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The SEC's Head HFT Investigator, Who Blamed The Flash Crash On Waddell & Reed, Is Leaving
In the aftermath of the May 6, 2010 flash crash, which by now everyone realizes is due to HFT whose "liquidity providing" prowess has led to comparable flash crashes in both the Treasury and the FX market since, it took the SEC nearly half a year to release its final report which did not find any HFT culpability for the biggest intraday market crash in history, and instead blamed it all on a small Kansas-based money manager, Waddell and Reed.
At 2:32 p.m., against this backdrop of unusually high volatility and thinning liquidity, a large fundamental trader (a mutual fund complex) [ZH: Waddell and Reed] initiated a sell program to sell a total of 75,000 E-Mini contracts (valued at approximately $4.1 billion) as a hedge to an existing equity position."
The rest as they say is history, and as of today, so it the person who wrote the HFT-friendly report, the SEC's Associate Director of the Office of Analytics and Research in the Division of Trading and Markets, Gregg Berman who according to a press release is leaving the agency later this month.
From the release:
During his tenure, Mr. Berman worked on an analysis of the causes of the May 6, 2011 “flash crash,” on rulemaking to create a Consolidated Audit Trail, and on new rules for derivatives trading required by the Dodd-Frank Act. He also oversaw the creation of the Office of Analytics and Research and the implementation of the Market Information Data Analytics System (MIDAS), which daily collects about one billion records, time-stamped to the microsecond, from proprietary stock market data feeds. The SEC shares the data, along with its own research and analysis, on its market structure web site, enabling market participants, academics, and investors to explore key market metrics and trends.
Far more importantly, during his tenure the rise of predatory, parasitic HFTs algos continued without one word from the SEC and has led to a "market" in which virtually every move is now a stop hunt across one, more, or all asset classes.
Berman's capture by the HFT lobby is best seen in what many claim is his crowning achievement, the Market Information Data Analytics System, or MIDAS, which collects time-stamped records down to the microsecond from the same proprietary stock feeds used by high-speed trading firms.
There was, however, one problem: as we reported in 2013, MIDAS was developed automated trading firm Tradeworx... "Traditionally when a problem in the market has needed to be investigated, the SEC has gone to the exchanges, the Financial Industry Regulatory Authority, and the firm that introduced the error, to diagnose the cause. But MIDAS allows the regulator to do its own assessment as well."
This is how we summarized it:
... the SEC which admits it was clueless in analyzing the modern, fragmented market (yet which found definitively that the culprit for the May 2010 flash crash was Waddell and Reed, and nobody else, using what technology at the time, nobody knows), uses a platform developed by High Frequency Trading firm Tradeworx... to reach a conclusion that High Frequency Trading firms are innocent of every flash crash resulting from an HFT algo gone haywire...
Because nothing screams prudent supervisor and enforcer of HFT like using an HFT-designed platform to catch other HFTs in the act of manipulating and rigging stocks.
Gregg Berman also startted in the 2012 documentary "Money & Speed: Inside the Black Box" which positioned the now former SEC staffer against Nanex's Eric Hunsader.
This is what Hunsader, whose feud with Berman is well known to industry insiders, said at the time:
Gregg Berman claims in the movie that it took the SEC 5 months to assemble the data for that one day. Five months after May 6th would be October 6th, which is 6 days after they released their final report. When did they have time then to analyse the data?
Then, Berman, in an attempt to dismiss concerns that the report only shows data aggregated on a full minute basis, drops this bombshell:
"Interesting things tend to chunk up on the one second and one minute interval."
Unbelievable: the ability to make up stories like that.
Here's what really happened. The SEC didn't have the capability to look at data in a finer resolution, but rather than admit this deficiency, they made up a story and hoped the viewer won't notice. Analyzing modern markets using 1 minute snap shot data is equivalent to inspecting one page out of a stack of paper 20 feet tall. Imagine if physicists looking for the Higgs Boson were using a student microscope!
Is it any wonder that the SEC commissioners never signed off on the SEC staff's final report on the flash crash? They knew it was riddled with errors.
In retrospect, we almost feel bad for Gregg: after all in the new paranormal, in which the market is manipulated, fragmented and broken from the top (central banks) all the way to the very bottom (HFTs) with the sole purpose of pushing it ever higher in a futile attempt to restore confidence and retail investor participation in what is so clearly a rigged casino it is not easy pretending everything is fine when everything is on the verge of total collapse at any given (nano)second, and where the only recourse to coordinated selling is for the markets to break. Literally.
To be sure, however, Gregg will find a hospitable and well-paid position after spending 6 years defending the well-paying HFTs lobby. In all likelihood after taking a 2-4 month break from the industry, he will pull a Bart Chilton, and will join either HFT powerhouse Virtu, perennial accumulator of former government staffers, Goldman Sachs, or - most likely - the NY Fed's shadow trading desk and the world's most leveraged hedge fund, Citadel itself. Because for every quo there is a (s)quid.
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The SEC and CFTC are part of this whole fraud.
"To be sure, however, Gregg will find a hospitable and well-paid position after spending 6 years defending the well-paying HFTs lobby. In all likelihood after taking a 2-4 month break from the industry, he will pull a Bart Chilton, and will join either HFT powerhouse Virtu, perennial accumulator of former government staffers, Goldman Sachs, or - most likely - the NY Fed's shadow trading desk and the world's most leveraged hedge fund, Citadel itself. Because for every quo there is a (s)quid."
So I guess that sets the over/under at 3 months? Let the betting begin!
<-- Over three month "break"
<-- Under three month "break"
I'd say it depends upon how much vacation time he had on the books at the SEC.
Rumor has it he's going to be Head of Compliance at Waddell & Reed
BAAAHAHAHHAHAH
man... i really wish i could see that trade data. that dude from nanex must really love and hate his job. love becasue he can see into the matrix. hate- because he cant really disclose the truth for fear of civil/nailgun penalties
That is a misquote, he's going to give head to and comply with Waddell & Reed.
Maybe he will now produce porn rather than spend all day watching it
Farewell asshole
Not just a part, but allowing and leading (in between porn fapping) this giant turd of manipulation.....
But by all means, keep forcing the little guy into ridiculous "enforcement" settlements that literally drive them into bankruptcy.
I'm making over $7k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life. This is what I do... www.globe-report.com
I wish people would SEE what is happening:
https://www.youtube.com/watch?v=YThN6iqr4SM
Look for him at an investment bank near you!
"as the revolving door turns"...
"In all likelihood after taking a 2-4 month break from the industry, he will pull a Bart Chilton,"
not sure he'll even bother to wait that long "spending time with his family" before cashing in.
Dick Fisher (dallas FRB) became a board member of Pepsi the day after leaving bank.
i read that SEC release ... no mention of how many hours Berman spent watching pr0n ... must have been an oversight
Tylers, how about a follow-up in a few months on Gregg Berman's new job & salary? If that story's not on ZH, it won't be anywhere.
"Citadel: the core fortified area of a town or city. It may be a fortress, castle, or fortified center."
Makes sense, bet he goes there.
Amazing how the Tribe always get a fellow Tribesman to investigate their shenanigans. And the result always seems to be 'nothing to see here, move along now'.
I hear there's an opening at Bear Stearns
Greg Berman worked for RiskMetrics Group before he went to the SEC. RiskMetics was spun off from J.P Morgan in 1998. That's all one needs to know.
"In 1998, as client demand for the group's risk management expertise exceeded the firm's internal risk management resources, the Corporate Risk Management Department was spun off from J.P. Morgan as RiskMetrics Group with 23 founding employees."
http://en.wikipedia.org/wiki/RiskMetrics
High frequency trading is another form of rents. Regular traders are not getting true price discovery, and hence are not buying at the true lower price.
In effect, HFT is front running the market, in order to steer prices to their benefit. Some of the front runners never have losing days. How is that statistically possible?
Rentier activity should be taxed. A Tobin tax is a small tax on every trade, so those doing many trades will have a bill that adds up to a large amount due to their frequent number of trades.
Everywhere we turn, it is finance stealing and making gains at the expense of labor and real producers.
Government in turn has their regulatory bodies co-opted through revolving doors paid for via lobbyist activity.
The money power trusts fully inserted themselves as a parasite in 1912. America's body is parastized and plays host to money powers.
Of all of the ammendments, the 17'th is easily the most pernicious. Senators should be sent by their State legislature and not be directly elected. Constitution is clear that Senators should not be populist. Senators are to be sent by their State Legislature's and hence should be above Washington's political fray. Original intent was for Senate to consist of Statesmen who had long range vision, and who did not have to gyrate to populist movements.
Senators are now populists who do bidding of those who buy them with lobbyist money; Senators do not do political bidding of their States. The 17'th turned Senate into populists like the House, and gave money power entry to then pervert the law, to then make rentier gains.
1912 election and subsequent actions were direct result of money power, mostly Geman Jews, who intended on inserting themselves into America's body. Insertion of money power parasite includes assuming legal power of making debt instruments. These debt instruments are then hung on the people and their government.
Lobbyist money typically comes from finance, their related corporations, and top .01%. The financial machine takes usury and rental gains, and ports them through the 17'th, to then codify their gains permanently. This mechanisms is oligarchy and/or a type of Feudalism. These schemes are fully in alignment with Kabbala and other Jewish money power manipulations going back thousands of years. Of course, now the parasite has spread, and is no longer fully Jewish.
Federalism can work, but the money power must come under control. The founding fathers did not fully understand private banking credit methods, as Bank of England was private only in 1694.
Getting rid of private banking credits, and their ability to create debts, will go a long way toward defunding the parasite.
www.soverereignmoney.eu
Is he going back to his home planet?