrazyCooter
CrazyCooter's picture

THAT is interesting ... anyone in the thread seen a chart of exchange volume with HFT churn netted out? I don't know much about this particular subject, but I think ZH harps from time to time on lack of volume.

If the Fed is on track to own the Treasury market, maybe their henchmen are also on track to own the damn stock market too.

I think that would be an interesting post if someone did it up properly. Tylers?



Mon, 03/31/2014 - 21:30 | 4612602 Retronomicon
Retronomicon's picture

If a one cent skin isn't rigging, is five cents?  It's really not the amount that matters, but the principle.  

Mon, 03/31/2014 - 21:34 | 4612603 NOZZLE
NOZZLE's picture

I heard Limbaugh discussing this and I was frankly shocked that he took the attitude of "okay you were front run by a broker dealer who was holding your market order who first executed for himself and then sold his position to you taking off only a few cents.  I frankly think he was confused and did not understand how insideous that practice is.  

I was a victim of front running by Paine Webber floor traders in the S&P pit back in the late 80's, their attitude as recorded by a device hidden in an FBI agents class ring was "Fuck Paine Webber's customers".  They would see a bid stack of market orders hit the floor and instead of executing at market, they would buy, cause the market to go up a tick and then execute the customer's order from what they had just bought or sold.

Mon, 03/31/2014 - 22:33 | 4612762 ILLILLILLI
ILLILLILLI's picture

Rush is fine with it since they only "stick it in a little bit"...

Mon, 03/31/2014 - 21:35 | 4612615 ebworthen
ebworthen's picture

It is rigged you dolts - you are just desperate for Mom and Pop to think it isn't.

Mon, 03/31/2014 - 21:41 | 4612624 fonzannoon
fonzannoon's picture

Eb fwiw I totally disagree. You can tell from these clips and many others that CNBC is just dying to come out and say "Of course it is rigged you fkin morons! Now get in! WTF are you waiting for!"

Tue, 04/01/2014 - 01:12 | 4613034 ebworthen
ebworthen's picture

I can sse that, a duual-pronged approach.

Mon, 03/31/2014 - 21:43 | 4612628 nmewn
nmewn's picture

"...and another talking-head popped up on CNBC to proclaim, "being a little bit front-run is not a problem... remember, it's legal."

So was slavery.

Mon, 03/31/2014 - 21:43 | 4612629 Less than Zero
Less than Zero's picture
Pisani keeps talking about confidence in the market, he's trying real hard to sugar coat this whole fiasco by using confindence terms. The markets are really a CON-GAME, from Fraud closer, Libor, Commodities rigging, oil, Farmer food contracts hoarding aluminum, money laundering & now HFT. The evidence is over whelming and i'm not going over a lim in saying that the MARKETS ARE RIGGED.
Mon, 03/31/2014 - 21:43 | 4612633 ShortTheUS
ShortTheUS's picture

Moar Kelly Evans!!!

Tue, 04/01/2014 - 01:14 | 4613038 ebworthen
ebworthen's picture

Uggh, that little casting couch tart.

Mon, 03/31/2014 - 21:44 | 4612634 dexter_morgan
dexter_morgan's picture

They are doing god's (J M Keynes) work in pumping liquidity so therefore they are entitled to it in their minds.

Mon, 03/31/2014 - 21:46 | 4612639 CrashisOptimistic
CrashisOptimistic's picture

The viewer is not the customer.  You all know that.

One of the things that let me shave every day is being able to look in the mirror, knowing I never watch CNBC. 


Mon, 03/31/2014 - 22:50 | 4612799 UselessEater
UselessEater's picture

There certainly appears to be a lot of psychology behind its format. Fast overbearing talking, dressed up dolls and discordant debate at high volume interweaving truth, fiction and emotion. The viewer seems to be a psychiatric target.

Mon, 03/31/2014 - 21:49 | 4612646 Catullus
Catullus's picture

The people who have the real nerve are the apologists for the regulators. It's not that the market is rigged. It's that there's nothing the regulators do about it.

Oh btw, those of you living in Central New Jersey, YOU are subsidizing this. The demand for electric power to keep these data centers and HFT hubs is enormous. It's enough to make a big difference. Your transmission and capacity and congestion charges are through the roof. It's probably $10-17/mwh

Mon, 03/31/2014 - 21:51 | 4612650 kchrisc
kchrisc's picture

You know, HFT is not the problem. It’s that an environment has been created that makes HFT possible and necessitates its use.

In an unfettered economy, one that didn’t have the banksters robbing everyone of their labor and product day in and day out via “printing,” there would be no HFT or need for it.

In such an economy, people would earn returns on their savings and investments from the resulting increase in productivity in the economy induced by their investments.

People just wouldn’t make money shuffling ownership around at high speed.

Sidenote: When one studies inflation, especially hyper-inflations, one will inadvertently see the affected society become more and more short-term focused with a resulting fixation on speculation.


“Of course the fix for it all is the guillotine.”

Mon, 03/31/2014 - 21:57 | 4612663 Bryan
Bryan's picture

It's so satisfying in a twisted way to see them squirm and spin and distract.

Mon, 03/31/2014 - 21:58 | 4612666 Dingleberry
Dingleberry's picture

Of course it's rigged.

It's always been rigged. Flash trading anyone? And in the internet age, plus the massive financial frauds that seemingly have no end, ignorance of this fact is absolutely no excuse.

I guess 60 minutes never heard of Keiser, Chapman, Denninger, and oh.....about 1,000 other bloggers who have been speaking of this shit for about 5 years.......EVERY. FUCKING. DAY.

And it's not like it would take an act of God to figure out how to stop this. But can you imagine what would happen to trading volume when that happened? Profits at JPM, GS? 

But the "little guy" always thinks he can get a piece of the action, even though he knows deep down it's all a fraud. The S&P seems to be sky high and going higher. Oh well. Hope springs eternal.....

But alas, you cannot cheat an honest man, as an honest man wouldn't play along with this scam disguised as a market.

Anyone else who does is and thinks he is "investing", by definition, is simply not being honest with himself.  He is just another speculator. And unless he is an HFTer or some other insider, he deserves the losses coming his way.

Speculating in itself is not bad.....just do not confuse it with investing in what is obviously an utterly and thoroughly rigged con game.

I can just hear the wailing and gnashing of teeth from the unwashed masses when this bitch goes down.

As Keiser often says....take away fraud, and you have no market.

Mon, 03/31/2014 - 22:06 | 4612678 deerhunter
deerhunter's picture

i walked into a 7 11 at 3 AM back in my single, carousing and drinking days.  There were people helping themselves to two hands full of 12 packs of beers and walking out.  Something not right.  The night clerk had suffered a stroke and was in the back room on the floor.  People helped themselves.  I walked out to the payphone and called the cops.  Character is what you do when no one is looking.  I waited for the cops and had a bit of a drunk on but I was walking back to my apartment from my favorite watering hole.  It doesn't make me better than the thieves.  They were expressing their true character as well.  There are so many things unseen in our banking and finance systems that we may not want to know what goes on.  Would you want a banker dating a sister or God forbid a daughter?  Not me.  

Mon, 03/31/2014 - 23:19 | 4612854 Fidel Sarcastro
Fidel Sarcastro's picture

Don't be so modest!  It *does* make you better than those f*cking scumbags that rather ripped off the store & watched a man die than lift a finger to help. 

Mon, 03/31/2014 - 22:08 | 4612682 Yen Cross
Yen Cross's picture

    Pissonme needs to quit acting like he's speaking for the average investor. He's arguing that the Lewis book will give the impression that the whole market is rigged (it is) and that the average investor will see it that way.

   FFS look at the volume in the markets. They don't need Bob Pissonme to tell them that. You can see that it's just a big circle jerk with with little general public involvement. He needs for Santelli to give him a swift kick in the ass...


Mon, 03/31/2014 - 22:10 | 4612689 fonzannoon
fonzannoon's picture

Yen as a piker representative for the retail investor I can tell you that the average investor sees one thing. This.

Mon, 03/31/2014 - 22:12 | 4612694 Yen Cross
Yen Cross's picture

     I almost upchucked Fonz. Got to go get a glass of water.

Mon, 03/31/2014 - 22:18 | 4612708 fonzannoon
fonzannoon's picture

it's fascinating man. The fed managed to erase one of the biggest crashes in history from Joe six pack's memory.

Mon, 03/31/2014 - 23:39 | 4612898 yogibear
yogibear's picture

Pissonme always carries his knee pads to suck on some Wall Street  guest knobs.

The guy is disgusting. No objectivity at all.

No loss if CNBC canned this useless person.

Mon, 03/31/2014 - 22:26 | 4612725 Dickweed Wang
Dickweed Wang's picture

If Santelli keeps it up he won't be long for the CNBC world.  In fact, he might end up drowning in his bathtub or shooting himself in the head with a nail gun 10 times.

Mon, 03/31/2014 - 22:28 | 4612735 I Write Code
I Write Code's picture

Let's see, four trillion dollars, average share price $50, is 80b shares.  Penny a share is $800,000,000 over five years, risk free, just money lying on the street, down in the rounding error.  That's *just* sucking up the fed.*

Average NYSE plus NASDAQ volume 5b/day, 1.2t shares/year.  Penny a share is $12,000,000,000 per year.  Just for showing up.  Sure, have to fight off those other greedhead HFT'rs but we're all fellow rogues.

Geezus how do I get into this game?

*and actually all $4t from fed didn't go to equities, but we really don't know how much did.

Mon, 03/31/2014 - 22:29 | 4612751 VWAndy
VWAndy's picture

 Come on you know ya like it. Dont worry baby you gonna get some more tomarrow. We gonna give it to ya in the pension hole and,,,

 It is what it is.

Mon, 03/31/2014 - 22:36 | 4612770 Dickweed Wang
Dickweed Wang's picture

When something like HFT is "exposed" on 60 Minutes, the FBI gets involved and GS all of a sudden comes out against it, it's time for the little people to say BOHICA.

Mon, 03/31/2014 - 22:42 | 4612778 highwaytoserfdom
highwaytoserfdom's picture

From Occ q4 2013 bank trading and derivatives activities.. Mind you 4 banks ... 

FED FUNDED TIER 1 STRESS TEST..   Now I am not going to Bove Dick the numbers but

HFT Please  get a grip.. such a minor issue to FED liquidity to banks

interest      Libor       Bid rigging

forign ex     Fx bid rigging

Equity          HFT

Credit         rating agency fraud

Mon, 03/31/2014 - 22:47 | 4612787 Downtoolong
Downtoolong's picture

"I'm sorry but if a large group of people can take that one cent all day long, day-in and day-out, then there's a problem."

I look at it slightly differently. 99% of investors would trade their opportunities in the current market for a chance to make “only a penny” on 1% of the trade volume in the market, if they  could. The other 1% of investors are likely doing something even more illegal.

And, what about those greater fools who trade penny stocks? Suddenly, "only a penny" becomes "a big penny".

Mon, 03/31/2014 - 22:59 | 4612814 Downtoolong
Downtoolong's picture

May Day! May Day! It's like a talking-head market-shill scramble.

The only thing missing is an air raid siren in the background.

Mon, 03/31/2014 - 23:12 | 4612841 ThirdCoastSurfer
ThirdCoastSurfer's picture

The Wolf of Wall Street was a worthless and disappointing movie for me except in the beginning where the character that Matthew McConaughey plays states that there is a big difference between real money and paper profits. 401(k)'s are all paper while the money syphoned-off in pennies, like in the movie Superman 3 or Office Space, is the real money that generates the commissions and pays the bills for the likes of Goldman Sachs where the average salary of all 32,600+ employees is $383,000 because of the spectacular amounts that a select few receive, and guess who they are?

I also reiterate that front running is not limited to just buy and sell back at a penny higher. It is very active against technichnal traders and candlestick markers. If a stock hits it's 200 day moving average, you can expect some action. If you put in a bid right on the marker, right on the MDA, you'll see a large parade of trades go by, well beyond the initial level 3 indicators, as all the groups with front run get in before you. Since these trades are then based on a theta, or time element, then you can pay a penny more or take you chance across the MDA but that's more risk or more money than those who have cut in front of you have had to take and in the long run it's like the odds in blackjack, you're gonna lose. Besides, they trade basically for free and you have to pay like $9.95 to buy and then another $9.95 to sell so it's all stacked against you. 

Mon, 03/31/2014 - 23:18 | 4612851 breakyoself
breakyoself's picture

I love how CNBC tries to take credit for bringing things like HFT frontrunning of orders to light.

Mon, 03/31/2014 - 23:47 | 4612911 ChargingHandle
ChargingHandle's picture

This is just the tip of the proverbial iceberg and I have always respected Santelli ... He never sugarcoats regardless of who the audience is. I sure hope he doesn't pick up carpentry and buys a nail gun. 

Tue, 04/01/2014 - 00:39 | 4612986 Mine Is Bigger
Mine Is Bigger's picture

I remember back in the day when Zeroheadge launched its crusade against HFT.  Some guys who co-located theri servers next to an exchange came to the forum and argued HFT was a good thing because they provided liquidity.  I wonder how they are doing now (how much they have lost to more sophisticated HFT operations.).  My sincere congrats to the ZH team for making people aware of HFT.

Tue, 04/01/2014 - 00:43 | 4612997 TrustbutVerify
TrustbutVerify's picture

HFTers make profit - pay taxes likely at highest rate.  QE induced market's go higher - pensions and 401-Ks go higher.  Churn in various accounts as market goes higher generates cap gains taxes.  Markets go higher -  financial management sector pay goes higher and is taxed at highest rate.  (I don't realy buy that HFT drives the market higher by much but its profits generate pretty consistent income/tax revenue stream.)  

Regulators know whats going on - just like they knew and stood by as the bubble built before the 2008-2009 crash. I find it sickening that 99% of the commentary about these bubbles never mentions goverment involvement/encouragement and tax revenue induced government/regulator passivity.  

Come on, who's going to clamp down on this when the trend/game is going so well?  

Some numbers today suggested 2010 HFT revenue was $5 billion.  Last year it was $1 billion.  HFT (seems more accurate to call it "front running") is an important issue but definitely not the major manipulation of markets of our era.  

Tue, 04/01/2014 - 00:50 | 4613011 tickhound
tickhound's picture

What a waste of technology and resources.

Tue, 04/01/2014 - 01:17 | 4613040 bh2
bh2's picture

It remains a mystery how Santelli manages to put up with that crowd of apologists for all that is wrong with our financial system.

Tue, 04/01/2014 - 05:24 | 4613223 grekko
grekko's picture

I'd put up with it for his paychecks.

Tue, 04/01/2014 - 07:42 | 4613313 El Hosel
El Hosel's picture

..... No mystery, he is on the payroll. He may be a squeeky wheel but his works for the machine.

Tue, 04/01/2014 - 01:37 | 4613054 starman
starman's picture

Kelly I just want to bend you over!

Tue, 04/01/2014 - 06:35 | 4613260 1stepcloser
1stepcloser's picture

I've heard she has a thing for bozo, you'd got a good shot..

Tue, 04/01/2014 - 03:07 | 4613128 Lin S
Lin S's picture

Bob Pisani's a know-nothing little bitch.

Tue, 04/01/2014 - 04:59 | 4613206 MiniCooper
MiniCooper's picture

Watching CNBC from the UK it really was very obvious how so many commentators were desperatley trying to undermine or counter the Lewis arguement about HFT. Why?

The arguement that really riled me was the one that 'Mom and Pop' investors are paying less to trade now than 30 years ago. Whoppee DO! Just think how much less they would be paying if someone wasnt front running them.  

As usual Rick Santelli nailed it.

If HFT are making that much money - its a problem.

I am sick to death of my online UK broker not getting me the best price. Its really obvious in the smaller stocks. I see trades going through the market (I pay for real time trade reporting data) at the price and size I am bidding at and my broker saying he cant trade at that price. Really? No actually I know full well you sold your client book to a third party who routes the trades via their system first and my bid never gets shown to the market. HFT isn't the only issue. Front running in all its forms is rampant. It is illegal. Always was illegal.  We need one stock market like a public utility with a simple bid offer stack and nobody gets to see it first. Bids and offers have to stay firm for at least 2 seconds. That would kill HFT.  

I also want to ask the question. Why Now? Why is it this story is out now? I also think HFT will be blamed for the coming crash. 

Tue, 04/01/2014 - 05:54 | 4613239 RaiZH
RaiZH's picture

How/Why do HFT firms get paid by exchanges for trading on them? 

Because they bring a lot of traffic ?  

Tue, 04/01/2014 - 07:35 | 4613302 El Hosel
El Hosel's picture

"I'm not trying to be an apologist for HFT, but"...  Mom and Pop need to know their money is safe with the other thieves on Wall Street, its my job to sell the message.

Tue, 04/01/2014 - 08:44 | 4613397 Angelo Misterioso
Angelo Misterioso's picture

Grasso was there as this was all getting set up - and he got his 140 million golden parachute - follow the money always...who else get's paid off?

Tue, 04/01/2014 - 11:58 | 4613898 Againstthelie
Againstthelie's picture

Very enlightening:

First they ignore it.

Then, when they can't ignore it anymore, they play it down (we have always covered it, it's not a big problem).

Presstitutes! What an ugly hard earned money. Going to bed at sunday evening and knowing, I only get up to tell people all day long shit, my bosses want me to spread.


But what I have been missing in the whole discussion is the following:

The information for the individual investor how he can avoid it: by using limit orders, not market orders. Problem solved.


Two problems remain, and they can be MUCH more expensive than a few pennies:

1. Stop-losses need to be market orders, if they should be effective.


2. In stocks with low liquidity, for example TSX gold explorers, the HFT crowd can be extremely damaging, if people assume, that the shown bids/asks always were real buyers/sellers.

But  artificial asks/bids at several prices can be present and if a real buyer places his limit order, in the believe what he sees is the current market demand/supply, it could be that it is filled immediately, because the HFT fake asks just disappear before his order is executed, and the next real ask is even lower. So if he would have chosen an even lower price to buy, he still would have got a fill.

The problem is, by looking at the L2 depth, you can't see this, because these HFT fake asks (or bids in the case of selling), can be placed at several different levels and create a complete fake orderbook.


As general help: read Benjamin Graham "The Intelligent Investor" and avoid playing their game.

Tue, 04/01/2014 - 11:54 | 4613906 Againstthelie
Againstthelie's picture

double post

Tue, 04/01/2014 - 12:07 | 4613944 Seeking Beta
Seeking Beta's picture

I love how santelli's video is not avalaible right now

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