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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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Fri, 07/18/2014 - 08:22 | 4972631 GetZeeGold
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.

Fri, 07/18/2014 - 08:37 | 4972686 smlbizman
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...

Fri, 07/18/2014 - 09:03 | 4972760 power steering
power steering's picture

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

Fri, 07/18/2014 - 09:16 | 4972804 mvsjcl
mvsjcl's picture

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

Fri, 07/18/2014 - 11:00 | 4973420 SafelyGraze
Fri, 07/18/2014 - 11:02 | 4973436 SafelyGraze
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 

Fri, 07/18/2014 - 09:03 | 4972762 BaBaBouy
BaBaBouy's picture

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

Sat, 07/19/2014 - 10:27 | 4976800 maxamus
maxamus's picture

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

Fri, 07/18/2014 - 09:01 | 4972750 GolfHatesMe
GolfHatesMe's picture

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

<Sarc Off>

Fri, 07/18/2014 - 09:37 | 4972898 disabledvet
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.

Fri, 07/18/2014 - 12:25 | 4973883 TheRedScourge
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.

Fri, 07/18/2014 - 08:26 | 4972636 One And Only
One And Only's picture

Goldman Sigma X and Citadel are the ones missing.

Fri, 07/18/2014 - 08:36 | 4972680 Dr. Engali
Dr. Engali's picture

You expected anything different?

Fri, 07/18/2014 - 08:36 | 4972681 Cognitive Dissonance
Cognitive Dissonance's picture

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

Sat, 07/19/2014 - 11:39 | 4976954 mkkby
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

Fri, 07/18/2014 - 08:38 | 4972687 Stoploss
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.

Fri, 07/18/2014 - 09:05 | 4972764 power steering
power steering's picture

What happened to Bob?

Fri, 07/18/2014 - 10:43 | 4973298 dracos_ghost
dracos_ghost's picture

Why no Tradeworx either.

Fri, 07/18/2014 - 08:21 | 4972639 Ghordius
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

Fri, 07/18/2014 - 08:24 | 4972646 doomandbloom
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

Fri, 07/18/2014 - 08:30 | 4972661 Ghordius
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

Fri, 07/18/2014 - 08:35 | 4972679 headhunt
headhunt's picture

So they just steal for a short amount of time?

Fri, 07/18/2014 - 10:01 | 4972998 Zerozen
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.

Fri, 07/18/2014 - 08:25 | 4972640 buzzsaw99
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.

Fri, 07/18/2014 - 08:31 | 4972658 Ghordius
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

Fri, 07/18/2014 - 08:33 | 4972670 buzzsaw99
buzzsaw99's picture

gs would be the first voted off the island

Fri, 07/18/2014 - 08:33 | 4972673 headhunt
headhunt's picture

How about we add politicians

Fri, 07/18/2014 - 08:42 | 4972700 RaceToTheBottom
RaceToTheBottom's picture

We would need more than one spot to fill.

 

 

Fri, 07/18/2014 - 08:47 | 4972714 Ghordius
Ghordius's picture

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

Fri, 07/18/2014 - 08:50 | 4972723 headhunt
headhunt's picture

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

Fri, 07/18/2014 - 10:04 | 4973013 Boxed Merlot
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.

Fri, 07/18/2014 - 11:09 | 4973479 mraptor
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.

Fri, 07/18/2014 - 08:27 | 4972648 pelican
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

Fri, 07/18/2014 - 08:26 | 4972650 Ban KKiller
Ban KKiller's picture

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

Fri, 07/18/2014 - 08:29 | 4972659 bubblemania
bubblemania's picture

Bullish!

Fri, 07/18/2014 - 08:29 | 4972660 Atlantis Consigliore
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...

 

Fri, 07/18/2014 - 08:32 | 4972663 Otrader
Otrader's picture

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

Fri, 07/18/2014 - 08:31 | 4972664 headhunt
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.

Fri, 07/18/2014 - 08:42 | 4972702 firstdivision
firstdivision's picture

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

Fri, 07/18/2014 - 08:37 | 4972683 ThisIsBob
ThisIsBob's picture

Looks like Wadell & Reed dodged another one.

Fri, 07/18/2014 - 08:37 | 4972688 smithmorra
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.

Fri, 07/18/2014 - 08:38 | 4972693 buzzsaw99
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.

Fri, 07/18/2014 - 08:52 | 4972728 Grande Tetons
Grande Tetons's picture

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

Fri, 07/18/2014 - 09:03 | 4972758 medium giraffe
medium giraffe's picture

"The one P's and two P's that people forget about..."

http://www.youtube.com/watch?v=LA3zhzT1wDo

Tue, 07/29/2014 - 14:30 | 5018812 Sorry_about_Dresden
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?

Fri, 07/18/2014 - 08:40 | 4972698 MFL8240
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. 

Fri, 07/18/2014 - 08:42 | 4972703 gdiamond22
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.

Fri, 07/18/2014 - 08:58 | 4972738 mvsjcl
mvsjcl's picture

Both of their ears, I hope.

Fri, 07/18/2014 - 08:46 | 4972713 Keltner Channel Surf
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.

Fri, 07/18/2014 - 08:59 | 4972740 stutes33
stutes33's picture

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

Fri, 07/18/2014 - 08:59 | 4972742 yogibear
yogibear's picture

Just 10 firms? It's just before an election that's why.

Where was the SEC before? Busy with porn?

No difference with the useless check collecting Bart Chilton of the CFTC leaving.

These agencies are a joke!

Fri, 07/18/2014 - 09:01 | 4972744 Max Cynical
Max Cynical's picture

I'm curious what becomes of the financial services industry after the next market crash...when the individual investor finally figures out the stock market is nothing more than a rigged casino and that their "financial planner" is nothing more than the dealer (the house always wins).

Fri, 07/18/2014 - 12:35 | 4973937 venturen
venturen's picture

hopfully a caste system evolves and they are made to clean toilets...FOREVER! 

Fri, 07/18/2014 - 09:00 | 4972746 MrBoompi
MrBoompi's picture

The evidence has already been out there and available for years. A day late, a penny short, and maybe, at best, a slap on the wrist. Today's worthless SEC.

Fri, 07/18/2014 - 09:02 | 4972749 Brokenarrow
Brokenarrow's picture

i wonder? at what point will they have the secret service sitting outside griffin's house? The SS will be opening doors and cleaning windows for mrs beanyarita and wiping Kenny's kids ass at taxpayer expense.

He went from pretending to be smart to being a world class whore and liar.

Fri, 07/18/2014 - 09:17 | 4972808 yogibear
yogibear's picture

Hey boys and girls at the SEC you have become a joke at Wall Street parties!! You have 0 credibility. Same with the CFTC. The big boys are laughing at these agencies.

Fri, 07/18/2014 - 12:37 | 4972861 paint it red ca...
paint it red call it hell's picture

The  the best, brightest and most incompetent of these agency employees will be working for the big boys in just a few years.

Fri, 07/18/2014 - 09:34 | 4972884 Downtoolong
Downtoolong's picture

other issues relating to high-frequency trading that might be violations of the law

Like self-dealing with each other to manipulate prices, perhaps?

Seriously, how easy would that be to build into these algos? Considering a large percentage of all trades in the market are between these HFT players, I certainly wouldn’t ignore the possibility.

 

Fri, 07/18/2014 - 09:40 | 4972907 orangegeek
orangegeek's picture

just another SEC circus act

 

SEC methodology - look interested, talk a lot, do nothing (lather, rinse, repeat)

Fri, 07/18/2014 - 10:21 | 4973127 WhyDoesItHurtWh...
WhyDoesItHurtWhen iPee's picture

 

SEC methodology - arrive many years late, look interested, talk a lot, do nothing (lather, rinse, repeat)

Sorry, you missed one detail.

 

Fri, 07/18/2014 - 09:56 | 4972976 chinaboy
chinaboy's picture

Or the government should order these buys to provide water (or true liquid) to the people of California.

Fri, 07/18/2014 - 10:44 | 4973297 Itchy and Scratchy
Itchy and Scratchy's picture

Legalized front running. Nothing more nothing less. Nothing to see here. Loser move along!

Fri, 07/18/2014 - 13:32 | 4974287 Ariadne
Ariadne's picture

Why the leg irons? Should it be a beggar's cup?

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