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28 Ways 'They' Rig The Market

Tyler Durden's picture




 

Via Nanex,

Rigged - Financial Word of the Year

What do people mean when they say the Stock Market is rigged? Below is a definition along with many examples that would lead reasonable people to conclude that the market is rigged.

Definition

Rig

 

rigged, past tense of rig

 

1. Used to describe situations where unfair advantages are given to one side of a conflict.

2. Describes the side of a conflict that holds an unfair advantage.

Use in a Sentence

Despite costing taxpayers billions of dollars during the financial crisis, Wall Street decided to change nothing about the rigged market. In fact, Wall Street is known to have rigged the equity market, FX market, Libor, and the Commodities market since the financial crisis.

Examples

  1. To falsely represent that a trading algorithm is capable of making decisions based on real time information.
  2. To falsely represent that profiling of certain participants leads to the protection of investor orders on a particular venue.
  3. To falsely represent that a broker’s router is unbiased in its treatment of all trading venues.
  4. To falsely represent the extent to which an investor interacts with a type of market participant.
  5. To falsely represent that certain participants have been removed from a venue.
  6. To falsely represent the functionality of a venue to investors.
  7. To knowingly allow select participants to enter orders on a venue in a manner that is in direct violation of US regulation.
  8. To willfully ignore the possibility of a broker achieving a better execution outcome for an investor.
  9. To willfully obstruct the quality of executions on a venue in a manner intended to improve the relative appearance of a brokers own venue.
  10. To willfully send an order(s) to a venue(s) in a manner that would reasonably inhibit the probability of executing an order on a venue.
  11. To willfully route investor orders to an offshore affiliate for the purposes of allowing the offshore affiliate to generate a profit via mark-up or mark-down.
  12. To willfully route investor orders to an affiliate entity for the purposes of providing that affiliate entity with an opportunity to profit ahead of the execution of that investor order.
  13. To willfully provide knowledge of unexecuted trading interest on a given venue to an independent routing facility of an affiliate or partner in a manner that gives that affiliate or partner an advantage over other participants.
  14. To willfully notify a select group of participants of the unexecuted interest of an investor order in a manner that could be reasonably expected to negatively affect the economic outcome for that investor.
  15. To willfully send investor orders to an intermediary, ahead of any interaction with other natural investors, and in a manner that could be reasonably expected to result in an inferior economic outcome relative to interaction with other natural investors.
  16. To willfully send orders to a venue(s) for the purposes of achieving an economic benefit to a broker in a manner that could reasonably be expected to be detrimental to the economic outcome of an investor.
  17. To willfully manipulate the opening or closing price of security.
  18. To willfully allow the manipulation of the opening or closing price of one or more securities for a period of time in a manner where any reasonable person familiar with the arts would have identified that pattern of manipulation.
  19. To willfully allow a 3rd party participant to utilize a function designed for use by a specific type of market participant on a venue; but is otherwise resold by that market participant to a 3rd party in a manner that provides that 3rd party an improved queue position on an exchange.
  20. To willfully disseminate market data from a venue to a select group of participants at transmission speeds that could be reasonably expected to allow those participants to effect executions on the venue at outdated prices.
  21. To willfully provide trading access to domestic or overseas participants without the provision of risk safeguards required to be in accordance with US regulation.
  22. To willfully obfuscate the manner in which order types work in a regulatory filing while concurrently providing select participants a more comprehensive understanding of the functionality.
  23. To willfully misrepresent the concentration of a select group of participants on a publicly traded exchange in an attempt to mislead investors from the potential revenue at risk as a result of any regulatory change affecting those participants.
  24. To willfully provide a select group of participants with characteristics of investor order flow that would increase the probability of those participants interacting with a type of investor order in a manner where those participants would be expected to profit from that information.
  25. To obstruct an investigation or expected investigation through the destruction of data that is otherwise required to be archived in accordance with the oversight and regulation of a trading venue.
  26. To unreasonably prohibit certain participants from understanding or utilizing functionality on a venue that is otherwise available to select participants.
  27. To purposefully expunge source code in a manner that would obstruct an investigation or an expected investigation into manipulative trading practices.
  28. To willfully allow orders to be exclusively routed to intermediaries or to venues that cater to intermediaries while acting as a fiduciary.
 

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Mon, 04/06/2015 - 17:45 | 5964778 Pooper Popper
Pooper Popper's picture

I Hate fucking cheaters....

 

Assholes!

Mon, 04/06/2015 - 17:52 | 5964804 nuubee
nuubee's picture

Boom! Headshot!

Mon, 04/06/2015 - 18:02 | 5964828 knukles
knukles's picture

Methinks one of the "loopholes" with respect to enforcement (Aside from Campaign Contributions and the Revolving Door, a.k.a. Completely Corrupt) is that the regulations as I remember them, are written such that all these things are illegal for a person to do, but not a machine.
Now, that begs a one sentence global fix to the regs stating unequivocally that the words persons and agents, etc., applies equally to machines, algos, etc., , but that ain't gonna happen any more than a full audit of every single last FED action as per swaps, loans, purchases, sales, etc. 
Duh....

Mon, 04/06/2015 - 18:15 | 5964866 Divine Wind
Divine Wind's picture

 

 

Hunsader needs to be careful.

Snitches Get Stitches (or Nailguns).

Tue, 04/07/2015 - 00:52 | 5965772 TheReplacement
TheReplacement's picture

Technically speaking, no machine can perform actions not designed by a human and so, by extension, the machine's actions are really the human's actions.

That guillotine ain't gonna drop itself.

Mon, 04/06/2015 - 18:52 | 5964999 glenlloyd
glenlloyd's picture

So what's the difference between this sort of cheating and say Corzine or Madoff?

Mon, 04/06/2015 - 18:13 | 5964859 raywolf
raywolf's picture

that's about the size of it... but back in the day... the kings were not that powerful, were clear targets for revolution and were not instantly replaceable...

now we have this rotating magic trick of leaders, that all carry on the kings work, screw the people and then dance out of reach, while apparently the people decide on the next leader, who does the exact same thing...

Tue, 04/07/2015 - 01:26 | 5965815 blowing winter
blowing winter's picture

Start working at home with Google ! Its by-far the best mixed bag of goods I've had. Last Thursday I got a trademark new Bmw since getting a check for $6474 this - 4 weeks past. I began this 8-months ago and immediately was coming with house at least $77 per hour. I work through this connection, go.to tech marker for work detail.... www.globe-report.com

Mon, 04/06/2015 - 17:38 | 5964761 thecrud
thecrud's picture

Were boned.

Mon, 04/06/2015 - 18:48 | 5964983 eatthebanksters
eatthebanksters's picture

up the ass...

Mon, 04/06/2015 - 17:39 | 5964764 Steroid
Steroid's picture

29) To call it a market.

Mon, 04/06/2015 - 17:39 | 5964766 order66
order66's picture

Sounds legit.

Mon, 04/06/2015 - 17:48 | 5964783 davidalan1
davidalan1's picture

I swear to gawd, when I finally get my hands on "THEY"--

Mon, 04/06/2015 - 18:03 | 5964835 knukles
knukles's picture

The "Ubiquitious Them".  They're everywhere!

Mon, 04/06/2015 - 18:23 | 5964891 Urban Redneck
Urban Redneck's picture

They are everywhere.

Jamie D and Lloyd B don't spend their weekends writing code for customer order routing, their nights rolling changes onto production servers, and their weekdays reading Reg NMS and the technical circulars from the Exchanges in order to dream this stuff up, much less write the legal and compliance reviews, and coordinate internally across departments so that their own traders don't get skimmed like their customers.

--

There are THOUSANDS of "THEM" across the large financial institutions.

--

I was always bothered by those "HFT for Dummies" videos Tyler used to post with ostensibly smart and experienced math nerds/bankers saying "Who knew? Nobody knew WTF was going on..."  Millionaire math PhDs playing the part of 12th man on the deal team.

Mon, 04/06/2015 - 17:49 | 5964786 Burticus
Burticus's picture

Central bankers scrapped the "cheaters never win" saying.

Mon, 04/06/2015 - 17:50 | 5964798 Chupacabra-322
Chupacabra-322's picture

How to rig a market?

PRINT.

Mon, 04/06/2015 - 17:56 | 5964815 Q-Q-Q
Q-Q-Q's picture

How to rig a market - involve the politicians.

Mon, 04/06/2015 - 17:57 | 5964820 Berspankme
Berspankme's picture

It means they win, you lose. All you need to know.

 

Fuck you Bernanke

Mon, 04/06/2015 - 20:06 | 5965218 The Duke of Skiatook
The Duke of Skiatook's picture

In the mouth.

Mon, 04/06/2015 - 18:19 | 5964882 max2205
max2205's picture

Rigged is the new rich 

Mon, 04/06/2015 - 18:23 | 5964887 Chupacabra-322
Chupacabra-322's picture

"We Rigged some Folks."
-Criminal Fraud UNITED STATES, CORP. INC. CEO Obama.

Mon, 04/06/2015 - 18:27 | 5964904 kowalli
kowalli's picture

it's a casino, not a market

Mon, 04/06/2015 - 18:36 | 5964935 logicalman
logicalman's picture

It's worse than a casino.

At least, in a casino, the rules don't suddenly change when the roulette wheel stops and the ball finds its resting place.

 

Mon, 04/06/2015 - 19:03 | 5965043 sgt_doom
sgt_doom's picture

When everything is rigged, it's not even a casino.

Trivia question for the day:  How many times has a Federal Reserve Bank vault been broken into?

Mon, 04/06/2015 - 22:28 | 5965524 Tall Tom
Tall Tom's picture

Every game is rigged in any casino so that the House has the inherent advantage.

 

(There are some rare exceptions to the rule. The clever gambler will seek them out and exploit them, Full Pay Video Poker being one. But that is ADVERTISED with Large Signs over the machines and they are used as Loss Leaders. However other plays do exist..)

 

If you do not know that then you do not belong in a casino.

Mon, 04/06/2015 - 18:32 | 5964916 Atomizer
Atomizer's picture

30) Nanex Flash Crash Summary Report 

Publication Date: September 27, 2010

http://www.nanex.net/FlashCrashFinal/FlashCrashSummary_I.html

Mon, 04/06/2015 - 18:36 | 5964932 Atomizer
Atomizer's picture

31) Purchase google backlinks to harvest panic.  Wallstreet, fire in the hole

Mon, 04/06/2015 - 20:23 | 5964952 benbushiii
benbushiii's picture

Pretty soon it's going to turn into 50 ways to lose your lover / money.  Just remember,

 

"Do you hear the people sing

Lost in the valley of the night?

It is the music of the people

Who are climbing to the light."

 

Do you hear the people sing?

Singing a song of angry men?

It is the music of the people

Who will not be slaves again!

When the beating of your heart

Echoes the beating of the drums

There is life about to start

When tomorrow comes!

Mon, 04/06/2015 - 18:46 | 5964975 BoPeople
BoPeople's picture

To be fair, they need to repay their victims all of the money they have stolen through cheating ... with interest.

My guess is that to do that the banks will have to reclaim pay and bonuses from every employee in their company along with those who were complicit, going back to where it started. Those who cannot pay will need to have their assets sold to pay for it.

Mon, 04/06/2015 - 19:35 | 5965142 RaceToTheBottom
RaceToTheBottom's picture

I don't know about you but I am eagerly awaiting payment....

Tue, 04/07/2015 - 03:13 | 5965921 AE911Truth
AE911Truth's picture

Board of Governors of the World Bank and IMF have foreclosed on the Fed:
https://s3.amazonaws.com/khudes/Twitter3.24.15.pdf

So now it is just a matter of returning the stolen wealth to those who actually earned it.

Mon, 04/06/2015 - 19:02 | 5965037 sgt_doom
sgt_doom's picture

First of all, it's called internalization, been going on awhile, it is not a secret, simply rather recondite.

The top banks and hedge funds buy almost 100% (around 96%) of the public trades from the major brokerages, and match them up internally on their systems, known as dark pools.

Got it?

This combines both insider trading with financial market manipualtion, can you dig it?

And why doesn't anyone feature articles about Erin Arvedlund's most excellent book on the LIBOR rigging:

http://goldbergmcduffie.com/project/open-secret

http://www.amazon.com/Open-Secret-Conspiracy-Swindled-Investors-ebook/dp/B00DMCPLEI

(Because it names names, perhaps?)

Mon, 04/06/2015 - 19:09 | 5965054 Goat Roper
Goat Roper's picture

Why would I "invest" in the stock market?

Mon, 04/06/2015 - 20:18 | 5965239 Crocodile
Crocodile's picture

Because it is rigged. :)

Mon, 04/06/2015 - 19:23 | 5965103 Dragon HAwk
Dragon HAwk's picture

Somewhere somebody is chuckling, saying  shit they missed the other 30 ways were raping people...

Mon, 04/06/2015 - 19:48 | 5965177 The central planners
The central planners's picture

We rigged some folks!!

Mon, 04/06/2015 - 19:48 | 5965178 Downtoolong
Downtoolong's picture

We only did 27 of these 28 things. That's reasonable doubt by our standards. Ergo, we admit no wrong doing and claim innocence.

Lloyd Blankfein

Mon, 04/06/2015 - 20:00 | 5965204 Crocodile
Crocodile's picture

Freedom:  the power to act, speak or think without externally or internal imposed constraints or restraints

Slave: Someone dominated or controlled by internal and/or external influence(s), or person(s) that limit a person or group of persons freedom to make individual choices.

Everyone is truly enslaved and no one has freedom; only limited liberties and diminishing at that.  What does the word of God say about the human condition in this regard since it is the source of truth.  I find it to be true in light of Mr. Websters definition and the obvious inspection of the actual definitions.  However; humans hate to admit the truth even when they cannot deny based on their own experiences.

--------------------

Don’t you know that when you offer yourselves to someone as obedient slaves, YOU ARE SLAVES of the one you obey; whether you are slaves to sin, which leads to death (ETERNAL DEATH), or to obedience, which leads to righteousness? 

---------

But thanks be to God that, though you used to be slaves to sin, you have come to OBEY FROM YOUR HEART the pattern of teaching that has now claimed your allegiance.  You have been set free from sin and have become slaves to righteousness.

 I am using an example from everyday life because of your human limitations. Just as you used to offer yourselves as slaves to impurity and to ever-increasing wickedness, so now offer yourselves as slaves to righteousness leading to holiness.  When you were slaves to sin, you were free from the control of righteousness.

--------

Truth is the most hated and despised among ALL those who are perishing..sad and unnecessary as well.

 

Mon, 04/06/2015 - 21:34 | 5965409 SpudM
SpudM's picture

That's US!

Power concedes nothing without demand. It never did and it never will. 
The limits of tyrants are prescribed by the endurance of those whom they suppress...

– Frederick Douglass, 19th c. American orator, author, reformer.

 


Mon, 04/06/2015 - 23:11 | 5965613 Pancho de Villa
Pancho de Villa's picture

Hijo de puta! Me han robado!

Thu, 04/09/2015 - 02:38 | 5974342 onmail
onmail's picture

Zero sum game

Howsoever u play it

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