These Are The 10 "Liquidity-Providing" HFT Firms The SEC Is Investigating

Tyler Durden's picture

Despite a full court press of PR to confirm HFT firms are friends of retail investors and do no wrong; the SEC, it appears, sees it differently. While Mary White has confidently explained the market is not rigged, her agency is now actively seeking tips, complaints, or referrals that show, as The Chicago Tribune reports, evidence of abuse of order types, as well as traditional forms of abusive trading like "layering" or "spoofing" and other issues relating to high-frequency trading that might be violations of the law. Here are the 10 firms (including poster child holy-grail trader Virtu Financial) that the SEC is probing... can you spot the oddly missing one...

 

Via The Chicago Tribune,

The U.S. Securities and Exchange Commission has been seeking information on 10 registered broker dealers as part of an ongoing investigation into high-frequency trading strategies, according to an internal SEC document reviewed by Reuters.

 

The firms listed are Allston Trading LLC; Hudson River Trading LLC; Jump Trading LLC; Latour Trading LLC, which is an affiliate of Tower Trading; Merrill Lynch, Pierce, Fenner & Smith, owned by Bank of America Group; Octeg LLC, which has been merged into a unit of KCG Holdings Inc; Tradebot Systems Inc; Two Sigma Investments LLC; Two Sigma Securities LLC; and Virtu Financial.

 

They are all some of the largest trading firms in the U.S. Allston and Jump are both based in Chicago. Hudson River, Latour, Merrill, Two Sigma, and Virtu are headquartered in New York. KCG is in Jersey City, New Jersey, and Tradebot is based in Kansas City, Missouri.

 

Jump, Latour, Bank of America, Hudson River, Tradebot and KCG declined to comment. The other firms did not immediately respond to a request for comment.

 

Their number and the open-ended quest for information shows that the SEC is casting a wide net as it looks to unearth wrongdoing in the marketplace.

 

...

 

A number of government agencies, including the SEC, New York State Attorney General Eric Schneiderman's office, the Commodity Futures Trading Commission and the Federal Bureau of Investigation have said they had active probes into high-speed and automated trading.

 

The SEC has been seeking evidence of abuse of order types, as well as traditional forms of abusive trading like "layering" or "spoofing" and other issues relating to high-frequency trading that might be violations of the law, SEC Director of Enforcement Andrew Ceresney told Reuters in May.

 

Spoofing and layering are tactics where traders places orders that they cancel before they are executed to create the false impression of demand, aiming to trick others into buying or selling a stock at the artificial price.

*  *  *
While this list is notable (and wide) as Reuters notes, there is one name missing that surprised us... arguably the ibggest of all - Citadel... (too busy enabling the NYFed's VIX-selling machinations we assume is not considered rigging)

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GetZeeGold's picture

 

 

The SEC Is Investigating

 

....and will announce the results when we reach infinity.

 

We tried to email them for comment...but all the hard drives blew up yesterday....so they're working though all that.

smlbizman's picture

ot....but watching these cocksukers lying sooo fucking bad about who shot the  plane down...i hope their fucking dogs and kids and anything that matters to them suffers greatly for there part in this....but when you change the law that allows them to fucking lie, what would one expect...

https://www.techdirt.com/articles/20130715/11210223804/anti-propaganda-b...

power steering's picture

As long as Jamie's bonus is secured we're cool

mvsjcl's picture

Isn't the SEC more geared toward investigating the 10 largest "liquidity providing" porn stars? 

SafelyGraze's picture

Dear    SAFELYGR  ,

Thank you for your input into our investigation.

Unfortunately, all our browsers are down at the moment, so we are unable to follow your "link".

Also, we are looking for tips *other* than historical data from all markets.

Hugs,
MJ 

BaBaBouy's picture

SACKmans GOLD, Where Is SACKmans GOLD ?????

maxamus's picture

You sound like a Muslim, blame the kids and freaking dogs for their actions?  Kill them all.  Praise Allah.

GolfHatesMe's picture

I'm sure Disgorged Profits and Treble Damages are in Play

<Sarc Off>

disabledvet's picture

Before you can have accountability you have to have an actual accounting.

These are "information exchanges" and since privacy is in fact PUBLICITY now...how these matters "play out" is in fact a matter of National Interest.

These entities and the people who run them represent a Clear and Present Danger to the existence of the Republic...along with many other Republics I would imagine...and therefore need to have their identities exposed and analyzed first.

TheRedScourge's picture

Good thing the Republic has been dead for a hundred years then, because it would be a shame if it were being endangered as you say.

One And Only's picture

Goldman Sigma X and Citadel are the ones missing.

Dr. Engali's picture

You expected anything different?

Cognitive Dissonance's picture

Don't bite the hand that feeds you.....through future employment opportunities and business contacts.

mkkby's picture

After a lengthy investigation (of internet porn) each firm will be fined a small amount of the profit made, with no wrongdoing admitted.  The song remains the same. 

Maybe the HFTs will lay low in the forex market for a while, which is less visible to the sheeple.  A few suckers will be conned into believing the markets are fair again, and will wade in -- only to be ripped off the same way

Stoploss's picture

Anyone in the vicinity of Mary White, who possesses the ability to dial a phone, should dial this number 847-501-4787.

Ask for Scott.

Ghordius's picture

level field. at the end, it's all about making sure that all participants have the same access to the market

in a way, it's flabbergasting how conservative those market providers are. once a method is there, "it's the market, period". in itself, a sign of decay and corruption

ZH, Tylers, thank you for your year-long crusade against HFT

doomandbloom's picture

I am still having trouble explaining this to my investment banking friends. They are saying its merely 'time arbitrage'!!! Carry On High Frequencying

Ghordius's picture

well, it is merely time arbitrage. you take a deep, liquid market. you stretch it in time. and, lo and behold, you have a shallow, illiquid market which you can manipulate

headhunt's picture

So they just steal for a short amount of time?

Zerozen's picture

What utter fucking bullshit. You tell those I-banker friends they're full of shit.

Time arbitrage is not HFT. Time arbitrage is, as the name implies, arbitrage across time, e.g. buying oil today on a futures contract at price X and delivering it in two months against a more distant futures contract at price X+ $1 or whatever.

Time arbitrage is NOT front-running other people's orders with faster technology. That's got nothing to do with arbitrage.

buzzsaw99's picture

conveniently the squid is safely out of the way. HFTs have been raping the world for a decade and only now after they've jacked the market to insane heights does the SEC even look at it. Doin' a heckuva job. Eat shit and die Mary Jo. free sergey. free corzine.

Ghordius's picture

one of the more interesting ancient Athenians constitutions had a funny concept: every year, the "most dangerous citizen" could be voted on. if 6'000 citizens (percentage varied) deemed one man as too dangerous, he had to pack his suitcases and leave the city in banishment for ten years

today, we'd need the same... for corporations

buzzsaw99's picture

gs would be the first voted off the island

headhunt's picture

How about we add politicians

RaceToTheBottom's picture

We would need more than one spot to fill.

 

 

Ghordius's picture

one citizen out of 10'000 per year was the old formula for Ostracism. so a country counting millions...

headhunt's picture

30,000 should take care of most of the politicians in the USA

Boxed Merlot's picture

so a country counting millions...

 

 

Are you sure we haven't already done this?  It would seem we banished them all to WS, DC and the Fed.  They're so far out they've banded together to prevent the Athenians from joining them.  Ostracizing only works if the ostracized want to be where they aren't.

 

Currently, the Honorable Jon Corzine is said to be "frustrated".  Perhaps we could work on that angle.

 

jmo.

mraptor's picture

In Sparta every year the king's were assumed guilty until proven innocent. So they have to defend themselve after a year of rule.

pelican's picture

You have been bad. Now pay 10% of your profits from this activity and don't do it again??wink wink nudge nudge

Ban KKiller's picture

Bank of America involvement? GUILTY! No jail, just a fine. 

Atlantis Consigliore's picture

Merrill Lynch??? Merrill Lynch?????  How can it be??? Under BAC???

Citadel??  E TRADE?     but but but but  We testified, and did the Watusi...

 

Otrader's picture

What a joke.   There is always that feeling inside that may be this time they will....then it sinks in.  Nope.

headhunt's picture

"Citadel Investment Group founder Kenneth Griffin on July 8 urged Congress not to ban high-frequency trading, but to focus on regulations that would improve market stability, according to FINalternatives.

Speaking at a Senate Banking Committee hearing, Griffin, whose firm does some high-frequency trading, albeit less than in previous years, said that Congress should “absolutely not” ban the practice. He called the U.S. equity markets “the fairest, most transparent, resilient and competitive” in the world, and said that HFT helps reduce market inefficiencies."

Apparently “the fairest, most transparent, resilient and competitive” which griffin speaks of is in relative terms.

If a thief steals a million dollars he apparently is not as bad as a thief that steals a billion dollars.

firstdivision's picture

Last I cared to know, Citadel was nothing but a HFT firm as their foray into IB was a total flop.

ThisIsBob's picture

Looks like Wadell & Reed dodged another one.

smithmorra's picture

Incentivizing providing insider information on the fraudsters should be done more aggressively with whistle-blowers given full protection as well as greater %s of ultimate settlements.  The Blythe Masters and Steve Cohens of the world should be behind bars, not pandered to and enabled due to their connections, millions and sharp scumbag lawyers.

buzzsaw99's picture

Joanna: [Confused] So you're stealing?

Peter Gibbons: Ah no, you don't understand. It's very complicated. It's uh it's aggregate, so I'm talking about fractions of a penny here. And over time they add up to a lot.

Joanna: Oh okay. So you're gonna be making a lot of money, right?

Peter Gibbons: Yeah.

Joanna: Right. It's not yours?

Peter Gibbons: Well it becomes ours.

Joanna: How is that not stealing?

Peter Gibbons: [pauses] I don't think I'm explaining this very well.

Joanna: Okay.

Peter Gibbons: Um... the 7-11. You take a penny from the tray, right?

Joanna: From the cripple children?

Peter Gibbons: No that's the jar. I'm talking about the tray. You know the pennies that are for everybody?

Joanna: Oh for everybody. Okay.

Peter Gibbons: Well those are whole pennies, right? I'm just talking about fractions of a penny here. But we do it from a much bigger tray and we do it a couple a million times.

Grande Tetons's picture

Priceless. You should be the one explaining this, Buzz. 

Sorry_about_Dresden's picture

It absolutely blows my mind that the best explanation of HFT comes from the comedy "Office Space".

 

I wonder if the writer of the screen play had a notion of HFT when he wrote that script?

MFL8240's picture

While Mary White has confidently explained the market is not rigged, ...

 

Mary do you still  believe in Santa Claus?  The whole sytem is a game and the world knows it and have had enough of our courrpt bankers. 

gdiamond22's picture

HAHA..I was at a conference in March and the CEO of Tradebot spoke. He was all bulled up on the future of HFT and said "this is the wave of the future and everyone should be on board, it is the right thing for the market". Then the 60 minutes piece on HFT came out the next day. Nice timing, tool.

 

Al Gore spoke after him.

I was close to shoving a sharpened pencil in both ears that week.

mvsjcl's picture

Both of their ears, I hope.

Keltner Channel Surf's picture

Well, if the agency is true to past form, word came down post-Lewis' book from on high to show they're on top of this, so we'll get a few wrist slaps, $5 million dollar fines and "new rule" proposals that will take years to implement, meanwhile the chicanery will continue because, sadly, they haven't the horses, in expertise, nor numbers, to chaperone this technology.

stutes33's picture

Lets NEVER quote the Chicago Tribune again....please.