Even The Regulators Are Rigged: Prominent HFT Critic Stiglitz Blocked From SEC Panel

Tyler Durden's picture

That markets are rigged, at both the macro level, through central banks, and micro, through HFTs, dark pools and purposeful market fragmentation, should be painfully obvious to everyone by now. But when even the regulators engage in "jury rigging", or in this case blocking prominent HFT-critic Joseph Stiglitz, a Nobel prize winning economist (a prize which doesn't count for much on these pages but should - at least on paper - impress such statist cronies as the SEC), has been blocked from a government panel that will advise regulators on issues facing U.S. equity markets, it becomes clear as day that the rigging is not just in the markets: worse, it is openly involves the market's "regulator" and "enforcer."

“Financial markets are important and I have been worried about the way they have been working and whether they are serving the American economy,” Stiglitz said. “I was willing to serve. The next thing I knew, I was told you didn’t get it.”

According to Bloomberg, "Stiglitz’s rejection shows the partisan infighting that has bogged down Securities and Exchange Commission Chair Mary Jo White’s plan to set up a panel of experts to advise the agency on topics ranging from rapid-fire stock trading to dark pools."

Actually what it shows is that the SEC is a puppet of the wealthy and powerful HFT lobby, which has made a mockery of markets ever since the passage of Reg NMS, and which has been given free reign to manipulate anything and everything however it wishes: manipulation which, as described here first 6 years ago and most recently, by Michael Lewis, is now obvious to all investors and explains why the general public has decided to fully boycott the capital markets knowing quite well that it, and nobody else, would be the sucker when the Fed pulls the rug from underneath both carbon-based traders and vacuum tubes.

Stiglitz himself understands this, and as he said in a phone interview,  "I think they may not have felt comfortable with somebody who was not in one way or another owned by the industry."

Not surprisingly, even the rigging of US capital markets is split according to political lines:

Republican Commissioner Daniel Gallagher opposed Stiglitz’s nomination in recent weeks as White sought to complete the list of participants, according to two people who asked to not be identified because the deliberations were private. Democratic Commissioner Luis Aguilar had pushed for Stiglitz, who has said  high-frequency trading isn’t good for financial markets and should be curbed, possibly through a tax.


White said Jan. 3 that she will announce the members of the advisory market-structure committee in the coming days -- six months after she first proposed the idea together with a blueprint for renewed market oversight. Each of the five commissioners -- two Democrats, two Republicans and White, an independent -- was allowed to nominate one person to the panel. The commission then had to come to agreement on the final list, which is expected to have more than 15 members.


Gallagher declined to comment on the panel, as did Gina Talamona, a spokeswoman for White.

But that's not as bizarre as it gets: apparently none other than former Fed vice chairman, Roger Ferguson also wanted to be on a panel advising on, of all things, efficient equity markets.

Stiglitz, 71, wasn’t the only nominee that sparked wrangling. Earlier in the process, SEC Commissioner Michael Piwowar, a Republican, opposed the involvement of TIAA-CREF Chief Executive Officer Roger Ferguson, according to two other people familiar with the matter. Ferguson, whose firm manages hundreds of billions of dollars in retirement savings, is a former Federal Reserve vice chairman. He is married to former SEC Commissioner Annette Nazareth, who now advises some of Wall Street’s biggest banks on regulatory issues. 


Piwowar wouldn’t discuss specific nominees but said that he opposed “a former Federal Reserve governor” who was included in an early list of candidates prepared by the SEC’s staff. Mike Tetuan, a spokesman for TIAA-CREF, said Ferguson declined to comment.


“My concern was about the institution of the Federal Reserve and not any particular individual,” said Piwowar, who has complained about the Fed’s role regulating companies overseen by the SEC. “I didn’t want to give them more undue influence in areas in which they have no particular knowledge or expertise.”

That said the panel won't be staffed entirely by current and former employees of the biggest HFT firms: present will be Brad Katsuyama who singlehandedly cost BATS CEO William O'Brien his job after the latter lied on CNBC about his business model.

The panel is expected to include representatives of Wall Street brokerage firms and academic researchers. IEX Corp. Chief Executive Officer Brad Katsuyama and former Senator Ted Kaufman of Delaware are expected to be named to the panel, two people with knowledge of the matter said.

Back in April, in a speech at the 2014 Financial Markets Conference hosted by the Atlanta Fed, Stiglitz said what Zero Hedge first posited 5 years earlier, namely that high-frequency trading makes markets less efficient while driving other investors to cloak their orders by placing them away from exchanges using dark pools, leading to less transparency, leading to premeditated market manipulation. Stiglitz' speech "Tapping the Brakes: Are Less Active Markets Safer and Better for the Economy?" can be found here.

Normally, we would be disgusted by this latest example of corruption, cronyism, and the realization that rigged markets can never become unrigged as long as the fallible and easily bribable human elements is present. At this point, however, there is little sense: with the macro manipulators, the world's central banks themselves, increasingly boxed in and with zero options left, what happens next not even the algos can prevent.

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johansen's picture

Is anyone surprised?

Jeff the Terrible's picture
Jeff the Terrible (not verified) JohnnyHenriksen Jan 5, 2015 5:09 PM

Try our new iRig v1.1. Guaranteed to be 'better' than the iRig v1.



NoDebt's picture

Katsuyama is on (IEX).  He's gonna have to do some heavy lifting, though, all alone.

And besides, it's just an ADVISORY panel- they're not making regs.  They're just there to make it look like it's legit all the stuff the regulators already know they're going to do (or not do).

Without HFT every exchange in the country goes tits-up for lack of billable fees (volume).  You think they're gonna let that happen?

Winston Churchill's picture

Yeah, but normally they put on a show Royal comission,or Presidential comission with token rebels.

Let it marinate until the noise blows over, and then ignore it.

Showtime is over it seems.

Manthong's picture

At least we had a straight shooter back in the day when Bart Chilton was on the job.

knukles's picture

Well Heavens to Betsy!  And here all along I thought it was just the EPA banning qualified scientists form testifying about or ruling on environmental matters because they have all the folks who've already decided "da troof" in the EPA as is, already, again.

Yes Martha, we can make gold from lead.  No, it's not quite as good as it seems.  It's highly radioactive, darling.
What an idea!
Sell it in Fukushima!
A New American Export Good!

Lumberjack's picture

Fucking right. Shit is sliding downhill at warp speed. I would like to see both Stiglitz and William Black turn up the heat!

ajax's picture



Go the LSE site and search out Stiglitz's lectures. Stiglitz is the only man making any sense since... donkey's years.

OldPhart's picture

It's right there in plain sight.

Reg NMS... Now Manipulate Stocks

insanelysane's picture

They need to be able to say, we had a panel of experts and none of them say this coming.  It was unavoidable.

polocko's picture

If you were anywhere near a terminal in November 2007 when REG NMS was in it's infancy, you noticed a difference right away. It was almost impossible to be on the inside bid without being pennied or 10th of a penny in front of you.  You would watch stocks start trading at prices from 0 to 100 dollars in flash moves all over the place. There is no real intraday price of any stock anymore. They can move any stock to any price at any given time.

The big investment houses were having orders run over by daytraders and couldn't compete. They were losing too much money from the skim they invented. They weren't going to lose control of a major cash cow. So they came up with .....Reg NMS

Reg NMS was a goal of taking back the markets from day traders. By using ECN's and being able to back away from trades. Markets makers used to have to show and ID and honor that bid or offer. Now they show 1000 shares using ECN's on a bid and is will dissapear and only fill a few 100 shares at that price and fill the rest pennies below in increments. Almost like they could see the orders coming. This is still happening today.  The 50 cent to a few points reversal on long or short positions are getting squeezed in both directions intraday.  Stock jump around without any logic or reason.

nce REG NMS was in place all they needed was the speed.. HFT..since it's inception it was designed to take profits and wipe out daytraders.

Come 2010 the software writers and algo geeks were making such big bonus they went off and opened their own firms, now the joke was on the investment house and big banks. Same guys who wrote and designed the house algo's were now gaming the same systems they designed for the banks.


Winston Churchill's picture

TPTB are not amused.

If you a quant, life insurance is a must right now.

Its only business, nothing personal, as they say.

falak pema's picture

Just goes to show that the liberals (from civil society)  are closer to the truth in Congress than the ZH mentors...Speaks volumes.

Cognitive Dissonance's picture

Vertical integration rigging bitches.

Skateboarder's picture

Try our new iRig N+1. Guaranteed to be 'better' than the iRig N.

Egan Jones was big enough of a datapoint for me.

disabledvet's picture

So fake liquidity still is better than real liquidity?

Not today apparently.

Why not say that the reason markets got hammered today is because...well, they are free markets! They don't like non existent money (debt) and thus will "panic" not towards a bailout but towards the ability to pay period (a real recovery.)

This whole "levered long zero" (hft has zero money behind all that trading) is still..ZERO.

That says to me creating a "debt ponzi" is asking for trouble in the form of an outright default. Now over lay that with equities at nosebleed levels "and the Bucky following suit"...and, well...where is the taxpayer again?

There's your "muppet" folks.

If this is the leading edge of a forty percent correction...

ajax's picture



And the USD/Swissy trade is a lot of fun.

Ms. Erable's picture

Apparently that SEC ship don't sail without proper rigging.

mtndds's picture

once again, BULLISH!!!

The Duke of New York A No.1's picture

The techncial name is called "Regulatory Capture" ... now stick that in your T/A.

Rainman's picture

IMO , Stiglitz should be relieved he won't have to participate in this absurd kabuki theater .

Bell's 2 hearted's picture

probably no skeletons in closet to hold over him ... say what is jeffrey epstein up to these days ?? ...

knukles's picture

Sheet!  Big Banana Bill Slick Wet Willy Clinton is right in there with those two.
Hello, Hillary?
Why didn't you get that divorce?  This shit woulda been vindication and an example of your good judgement.

logicalman's picture

Hill & Billary aren't married, they are the two co-conspirators at the head of a crime syndicate.

What each has on the other is what holds 'em together.

Hubbs's picture

Assuming he has a spotless record, the only thing this stink bomb of an investigation would do is discredit him, or

guilt by association.

Philo Beddoe's picture

manipulation which, as described..via ZH.. here first 6 years ago..

Show of hands...who thought they could pull this off as long as they have? Show of hands...how many more bunnies are up their asses? 

cynicalskeptic's picture

I couldn't believe the housing insanity lasted as long as it did... at this point, NOTHING is beyond belief.  

We're in BIZZARROWORLD where up is down and right is wrong - where 'reality' is whatever TPTB decide.....

knukles's picture

Listen guys.... when I was with my neo-con and Progressive golf buds this weekend and the Progressive boasted about the size of Opjama's balls slapping additional sanctions on the Norks because of The Interview and the neo-con stating point blank that he and his wifey had watched The Interview as a strike for American Freedom to prove that no little Pansyassed Commie Bastard Nork was gonna censor his movie watching, I about threw up and decided that this shit's gonna go on one hell of a lot longer than anybody thinks is possible.  Especially the consensus here on the Hedge.  Don't mean 'nuffin's fucked up.... just that the Band-Aids over the cancerous lesions will make do for quite a while longer.

logicalman's picture

Why do you hang out with such people?

Why do you play such a dumb-ass game?

I'm surprised at you!


Bell's 2 hearted's picture

in 2010 i thought they could keep it going another 2 years ... max


amazed at the machinations in the interim 


BUT ... i'm still convined that the longer the con continues ... the bigger the inevitable splash

Skateboarder's picture

If they kicked the can till 2014, 2024 does not seem like a longshot by far. This bitch aint going down until every last one of us has been juiced by one of those War of the Worlds tripod alien things, physically or figuratively.

Every year since '10, I've been saying to my folks and friends, "next year man..."

LOL at all of us. "Fly, you fools."

knukles's picture

Yorp .......  no question.
Oh wait, I do have one.
Are those tripod things painful?  Do they use KY?  How far up is their elbow?

semperfi's picture

<---  wall street crime center is biggest

<---  D.C. crime center is biggest

noben's picture
noben (not verified) semperfi Jan 5, 2015 5:34 PM

DC is supposed to keep NY on the Straight & Narrow.  Clearly they are not.

Just as clearly.. they are on NY's payroll.  Anything else we need to know?  Besides when the MF Guillotines start rolling? (rhetor. Q)

logicalman's picture

DC and Wall Street are in it together.

HowdyDoody's picture

Wall Street has bought DC. Look for the organ grinder, not the monkey.

Dickweed Wang's picture

Actually they're one and the same.  That is the definition of fascism (marrige of corporate and government power).

Sudden Debt's picture

He Tyler! Remember the BP oilspill where you had a article about the effect on UK pension funds as the dividend came into danger because of the fines?

BP just cut it’s divivdend because of the oil slump!

I guess the people now are going to feel that gift that keeps on giving!

Philo Beddoe's picture

Cutting dividends will be the story of 2015. That and....Gold is bad because it has no yield. 

disabledvet's picture

One look at GE says "sell" then.


This is still a fully functional free market folks...with both greed AND fear.


Now that "real liquidity" is collapsing (oil, natural gas, etc) why would anyone want to hold "fake" (hft, non existent liquidity) monies?

buzzsaw99's picture

mary jo, what a bowser

Bell&#039;s 2 hearted's picture

"in this case blocking prominent HFT-critic Joseph Stiglitz, a Nobel prize winning economist"


stiglitz needs to count his blessings ... and not complain


the alternative was for him to be placed on the board ... and then introduced to a tall building ... with open windows 

luna_man's picture



C'mon, you guys!...You know this sucker is ready to blow any day now!...CRIMINALS, are seriously, running out of gimmicks!!


do you smell it?  smells like the circus tent!  got a favorite clown?

Fuku Ben's picture

Heath Ledger by a mile

mygameon's picture


The clown in Stephen King's IT.

The eater of souls - hopefully banker souls....

richiebaby's picture

What do you expect with Moe Howard running the SEC?