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SEC Has Opened Several HFT Probes

Tyler Durden's picture




 

To think all it took to wake up not only the FBI (which generously provided a phone number to all interested parties so others could do its work for it) but the porn-addicts at the most corrupt, complicit and clueless, not to mention bought and paid for, "regulator" in US history, the SEC from a five year slumber - yes, we started warning about HFT in April of 2009 - was one Michael Lewis book. Moments ago we learned that the SEC, with a five year delay, has opened several investigations into HFT.

Below is an artist's rendering of just what these probes look like:

From the WSJ:

Ms. White, testifying before a House Appropriations subcommittee, said the SEC currently has "a number" of ongoing investigations regarding "market integrity and structure issues, including high-frequency traders." She declined to provide specifics about the investigations, but said they have been under way for "quite some time."

And now, please hold for laughter:

"We're very much focused on any abuses in that space," she said.

Ok, now you can laugh. And laugh some more:

The SEC and the Commodity Futures Trading Commission are looking into ties between high-speed traders and major exchanges, examining whether the firms are getting preferential treatment that puts other investors at a disadvantage, people familiar with the probes said Monday.

Since we feel generous, here is a place to start: several hundred articles covering precisely what you should have been investigating 5 years ago! And since we know you are budget strapped, we won't even ask for our finders fee for having been the first to expose the scam that is HFT - we realize that all those porn subscriptions cost a pretty taxpayer penny.

Then again, not even we are dumb enough to fall for the lie that the SEC is actually going to finally do something about HFT:

Ms. White acknowledged the SEC is in the midst of a policy debate on whether the speed and complexity of trading in stocks and other securities pose risks to markets. She said the SEC's approach on the issues would be "data-driven and disciplined." She stopped short of embracing any policy shifts.

 

The review of the guts of the stock market follows a string of market breakdowns, such as last year's failure of the Securities Information Processor, a computerized link that transmits market orders to the public and is overseen by the Nasdaq Stock Market.

Why? Because since hundreds of current SEC employees can't wait to quit their job in the glorious tradition of the SEC revolving door just so they can find a much higher paying job doing nothing at the same HFT firms they were supposed to be policing, and because it is the HFT lobby itself that controls the SEC (recall that SEC Uses HFT Firm-Designed Tool To Find That HFT Doesn't Cause Flash Crashes), only an idiot would fall for the same lie again and again. Especially since Mary Jo White will have to promptly recuse herself from this investigation: after all the bulk of her former clients at Debevoise, especially Morgan Stanley, are some of the most flagrant abusers of HFT.

As for retail investor "confidence" in capital markets, that ship sailed long ago. Because no matter how high the rigged market closes day after day on increasingly worse economic news, they are never coming back, period.

 

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Tue, 04/01/2014 - 19:18 | 4615398 fonestar
fonestar's picture

But what will the SEC do about Bitcoin?  Oh, the same as your "government"?

Hahahahahahahaha AAHahahahaha Ahahahahahaha!

Tue, 04/01/2014 - 19:40 | 4615469 SilverIsKing
SilverIsKing's picture

<- monkeyporn.com
<- nastychimps.com

Tue, 04/01/2014 - 19:58 | 4615534 AlaricBalth
AlaricBalth's picture

And where was Bart Chilton? In 2012 he was pandering to his audience at the HFT Leaders Forum.

An excerpt: "Well, there won’t be too many lulls in our conversation today, and I really am very excited to be with you—party time, excellent."

Full Keynote Address of Commissioner Bart Chilton Before the High-Frequency Trading Leaders Forum, Chicago, IL

http://www.cftc.gov/PressRoom/SpeechesTestimony/opachilton-71

Tue, 04/01/2014 - 21:37 | 4615771 Pure Evil
Pure Evil's picture

Shitte!

Just think.

If Tyler had binded up all the articles he's wrote on HFT since 2009 and printed off a book, he'd be the one getting all the attention.

So why does Michael Lewis get all the accolades for just writing a book?

I guess it's pretty easy to travel on cruise control from coast to coast when others have already built the highway.

Tue, 04/01/2014 - 19:20 | 4615403 LetThemEatRand
LetThemEatRand's picture

There is absolutely Zero Doubt that all of these announcements about "investigations" are merely to placate the public, so the average guy doesn't ask the obvious question of why they are not doing anything about it.  Say you're investigating, and then prosecute a few "bad apples," and the story dies a quiet death.

Tue, 04/01/2014 - 19:21 | 4615413 fonestar
fonestar's picture

What was that about Rand Corporation?

Tue, 04/01/2014 - 19:21 | 4615415 kliguy38
kliguy38's picture

like someone said earlier.......HFT may be shit......but the noise is to divert you from a bigger pile of shit and thats the WHOLE market is rigged......throw the peeps a bone and let them think its getting cleaned up....hahahahahaa

Tue, 04/01/2014 - 19:26 | 4615423 LetThemEatRand
LetThemEatRand's picture

Yes, somehow I don't think those FBI and SEC probes into the few small time bad applies who will take the fall, are going to touch where the money is coming from that the "bad applies" are skimming.

Tue, 04/01/2014 - 19:30 | 4615449 SAT 800
SAT 800's picture

Now, don't be like that; they're from the Government and they're there to help you.

Tue, 04/01/2014 - 21:24 | 4615779 Pure Evil
Pure Evil's picture

Don't expect them to dig to deep or explore too many trails.

All holes and paths lead back to the FED.

Tue, 04/01/2014 - 19:33 | 4615458 DaddyO
DaddyO's picture

Look. the croupier got caught cheating and the pit boss is obliged to change out the bad dealer.

In a few hands, the players will have forgotten completely about the cheater.

I would think that the house started to become more aware of the low crowds at the tables and decided it was time for a new marketing scheme.

DaddyO

Tue, 04/01/2014 - 19:53 | 4615523 Unknown User
Unknown User's picture

They broke a commandment "thou shalt not steal from the banksters", and now will be made to atone for their sins...

Tue, 04/01/2014 - 20:51 | 4615688 pizzedoff
pizzedoff's picture

No, Expect a 6 year investigation and then they will blame it on rouge programmers within each company that does HFT

Tue, 04/01/2014 - 19:29 | 4615448 eclectic syncretist
eclectic syncretist's picture

Yes! HFT morphed into a monster wherein the small investors have been eliminated, the big investors no longer trust the system, and the banksters with their HFT platforms have been left to parasitize each other.  This is against the Fed's true (and covert) mandate to enrich the big banks at the most widely possibly dispersed cost to everyone else (essentially the Fed exists to support and publically legitimize bankster parasitical skimming from the earnings of the populace). 

Since HFT is now impinging upon the Fed mandate, it will be utilized as the sacrificial lamb scapegoat for what the banksters are about to unleash upon us.

Tue, 04/01/2014 - 19:39 | 4615474 hobopants
hobopants's picture

Retail won't return no matter what show they put on because retail is flat ass broke. They've run out of cattle and now will have to turn cannibal. Bets on which bank eats which?

Tue, 04/01/2014 - 21:31 | 4615806 Pure Evil
Pure Evil's picture

I sincerely doubt HFT will be eliminated in its entirety.

I think the FED just doesn't like competition.

It's not starting to look good when HFT trading firms are being IPO'd.

Eventually there will be one on the corner of every block just like Cash For Gold stores.

Can't let the little guy in on the scam ya know, they're there to be fleeced.

HFT may be scapegoated if the market crashes and then regulated out of existence for the little guys, but HFT is a FED monetary policy tool to be used by its Wall Street banks, or in everyday parlance, its owners.

Tue, 04/01/2014 - 21:12 | 4615747 HardAssets
HardAssets's picture

The whole freakin' system is a fraud run by criminals.

Who cares about their coming HFT 'investigation' cover-up. That's small time. Ho-hum. Nothing of substance will come of it. We know that, don't we ?

The BIG cover-up for the whole rotten economic/political/gangster system will likely be another major war. Given how bad theyve made it, WW3 is out there on the horizon somewhere.

Thats the tactic they usually use to divert attention from themselves.

 

Tue, 04/01/2014 - 19:24 | 4615424 Ralph Spoilsport
Ralph Spoilsport's picture

The public has already been distracted away from this by a shiny object carried away by a squirrel. When I asked some people what they thought about the HFT headlines, most all of them said the market is doing great so WTF.

Tue, 04/01/2014 - 19:27 | 4615439 SAT 800
SAT 800's picture

Great picture of the Government Employee at his "keyboard". Precious.

Thu, 04/03/2014 - 14:47 | 4622081 MeelionDollerBogus
MeelionDollerBogus's picture

I'm surprised they're not sleeping at their desks until overtime kicks in.
Oh, is the SEC located in Detroit?
Wait, their work ethic is much stronger at the SEC. Before overtime hours kick in they'll be streaming porn and wide awake.

Tue, 04/01/2014 - 20:31 | 4615616 booboo
booboo's picture

"Gentleman, something has to be done about this, we gotta protect our phoney baloney jobs...hey I didn't get a hurumph out of you"

http://www.youtube.com/watch?v=JN99jshaQbY

Tue, 04/01/2014 - 19:21 | 4615411 Grinder74
Grinder74's picture

Fuck the SEC.

Tue, 04/01/2014 - 19:21 | 4615412 mbutler101
mbutler101's picture

I don't know who I despise more, the SEC or the CFTC...

Tue, 04/01/2014 - 19:24 | 4615422 slotmouth
slotmouth's picture

How to get rid of HFT, stop busting trades.

Tue, 04/01/2014 - 19:24 | 4615426 Evil Bugeyes
Evil Bugeyes's picture

This is a big deal! In several years some of the worst offenders might just be forced to pay several dollars in fines.

Tue, 04/01/2014 - 19:25 | 4615429 nmewn
nmewn's picture

Darcy Flynn could not be reached for comment.

Tue, 04/01/2014 - 19:25 | 4615431 gimli
gimli's picture

Tyler, change the site's name to Michael_Lewis@Zerohedge ..... 

You may even get an interview on BloomingOnionBerger

Tue, 04/01/2014 - 19:28 | 4615438 khakuda
khakuda's picture

Fuck Wall Street and the Fed for bringing blatant thievery and bubbles back so quickly after the debacle of 2008.

Maybe the Fed should've been watching this shit all along instead of printing almost $5 trillion and fucking savers out of interest.

Tue, 04/01/2014 - 19:28 | 4615442 Dewey Cheatum Howe
Dewey Cheatum Howe's picture

The fucking trading system is automated is it not. All trades have to pay a transaction tax right off the top once they get placed. Problem solved when that transaction tax costs more than they can make skimming .0001 pennies at a time. All trades, all firms no exceptions no do overs once a trade is fired off.

Thu, 04/03/2014 - 14:46 | 4622076 MeelionDollerBogus
MeelionDollerBogus's picture

As if they won't find a way to ding the rest of us with those fees by changing the spreads on what they re-bid? They will.
Just disconnect their wires & enforce that no one can be allowed to front-run. Do it & go to jail. It is illegal.
We don't just tax what's illegal, jail time should happen.

Tue, 04/01/2014 - 19:31 | 4615447 TaperProof
TaperProof's picture

Looks like the easy HFT money days are over.  In about 5 years I mean.

Tue, 04/01/2014 - 19:31 | 4615455 Mine Is Bigger
Mine Is Bigger's picture

Maybe they can no longer sustain the artificial stock pump and want to blame HFT for the upcoming epic crash.

Tue, 04/01/2014 - 19:32 | 4615456 williambanzai7
williambanzai7's picture

Tue, 04/01/2014 - 23:45 | 4616114 NaN
NaN's picture

Process Design Fraud.

What's the difference between a programmer writing banking software that puts a fraction of a penny in his account every time interest is calculated and a distributed stock exchange system that allows invisible front running for years? Not much. The former involves one person and the latter diffuses reponsibility and culpability so thinly that no one gets in trouble. 

This collective fraud hazard is an unsolved problem.

 

 

Tue, 04/01/2014 - 19:33 | 4615460 agent default
agent default's picture

They are either preparing for a huge market crash or the Fed is going to induce a market crash.  Either way, they are looking for someone to blame and scape goat.  They have put up with HFT for all those years, to pump the market, they even let GETCO to handle the GM IPO, and now all of a sudden they remembered that HFT is screwing the market?  Bullshit.  A crash is coming and they will blame it on HFT.  But, the zero volume rallies we have been getting all these years, is the economy improving, and not HFT.  Got it.

Wed, 04/02/2014 - 16:49 | 4618663 MeelionDollerBogus
MeelionDollerBogus's picture

HVU, UVXY, both 11x inverse to the Dow & S&P500. Get'em  before they're hot. Dump 'em on a local peak unless you got balls to hold on for S&P500 = 1000 but... that's a personal call.

When SPY=100 expect HVU = (219/100 )11 or even (222/100)11

so 5,557.57 to 6,454.79 share price

Tue, 04/01/2014 - 19:34 | 4615461 williambanzai7
williambanzai7's picture

Tue, 04/01/2014 - 19:38 | 4615471 Uncle Remus
Uncle Remus's picture

Of course, now that the party is over...

Tue, 04/01/2014 - 19:40 | 4615479 buzzsaw99
buzzsaw99's picture

Now I know the squid is behind this.

Tue, 04/01/2014 - 19:50 | 4615517 SilverIsKing
SilverIsKing's picture

Of course. That's why they are in on IEX.

Tue, 04/01/2014 - 19:43 | 4615487 TaperProof
TaperProof's picture

Truth is the market doesn't need actual humans trading any more.  Just robots.

Tue, 04/01/2014 - 19:43 | 4615489 Algosaurus Rex
Algosaurus Rex's picture

Investigations? Is this more change we can believe in?

Tue, 04/01/2014 - 19:43 | 4615490 CalibratedConfidence
CalibratedConfidence's picture

what a glorious day

Tue, 04/01/2014 - 19:47 | 4615506 Quus Ant
Quus Ant's picture

you're gonna love  tomorrow.

Tue, 04/01/2014 - 19:44 | 4615496 f16hoser
f16hoser's picture

Headline (5 years from now): SEC has determined that HFT Platforms are fair and balanced. In other news, Head of SEC, has taken a new job with Knight Capital who runs the worlds fastest HFT Platforms...

Tue, 04/01/2014 - 19:46 | 4615498 Goldilocks
Goldilocks's picture

The Monkees- Hey Hey We're The Monkees.
http://www.youtube.com/watch?v=ksJ6QP8BYn0 (2:24)

Tue, 04/01/2014 - 19:48 | 4615508 I Write Code
I Write Code's picture

SEC, that's the conference with the great football teams?

Tue, 04/01/2014 - 20:04 | 4615547 Baby Eating Dingo22
Baby Eating Dingo22's picture

This must be a sign of a top

The lactation guards storm in just as the udders have run dry

Tue, 04/01/2014 - 20:08 | 4615555 Judge Crater
Judge Crater's picture

Next you will see AG Holder announciing the indictment of Michael Lewis for criminally revealing proprietary information about high frequency traders, traders Holder calls vital to the marketplace.

Tue, 04/01/2014 - 20:29 | 4615618 Offthebeach
Offthebeach's picture

Wonder if Lewis has a framing nail gun in his garage? ( insert Christopher Walken voice; " He could have an aceedent, or sumpthen." )

Tue, 04/01/2014 - 20:11 | 4615560 swmnguy
swmnguy's picture

Obviously they're concerned that the muppet/sheeple are losing faith in the markets.  As usual, they're years late because it takes a long time for rumblings from the lower orders to disturb the insider cocktail circuit.

They've been following the same approach they use for everything now.  First, completely ignore any objection at all to the favored world view.  Dissent usually goes away.  If it doesn't, continue to ignore it, but get more Approved Sages to reinforce the favored world view.  If that doesn't quash the objections, gather a posse of Approved Sages, bring on the least charismatic or defensible proponent of the dissent, bait him into acting untelegenic, and have the Sages laugh at him, if not directly at his views.  If the dischordant view persists even after that, have someone with some Official Credibility pretend to take the dissenting view seriously, only to dismiss it. 

If that still doesn't squelch the heresy, it's pretty serious and time for serious measures.  At that point, all of a sudden all the Approved Sages spend a milli-second being "Shocked!  Shocked!," before immediately espousing the former heresy, and completely ignoring that they ever advocated otherwise.  Then an investigation is launched, to roll up some patsies and people nobody liked anyway.  Nobody of consequence will be more than mildly inconvenienced, and the underlying problem will absolutely not be solved.  That, of course, solves the entire problem. If you don't agree, you're a crank who can't "move on" past "old news.

Repeat until amnesia sets in, or the Kardashian's get in front of another camera. In extreme cases, an airplane may disappear, or a cat may recite T.S. Eliot on YouTube.

That we're now at the phase of the Extremely Solemn Investigation shows that they actually are pretty worried. Most of these things can be headed off by the stage where an Approved Sage pretends to consider it seriously and then dismisses it.

This one scares them a lot, because it's getting close to the source of a lot of large money.  After Watergate, 9/11 skepticism was inevitable, and manageable by these methods.  But to lose faith in, or not show appropriate respect to, the core parts of the system is the most dangerous and therefore intolerable transgression in our society.  Once it catches hold, it's a serious problem for these people.

Tue, 04/01/2014 - 22:08 | 4615898 object_orient
object_orient's picture

Well put. Michael Lewis said something about government legislation creating more loopholes for smart people to exploit. That's why I don't understand why anyone thinks a transaction tax - conceived and enforced by Congress and the SEC - is going to help. And if it did stop HFT you can bet it would open another avenue to profit from.

I hold no hope for a level playing field but it is interesting to see a sliver of truth emerge from time to time.

Wed, 04/02/2014 - 00:08 | 4616150 NaN
NaN's picture

Clearly, the legal code and case law is like a mandelbrot fractal. 

 

Tue, 04/01/2014 - 20:13 | 4615570 Seasmoke
Seasmoke's picture

ZERO HEDGE > MICHAEL LEWIS > F.B.I.

Tue, 04/01/2014 - 20:19 | 4615579 dizzyfingers
dizzyfingers's picture

"We looked into it for a whole day (minus 2 hours for lunch) and everything's hunky-dory don't worry."

Tue, 04/01/2014 - 20:22 | 4615586 Palladin
Palladin's picture

 

 

One thing I just don't get amid all the hoopla surrounding the latest HFT "revelations". How come nobody, well almost nobody, posts these links to every web site in the universe.

As the old saying goes..."follow the money"  and on the first column of the NYSE's Trading Fees, is Rebate for Adding. WTF is that. I don't get a rebate when I do a trade. Scroll down and look at all the entries for Rebates.

http://usequities.nyx.com/markets/nyse-arca-equities/trading-fees

And Nasdaq is right there with the NYSE with the worlds most complicated fee schdule: 

http://www.nasdaqtrader.com/Trader.aspx?id=PriceListTrading2

http://nasdaq.cchwallstreet.com/NASDAQTools/PlatformViewer.asp?selectedn...

And Bats Fee Schedule:

http://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&u...

And of course the SEC knows about and agrees with all of this.

 

 

Tue, 04/01/2014 - 20:27 | 4615606 loveyajimbo
loveyajimbo's picture

Remember to arrest that bag of rat puke Shapiro too.  And all the roaches at the CFTC for the last 20 years.  Give Holder 30 years in the Big House... Geithner can be his Cabin Boy.

Wed, 04/02/2014 - 06:58 | 4616513 kurt
kurt's picture

Ol' Crookfinger Paulson has him all loosened up and ready

Tue, 04/01/2014 - 20:36 | 4615641 Yen Cross
Yen Cross's picture

   Janet Yellen's dopplegänger is snorting fire and brimstone... You HFTers better run for the hills. /s

Tue, 04/01/2014 - 20:45 | 4615671 bh2
bh2's picture

Doutbtless the SEC will furiously steam back and forth laying smoke until nothing can be seen of any particular interest.

Tue, 04/01/2014 - 20:51 | 4615687 lakecity55
lakecity55's picture

The Truth resides at ZH along with commentators' comments!!

We are not mainstream, I don't want to be.

Tue, 04/01/2014 - 21:14 | 4615754 MeelionDollerBogus
MeelionDollerBogus's picture

Should be the "see no evil" monkey for the article-hook on the main page!
The faster the SEC opens investigations the faster it can close them with a conclusion of "no wrong-doing"

Tue, 04/01/2014 - 22:13 | 4615914 Its_the_economy...
Its_the_economy_stupid's picture

fuck these SEC POS

Tue, 04/01/2014 - 23:42 | 4616107 Quaderratic Probing
Quaderratic Probing's picture

These are not the HFT Droids you are looking for

Wed, 04/02/2014 - 01:25 | 4616237 peakaboo
peakaboo's picture

 

S E C

u l o

c i c

k t k

i e

n

g

Wed, 04/02/2014 - 03:28 | 4616371 kurt
kurt's picture

HFT is bitcoin mining for ASSHOLES

Wed, 04/02/2014 - 07:50 | 4616559 Illuminatus Rex
Illuminatus Rex's picture

HFT = High Frequency Theft.

The traders in London, Frankfurt, NY are simply trying to outrun a black hole of their own creation. Front running markets has never been simpler as the role of human traders has become a thing of the past and if anything, it is getting worse before a climactic and catastrophic end to a market they will not be able to continue to levitate.

Bottom line is simple, oversight will brought to bear on the market, largely due to the actions of the Tyler's and other disaffected ex bankers who will continue to expose them to the regulators which will in time have to react to avoid revolution.

How do I know this ? I am one of those disaffected souls who downed tools after becoming sick of working for the tribe ... payback and retribution is coming, but then again, so will deposit confiscation schemes, costs to physically bank cash, capital outflow controls and increased resistance by the banking fraternity to adapt to accept any loss of control to their shell game.

Hedge accordingly, invest in yourself, divest away from this game as you cannot second guess genocidal maniacs and their agents. They care nothing for anything except power itself to persist in a failing plan to open up a NWO to perpetually feed off us ad infanitum. This is never going to happen and deep down they know it and are petrified by any light and exposure to their plans.

Napoleons warned us, Churchill warned us, Andrew Jackson warned us, Lincoln warned us, JFK warned us and the world was hoodwinked repeatedly. Smile in the knowledge that deep down, any action to resist is a reward in itself and we are winning.

Wed, 04/02/2014 - 10:15 | 4617142 NoTTD
NoTTD's picture

Great!  Five years from now we can all revel in the findings of no wrong doing, by any one, anywhere, at any time.  In the interim the HFTs will scrape off another few billion.

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