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The Dark (Pool) Truth About What Really Goes On In The Stock Market

Tyler Durden's picture


Courtesy of the author, we present to our readers the following excerpt from Dark Pools: High-Speed Traders, AI Bandits, and the Threat to the Global Financial System, by Scott Patterson, author of The Quants.

In early December 2009, Haim Bodek finally solved the riddle of the stock-trading problem that was killing Trading Machines, the high-frequency firm he’d help launch in 2007. The former Goldman Sachs and UBS trader was attending a party in New York City sponsored by a computer-driven trading venue. He’d been complaining for months to the venue about all the bad trades—the runaway prices, the fees—that were bleeding his firm dry. But he’d gotten little help.

At the bar, he cornered a representative of the firm and pushed for answers. The rep asked Bodek what order types he’d been using to buy and sell stocks. Bodek told him Trading Machines used limit orders.

The rep smirked and took a sip of his drink. “You can’t use those,” he told Bodek.

“Why not?”

“You have to use other orders. Those limit orders are going to get run over.”

“But that’s what everyone uses,” Bodek said, incredulous. “That’s what Schwab uses.”

“I know. You shouldn’t.”

As the rep started to explain undocumented features about how limit orders were treated inside the venue’s matching engine, Bodek started to scribble an order on a napkin, detailing how it worked. “You’re fucked in that case?” he said, shoving the napkin at the guy.


He scribbled another. “You’re fucked in that case?” “Yeah.”

“Are you telling me you’re fucked in every case?” “Yeah.”

“Why are you telling me this?”

“We want you to turn us back on again,” the rep replied. “You see, you don’t have a bug.”

Bodek’s jaw dropped. He’d suspected something was going on in- side the market that was killing his trades, that it wasn’t a bug, but it had been only a vague suspicion with little proof.

“I’ll show you how it works.”

The rep told Bodek about the kind of orders he should use— orders that wouldn’t get abused like the plain vanilla limit orders; orders that seemed to Bodek specifically designed to abuse the limit orders by exploiting complex loopholes in the market’s plumbing. The orders Bodek had been using were child’s play, simple declarative sentences sent to exchanges such as “Buy up to $20.” These new order types were compound sentences, with multiple clauses, virtually Faulknerian in their rambling complexity.

The end result, however, was simple: Everyday investors and even sophisticated firms like Trading Machines were buying stocks for a slightly higher price than they should, and selling for a slightly lower price and paying billions in “take” fees along the way.

The special order types that gave Bodek the most trouble—the kind the trading-venue rep told him about—allowed high-frequency traders to post orders that remained hidden at a specific price point at the front of the trading queue when the market was moving, while at the same time pushing other traders back. Even as the market ticked up and down, the order wouldn’t move. It was locked and hidden. It was dark. This got around the problem of reshuffling and rerouting. The sitting-duck limit orders, meanwhile, lost their priority in the queue when the market shifted, even as the special orders maintained their priority.

Why would the high-speed firms wish to do this? Maker-taker fees that generate billions in revenue for the speed Bots every year. By staying at the front of the queue and hidden as the market shifted, the firm could place orders that, time and again, were paid the fee. Other traders had no way of knowing that the orders were there. Over and over again, their orders stepped on the hidden trades, which acted effectively as an invisible trap that made other firms pay the “take” fee.

It was fiendishly complex. The order types were pinned to a specific price, such as $20.05, and were hidden from the rest of the market until the stock hit that price. As the orders shifted around in the queue, the trap was set and the orders pounced. In ways, the venue had created a dark pool inside the lit pool.

“You’re totally screwed unless you do that,” the rep at the bar said. Bodek was astonished—and outraged. He’d been complaining for months about the bad executions he’d been getting, and had been told nothing about the hidden properties of the order types until he’d punished the it by reducing the flow he send to it. He was certain they’d known the answer all along. But they couldn’t tell everyone—because if everyone started using the abusive order types, no one would use limit orders, the food the new order types fed on.

Bodek felt sick to his stomach. “How can you do that?” he said.

The rep laughed. “If we changed things, the high-frequency traders wouldn’t send us their orders,” he said.

* * *

More tomorrow


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Sat, 06/30/2012 - 19:55 | 2577748 swmnguy
swmnguy's picture

I don't know enough to be able to tell if this is bullshit or not, but it sounds about right to me.

Sat, 06/30/2012 - 20:02 | 2577759 Dr Benway
Dr Benway's picture

And then they use the algos for other criminal aims, like manipulating up the share price before end of year to create the illusion of profits.



Only a banker could devise a way of stealing, and then a way of skimming from the theft, and then a way to scam the skim.

Sat, 06/30/2012 - 20:13 | 2577770 Cognitive Dissonance
Cognitive Dissonance's picture

Only a banker computerized wiz kid accountant could devise a way of stealing, and then a way of skimming from the theft, and then a way to scam the skim.

The bankers are way too stupid to actually come up with this stuff. But they sure know how to hire those that do.

Sat, 06/30/2012 - 20:23 | 2577782 williambanzai7
williambanzai7's picture

But they are smart enough to hire as many nerds as possible and lock them in a room.

Sat, 06/30/2012 - 20:33 | 2577792 Marginal Call
Marginal Call's picture

They were smart enough to saddle the smart kid with 300K funny money debt so they owned the kids before they started. 

Sat, 06/30/2012 - 20:35 | 2577797 Leopold B. Scotch
Leopold B. Scotch's picture

The way I beat their system is I run my trades through my Atari 2600, having modified the game of "Tank".

Sat, 06/30/2012 - 20:50 | 2577820 Marginal Call
Marginal Call's picture

I run the ES contracts cululative delta bars through a  Tecmo Bowl simulation to generate buy/sell pressure signals. 

Sat, 06/30/2012 - 21:01 | 2577840 veyron
veyron's picture

The reality is that most of equities trading moved to dark pools and other trading venues. Trading on lit markets is "exhaust"

Sat, 06/30/2012 - 22:44 | 2577947 Herd Redirectio...
Herd Redirection Committee's picture

No shit, so you're telling me if I put in a limit order the 'big boys' can see my order, but I can't see their orders, and my limit will magically get hit!  Limit orders, a good way to guarantee you lose money in a rigged, computerized, HFT market.  I already suspected this was the case, what 4 years ago, so no surprise really.

Sun, 07/01/2012 - 00:21 | 2578048 jayg
jayg's picture

do you have a better way for us normies to place trades?

Sun, 07/01/2012 - 02:20 | 2578125 Silver Bully
Silver Bully's picture

'do you have a better way for us normies to place trades?'


Yeah, its called buy physical and take delivery. Since these pukes own the system, don't expose yourself to ANY counterparty risk. Otherwise it'll get dumped on YOU.

Sun, 07/01/2012 - 04:00 | 2578152 Max Fischer
Max Fischer's picture



So basically what you're saying is that it's better to own physical silver which collapsed by 50% in 14 months than it is to own Apple stock because owing Apple equity exposes you to the possibility that Apple might go bankrupt?  How much wealth do you need to lose before the "no counterparty risk" component becomes just fucking stupid?

Sometimes I think that silver hillbillies like to throw around 'no counterparty risk" because they think it sounds cool.  


Sun, 07/01/2012 - 07:56 | 2578265 blindfaith
blindfaith's picture



WOW, can't tell if you got the thumbs down because of apple or silver comments.

Will say this, silver will be here in 10 years, will apple?

Sun, 07/01/2012 - 18:15 | 2579317 MeelionDollerBogus
MeelionDollerBogus's picture

Computers will still exist in 10 years. Stupid people who insist on shiny things which are overpriced and barely work will still exist. Therefore Apple will still exist.

Fri, 09/07/2012 - 23:56 | 2773918 CalibratedConfidence
CalibratedConfidence's picture

"Silver oxide-zinc is used in batteries for digital cameras, watches, and phones. Recently it was announced that all Apple products will be using silver oxide-zinc batteries".

You Can’t Beat Silver as an Investment


Sun, 07/01/2012 - 08:28 | 2578286 SWRichmond
SWRichmond's picture

As I read this article I just kept thinking "so this is just another example of how true price discovery is thwarted, and thus genuine capitalism is screwed."

Sun, 07/01/2012 - 09:12 | 2578332 tennisdude
tennisdude's picture

Ok. Keep doing what you're doing then.

Sun, 07/01/2012 - 18:14 | 2579314 MeelionDollerBogus
MeelionDollerBogus's picture

Silver has lots of non-monetary uses. If all you want is paper then use options so you get cash value for silver's price moves BOTH ways.

Maxipad, you are an unwanted attempted replacement for MDB.

No-counterparty-risk IS cool. It means no one can empty my account or re-write signatures or force me into negotiations while they hold my money hostage. They can't see it, touch it or even know I have it. It's MINE.


Sun, 07/01/2012 - 04:30 | 2578169 SoCalBusted
SoCalBusted's picture

In short, No.

You need the following:

1. big hardware

2. a fat pipe to the exchange

3. knowledge of the inner workings of the black box

4. ability to program T-SQL with multiple terms in the WHERE clause

If you have been on ZH for any length of time you already know by now that if you want to play, you are in the retail stock trading ghetto and will lose anyway.  The best way to win is to not play the game. (see War Games)

Sun, 07/01/2012 - 10:08 | 2578384 GMadScientist
GMadScientist's picture

5. friends at Goldman

6. friend at the Morgue

7. friends at the SEC

8. friends at the CFTC

9. friends at the DoJ

10. friends in the SCOTUS

Sun, 07/01/2012 - 10:06 | 2578381 GMadScientist
GMadScientist's picture

"do you have a better way for us normies to place trades?"

Sun, 07/01/2012 - 18:19 | 2579326 MeelionDollerBogus
MeelionDollerBogus's picture

Options. I only trade GLD, SPY, VXX, AGQ using options. I don't even need to use margin.

Sun, 07/01/2012 - 18:18 | 2579325 MeelionDollerBogus
MeelionDollerBogus's picture

If you pay to sit in the pits or get a better feed you can see their limits too. However you'd also need to know their latency and their fees and liquidity bonus to make best of the information.

In the mean time set limits higher or lower than the average as-per your needs to avoid being hit with the others.

The HFT's are also not watching highly illiquid (compared to stocks) options chains so by putting myself there I never get nailed by HFT's. Also typically stock-trades at extreme price changes lasting less than 1 second don't even register for the options that are linked to them. IF they do that usually is very good for me. If they don't then to me it's as if it didn't happen. I appreciate what NANEX reports but at the same time I appreciate a buffer stopping that shit from hitting my windshield.

Sun, 07/01/2012 - 09:08 | 2578327 BandGap
BandGap's picture

And I'd bet a lot of $$$ the "nerds" have no idea what their work is being used for. They write the module and someone else assembles them. I wrote modules in Pascal years ago that I could use for NMR pulse sequences or to figure out how often to spray crops for pests. Two totally differnet outcomes using the same prewritten pathways.

Just takes a guy at the top with a fair amount od savvy in programming and a vision of where he wants to go.

Wonder if they beta tested these? Hard not to notice the glitches as they ironed things out. Then again, no one was probably looking. I like the delay factor written into the executions. This makes it doubly hard to spot.

Wow, thieves are SMART.

Sun, 07/01/2012 - 10:19 | 2578398 disabledvet
disabledvet's picture

So long as that room is in their head then "they are free to be anywhere they want."

Sun, 07/01/2012 - 02:36 | 2577774 slewie the pi-rat
slewie the pi-rat's picture

the quaint faulknerian quants made her fuking quim quake, BiCheZ!

Sat, 06/30/2012 - 21:30 | 2577873 Bansters-in-my-...
Bansters-in-my- feces's picture

Dr Benway,I see a banker read your comment.

FuckTard he be.

Sun, 07/01/2012 - 10:55 | 2578424 X.inf.capt
X.inf.capt's picture



that they think the markets are rigged....

that the only reason the stock market goes up at the end of the month ( on low volume) is so when 401k's post, the small investor has to buy high....

and that the markets are just another ponzi scheme for the elite to wick more wealth from the middle class....



Sat, 06/30/2012 - 21:39 | 2577885 Bansters-in-my-...
Bansters-in-my- feces's picture

edit: double post....ooops.

Sun, 07/01/2012 - 00:18 | 2578046 Freddie
Freddie's picture

This reminds me of the movie Casino which was based largely on real people and events.  Joe Pesci talks about how the casino counting room was skimming the skim. Less and less skim money got back to the old mobsters in Kansas City.

Sun, 07/01/2012 - 05:38 | 2578198 Dustin de Wynde
Dustin de Wynde's picture


That's exactly right.

And it's fresh in my mind because I've been using this clip:

To explain the Facebook IPO Skim to people, but it works just as well here too.

In fact it's even more relevant, since if this is even half true then the level of endemic fraud is at least an Order of Magnitude greater than Fuckerberg's little scheme was.


Sun, 07/01/2012 - 10:09 | 2578388 rodocostarica
rodocostarica's picture

Hope you saw that movie on the net or in the theater and not on TV Freddie.


Sun, 07/01/2012 - 20:06 | 2579486 Buck Johnson
Buck Johnson's picture

The whole game is rigged pure and simple, and eventually the whole game will come crashing down.

Sat, 06/30/2012 - 22:06 | 2577912 cifo
cifo's picture

Outrageous and unfukingbelievable!

Sun, 07/01/2012 - 06:39 | 2578230 RECISION
RECISION's picture

Still... you've gotta admire the ingenuity of these sociopaths. 

Sun, 07/01/2012 - 11:13 | 2578455 SubjectivObject
SubjectivObject's picture

I dunno. put you in a room, well paid, to think up stuff, with a no restrictions scenario, and you are there.  Easypeasy to be a cunning mammal, the new brain only adds to the possibilities.

Sun, 07/01/2012 - 08:07 | 2578275 blindfaith
blindfaith's picture


Why unbelievable?  Look at that smirk on Cramer's Face on the ad at the right...he knows!

What might be hard to believe is that there is a spybot on your computer trate station that knows what you are doing in the first 3 keystrokes and is already out running you. No 'spyware' is going to catch it.  The idea is to slowly bleed you....and you hope that you will get lucky and regain your 'health'.

Even your 'smart phone' tracks you, why not a trade program.

Sun, 07/01/2012 - 08:31 | 2578289 Sudden Debt
Sudden Debt's picture

what bothers me is that the markets don't get in front of the game and alter the system in a way that it's fair to play the market for everybody.
this has got nothing to do with technocals anymore. it's fronting the lemmings and stealing theor money with fraud systems.
why don't they force 20 second min. price offers and 30 minutes that a stock can't be solved and the HTF stops there.

Sun, 07/01/2012 - 10:22 | 2578401 Debugas
Debugas's picture

good point

it should not be a problem to collect all orders during an hour time period into a black box and then open it once per hour and reconciliate. 24 price fixes per day is more than enough

Sun, 07/01/2012 - 09:58 | 2578371 Debt-Is-Not-Money
Debt-Is-Not-Money's picture


"...and you hope that you will get lucky and regain your 'health'."

It's called "investing"!


Sun, 07/01/2012 - 18:24 | 2579340 MeelionDollerBogus
MeelionDollerBogus's picture

Bu...bu...but ... Cramer's wearing my favourite snorgtee!!

Sat, 06/30/2012 - 22:23 | 2577925 Offthebeach
Offthebeach's picture

I picked up "Wall Street Jungle". Written in the 70's. Back then floor traders kept their book with non registered /side trades. It's all,as always, about the incentives. Whatever system there is, people will game it.

Sun, 07/01/2012 - 12:16 | 2578577 Yes_Questions
Yes_Questions's picture



The hook here is the concept of "saving" for retirement, education, etc.  The pros in equities know about HFT but does the worker bee?




Neither does any other "consumer" of equities.


Its bullshit, and its bad for you.

Sun, 07/01/2012 - 05:40 | 2578200 mrdenis
mrdenis's picture

This is not BS ,I use Fidelity and figured this out about 6 mos ago all depends on who you route your order through (NYSE ARC NASDQ or one of the others )you must use one of the off market (dark pools?) the only way to access this market is you must use fidelity's active trader  you can designate exactly where you want your order going ...if the market is 21.95 21.96 ,, you must put your order out to but at 21.96 won't get filled ,and your order dosen't show up on the quote but if someone sens a sell at 21.95 you'll buy his shares at 91.25.001 ..and if the bid gets hit for all the shares you might not buy any but at a even lower price21.94.001. I believe it has to do with the exchanges and where it trades .If your putting your orders out on the NYSE you'll get eaten aiive every day . 

Sun, 07/01/2012 - 09:32 | 2578350 Stuck on Zero
Stuck on Zero's picture

I used to day trade through eTrade and then something changed about five years ago.  I started getting shafted on every order.  Whether it was a limit order or a market order I would get a slow response and then end up on the tail end of a spike.  I didn't have that problem when dealing with a personal friend who was a broker at UBS.  The tricks are all there.  My words of advice.  Don't send any money to Wall Street.  You will be shafted.  Keep your money at home.  Buy a rental property.  Start a business.


Sun, 07/01/2012 - 18:19 | 2579292 Socrates
Socrates's picture

I spent 27 years as a trader on Wall Street. BELIEVE THIS BOOK and believe that they won't be stopped until the DOJ is not filled with white collar crime lawyers!


The Wall Streeet mindset is to take whatever is possible however possible as long as the cost of doing business (the fine of a settlement agreement) is less than the "take"

Sat, 06/30/2012 - 19:55 | 2577750 old naughty
old naughty's picture

More Tomorrow...
there is more?
Of course, there is. Stupid me.

Sat, 06/30/2012 - 23:32 | 2577999 Bringin It
Bringin It's picture

The toxic pools of naked shorts, in the metals, but really all over the place, that can never be covered/resolved is like the burning building no one sees.  They can't stop, because once they do most of the scams see the light of day.

Sun, 07/01/2012 - 03:12 | 2578139 Nage42
Nage42's picture

Ah, but if you buy in to the authors claim, then there is a bigger game afoot.

So the "lit" market of futures shows that the big houses are putting "years of production volume" against the price to artificially surpress it, right?  That's what you can _see_.

These big banks arn't stupid (well, they are mostly stupid, but they do have some nasty pieces of work at the helm), so if there's a tip-of-the-iceberg you can see, you really need to be figuring out what's going on under the surface...


Given the price surpression at spot, and the gutting of producer equity, my feeling is that some parties (possibly using banks as a vehicle to get it done) must be out there trying to buy up future-mine-production or, even better, refining to choke the sourcing.  So while the left hand is hitting the sell button, the other seven hands are quietly hitting the buy-now, buy-short-term, buy-mid-term, buy-long-term, and buy refining.   Game, set, and match.


The futures surpression is old news... stop ranting about it and find out what's _really_ going on (the hands you can't see in lit markets).


Just my 2 cents.


Sun, 07/01/2012 - 11:17 | 2578462 john39
john39's picture

does anyone really need the details at this point?  the bankers used the central banking system to take over governments...  now they run the world (most of it).  The laws are rigged, the markets are rigged, along with most everything else.  the truth is, most of humanity are slaves, in invisible cages with chains most can't see.

Sat, 06/30/2012 - 19:56 | 2577752 BattlegroundEur...
BattlegroundEurope2011's picture

Time to start lynching these SOBs

Sat, 06/30/2012 - 21:11 | 2577853 Thomas
Thomas's picture

Gimme a bat and ten minutes and it would be a sequel, "Silence of the Bankers".

Sat, 06/30/2012 - 21:19 | 2577864 SILVERGEDDON

I'm thinking Thomas and Robot Trader's avatars should duke it out . I got 5 Eagles on Thomas. Anybody in on the action ?

Sat, 06/30/2012 - 21:34 | 2577880 CaptainObvious
CaptainObvious's picture

If there's gonna be a girl fight between sexy avatars, look no further than Waffen's avatar.  I'd pay money to watch that girl fight.

Sat, 06/30/2012 - 19:57 | 2577753 RobotTrader
RobotTrader's picture

Those shenanigans only affect the Monster Energy-swilling day traders and mo-mo monkeys.  If you look at a 3 year chart of the Dow, anybody who bought quality stocks near the lows has done well, and the quote stuffing, dark pools, etc. have had no impact on the investment performance.

Anybody who bought KO, WMT, DIS, JNJ, etc. could care less about all these minute wiggle and games played on a day to day basis.

Every quarter the dividend checks roll in.

Every year, the stock's average trading price is higher and higher.

If you are a holder of gold stocks, well that's another story.  Naked short selling, last minute take downs, and horrid year over year performance the last 5 years has definitely taken a toll.

Sat, 06/30/2012 - 20:05 | 2577762 LawsofPhysics
LawsofPhysics's picture

Wow, that was a really quick "pay no attention to this" reply. On a Saturday night no less. Things that make you go Hhhmmmm.

Sat, 06/30/2012 - 20:35 | 2577798 El Oregonian
El Oregonian's picture

Robotrader is a known Govt. troll... Just junk him and move on...

Sat, 06/30/2012 - 20:41 | 2577805 Marginal Call
Marginal Call's picture

He's sort of right.  Half a tick doesn't matter to a swing trader or a long term investor.  And I rarely use limit orders for entry either.  When I make the decision to place an order I usually go straight for the market order button.  I've missed way too many trades trying to go a half tick deeper.


If the market is choppy and rotating in a point and a half range and I want out, I'll put a limit order in the dom to see if I can get out with a small profit.  But then again,  I close at market often too because I've lost profit or booked a bigger loss trying to squeeze out another .25 cents too many times. 

Sat, 06/30/2012 - 20:54 | 2577827 Dr Benway
Dr Benway's picture

This is exactly the sort of thinking that allows the parasites to suck your blood a little at a time.



If you steal a tiny bit out of a lot of transactions, it adds up.

Sat, 06/30/2012 - 21:07 | 2577847 Marginal Call
Marginal Call's picture

My thinking is I'm willingly playing a game that I know is tilted, and if I know I might have trouble getting filled because of it-I do what I have to do to get filled.  But while one part is tilted against me, not all parts are.


Rigged markets become predictable markets. 

Sat, 06/30/2012 - 21:11 | 2577852 LawsofPhysics
LawsofPhysics's picture

correct.  Well, at least until all the paper is worthless.  history shows that the latter is always "unexpected".

Sat, 06/30/2012 - 21:33 | 2577879 Marginal Call
Marginal Call's picture

I'm not fully prepared for that moment.  That's why I still play.  Where else can I pull large sums of paper to convert into land, tools, silver and seed?   


Only the dullest of idiots is ever all in on anything.

Sun, 07/01/2012 - 18:27 | 2579348 MeelionDollerBogus
Sat, 06/30/2012 - 21:19 | 2577865 calltoaccount
calltoaccount's picture

Bad to the bone.  This is just another one of their numerous crooked games.

"Wall Street has long considered Main Street “the dumb money.” theirs, almost by right, and certainly by tradition, for the taking.  Not surprisingly, they created a culture of corruption that’s proven itself bad to the bone.  What other industry has literally dozens of words and phrases characterizing unethical, illicit conduct?  (Backdating, Channel stuffing, Cherry picking, Churning, Cookie jar reserves, Cooking the books, Dummy accounts, Earnings management, Flipping, Fomenting, Free-riding, Front running, Insider trading, Late trading, Lulling, Market timing, Marking the close, Matching orders, Naked options, Naked short selling, Off balance sheet, Painting the tape, Ponzi scheme, Puffing, Pump and dump, Pyramid scheme, Round-tripping, Scalping, Selling away, Short and distort, Spinning, Spring loading, Tipping, Touting, Trading ahead, etc., etc., etc.)  God’s work, indeed.

Sat, 06/30/2012 - 23:35 | 2578001 Bringin It
Bringin It's picture

... numerous crooked games.

is the key take away.

Sat, 06/30/2012 - 22:12 | 2577917 holdbuysell
holdbuysell's picture

This is an excellent point. As a multi-year hold investor, you may not care about the inefficiency (scam). However, if many buy multi-year and they do this over the long term for 401k, etc., the amount siphoned could add up to huge money.

Contrary to the concept of "picking up nickels in front of a steamroller", this is analogous to picking up nickels from a fountain in a hotel--very easy to do and only the scum of the earth would consider it.

The markets are screwing everyone (as a society). Save/invest the hard-earned fruits of your productive efforts somewhere else. Ideally your community. There's lots of just need to look.

If you don't know who the sucker's you. True. True.

Sun, 07/01/2012 - 00:52 | 2578077 RockyRacoon
RockyRacoon's picture

Your analogy is much deeper than you may imagine.  Those coins in the hotel fountain were all placed with a wish, and a hope for something better, or a good thought for another.   Regular folk are being robbed of their futures and their hope for a better life -- a nickel at a time.  

Sat, 06/30/2012 - 20:17 | 2577777 Hopium Dealer
Hopium Dealer's picture


Sat, 06/30/2012 - 20:26 | 2577785 Stackers
Stackers's picture

And if you look at a 5 year chart of the DOW anyone who bought qualitiy stocks has been taken for a roller coaster ride and are lucky to be back at break even at best.

Sat, 06/30/2012 - 20:54 | 2577831 DavidC
DavidC's picture

Spot on.


Sat, 06/30/2012 - 22:19 | 2577922 jeff montanye
jeff montanye's picture

twelve years, but who's counting?

Sun, 07/01/2012 - 11:13 | 2578456 PivotalTrades
PivotalTrades's picture

Better yet deduct the infation and come up with about 20 years of nowhere,,I mean the real inflation not the that joke the Gov. prints.

Sat, 06/30/2012 - 20:50 | 2577818 algol_dog
algol_dog's picture

All they'd have to do is slap just enough of a fee per trade or share, to offset any profit that this enables, and this crap would end instantly. How hard is that?

Sat, 06/30/2012 - 21:06 | 2577846 Nid
Nid's picture

Or better, go back to 1/8s ..... Never should have gone to .01s in the first place.

Sat, 06/30/2012 - 22:10 | 2577916 JohnG
JohnG's picture

Or just restore the uptick rule.

Sun, 07/01/2012 - 00:54 | 2578079 RockyRacoon
RockyRacoon's picture

None of those changes were made without malicious intent.

Sun, 07/01/2012 - 18:31 | 2579356 MeelionDollerBogus
MeelionDollerBogus's picture

Do you understand nothing? "they" slap a BONUS on every trade even if it's a small loss of a trade just for making more than x trades PER SECOND

Sat, 06/30/2012 - 22:43 | 2577945 Hulk
Hulk's picture

Thank you Bob Brinker...

Sun, 07/01/2012 - 10:45 | 2578417 Bobbyrib
Bobbyrib's picture

I love how bulls always pick the time span that makes their argument correct. If you bought stocks five years ago, you're not in such great shape. That being said I understand Robo's function on ZH..

Sun, 07/01/2012 - 18:34 | 2579359 MeelionDollerBogus
MeelionDollerBogus's picture

If you look at a 3 year chart of the DOW you're either an idiot or analysing the effects of QE1 and QE2 to predict QE3's amount & timing. Stock valuations from 2009 March on have no meaning whatsoever except to describe criminal activity on a minute-by-minute basis.

If you are a holder of gold bullion you've out-done the market by miles for having a larger cash-pile AND no counter-party risk. Double-kudos for those using Options on GLD all the way up and down.


Sat, 06/30/2012 - 19:59 | 2577755 CreativeDestructor
CreativeDestructor's picture

and they send free porn subscription to SEC staff...

Sat, 06/30/2012 - 20:06 | 2577764 Jena
Jena's picture

Best way to keep them distracted...

Sun, 07/01/2012 - 02:28 | 2578127 StychoKiller
Sat, 06/30/2012 - 20:01 | 2577756 misterbear
misterbear's picture

Any sense when Greece will be pushed out.  Hurray the world is saved until we hear Greece needs more money.  

If I was a citizen over there I would be taking ECB loans left and right - hording Euros - and waiting till the day Greece defaultsw so I could bring back the Euros into the country - convert them to Drachmas - and quickly pay off the loans and have tons of cash left over.  Thanks Germany.

Sat, 06/30/2012 - 20:31 | 2577791 Rogier
Rogier's picture

Kinda off topic, wouldn't you say?

Sun, 07/01/2012 - 00:56 | 2578083 RockyRacoon
RockyRacoon's picture

Some folks get a brain fart and like to waft it over to threads that are irrelevant.  He's surely the smartest kid on the short bus.

Sat, 06/30/2012 - 20:03 | 2577758 LawsofPhysics
LawsofPhysics's picture

Let me summarize in a single word - " bidless"

Sat, 06/30/2012 - 20:10 | 2577763 Nid
Nid's picture

Typical fucking bullshit.

How about this one? Fucking NYSE saving an HFT from it's own piece of shit, manipulating algo...and boasting about it.

Sat, 06/30/2012 - 20:10 | 2577768 Cognitive Dissonance
Cognitive Dissonance's picture

New world order trading axiom.

There's a fool sucker born trading every minute nanosecond.

Sat, 06/30/2012 - 20:14 | 2577775 I am Jobe
I am Jobe's picture

So how is the 401K investment coming along? Just ask a sheeple and the match. Dreaming and more hope and change.

Sat, 06/30/2012 - 20:43 | 2577811 El Oregonian
El Oregonian's picture

You mean "Hope and Plunge" don't you?

Sat, 06/30/2012 - 20:20 | 2577781 I am Jobe
Sat, 06/30/2012 - 20:34 | 2577796 LawsofPhysics
LawsofPhysics's picture

Half a million in paper that will soon be devalued to nothing I'd be pissed too.  He should convert it all to PM's, beans, guns, and bullets, just to see how fast the FBI shows up.  See the latest list released with NDAA for reference.

Sat, 06/30/2012 - 21:03 | 2577845 Seize Mars
Seize Mars's picture


Apparently all those sad GM pensioners had no problem with looting & stealing from the bondholders.

Fuck them. The guy in the story with a half million dollar buyout and retiring at 60? Fuck him. He should have to compensate bondholders. Oh the humanity! Retiring when I'm 60! With a half-buck! Boo Hoo!

Guess what, ole Seize Mars ain't retiring at all. Ever. Am I supposed to be sympathetic to these lazy, spoiled union bullshit artists?

Sat, 06/30/2012 - 21:11 | 2577850 LawsofPhysics
LawsofPhysics's picture

While I agree with your general sentiment (I was a GM bondholder that got fucked too), this is about the rule of laws and contracts, break a deal etc...


Wouldn't it be nice if the fucking owners and management actually had to repay the creditors with their own wealth the next time their "leadership" tanked a fucking company.  Easy to shoot the messenger or the little guy, does nothing to address the real issues.

No more fucking bailouts, period.

Sat, 06/30/2012 - 21:56 | 2577904 MachoMan
MachoMan's picture

Since the inception of contracts, it has always been a right to break them...  especially when it is in your financial interest...  often times, the law attempts to take that advantage from you, but sometimes it fails.

The biggest issue is with the limited liability protection afforded by every de minimis entity...  it is virtually impossible to pierce the corporate veil...  and the barriers to entry for creating even a single person limited liability entity are nil, at best.  The law has ended up condoning entities as the alter ego of their owner(s).

I've said it before, but we need to return to sole proprietorships, partnerships, and limited partnerships...  anything past that is an abomination.  The risk of/incentive for inappropriate behavior is simple too great for society to bear.  There isn't any public policy justification when the totality of the circumstances are contemplated.

If you want limited liability, then be a limited partner and stay the fuck out of management.  Alternatively, buy insurance...  alternatively, be a good draftsman in all of your business endeavors.

Everything becomes so complicated, it takes a monumental effort to understand how it all fits together... 

Sat, 06/30/2012 - 22:32 | 2577934 Seize Mars
Seize Mars's picture

MachoMan, despite really digging "the" Macho Man, I must say I found your post to be, well, embarrassing. You have all kinds of self contradictions.

"Since the inception of contracts, it has always been a right to break them..." What? A "right" to...oh hell, forget it.

Dude there is nothing wrong with the corporate entity. Next you will be saying that guns kill. (Do pencils misspell words?) We need enforceability of contracts and money that is impossible to counterfeit. That's just about it. If all relationships are consentual, if all transactions are free from coercion, then it doesn't matter what the corporate capital structure is.


Sun, 07/01/2012 - 00:42 | 2578067 MachoMan
MachoMan's picture

Yes...  you have a right to break contracts...  you also may have an obligation to the other party(ies) for breaking the contract...  but you have a right to break contracts.  Think of the "marriage contract"...  the law doesn't want people to stay together that don't want to be together...  you have a right to default.

There is nothing wrong with the corporate entity in an academic vacuum...  however, once introduced to the real world...  and real human ingenuity (you know, when money and power are actually on the line)...  it takes a bit of a different character.  In the present case, it amounts to principal actors of the fraud being free from personal liability for things that literally negatively affect every human...

I'll conclude with the smart money is on a vastly less complicated world... which necessarily entails a pruning back of limited liability (it's a function purely of lobbying, not of public policy).



Sun, 07/01/2012 - 10:29 | 2578407 Liberty2012
Liberty2012's picture

Maybe even get rid of limited liability as well. Responsibility is key to freedom. Part of risk is being responsible for what you are part of. No hiding behind others.

Sun, 07/01/2012 - 11:29 | 2578481 trebuchet
trebuchet's picture

@MachMan, best line from "Dallas" series was JR ewing: " Son, a contract, thats written to be broken. but a handshake, now, you give your word as a man when you do that" 

Sun, 07/01/2012 - 09:47 | 2578364 WillyGroper
WillyGroper's picture

While you blame it on the pensioners, you might want to look at the top of the pyramid to exactly who's looting the pension fund & making shitty decisions. Hint: It's at the top. So, if anyone saw it coming you curse them because they got while the getting was good?

When CWA agreed to combine occupational with management's pension funds, the raiding started. The pension fund was 116% funded in 09. According to 2011 figures, now (after a revision) it is 84.5% funded. WTF do you think the top gets their bonus's & stock options?

Sounds to me like you have a burr up ur ass either because:

1. You didn't work for or put up with the bullshit of a corporation that had a      pension. 

2. Or you haven't saved enough.

Sat, 06/30/2012 - 20:28 | 2577786 Sweedumz
Sweedumz's picture

<blockquote> It was fiendishly complex. </blockquote>

Only for someone who regards an "if else" statement as "complex computer instructions".


This is not complex. It is very simple. The exchange ran two tiers of trading. In one, all information was visible, in the other, it was not. The first tier could trade on all orders, the second was restricted to only being allowed to trade on the leavings of the first tier. The first tier inserted itself as a middle man in every single trade in the second tier.


This is not complex. It is simple. This is a control fraud.


However, at the end of the day, Traders like Bodek have only themselves to blame. He knew the system was rigged---or should have known by 2009 ffs---yet he kept coming back for more. I have little sympathy for someone who played poker in a mob casino and then complained that he was the mark at the table.

Sat, 06/30/2012 - 20:28 | 2577787 williambanzai7
williambanzai7's picture

All you need is a spotter/shill, two bent red queens, one ace of spades, a card board box and a newspaper.

Sat, 06/30/2012 - 20:37 | 2577794 Cognitive Dissonance
Cognitive Dissonance's picture

Don't forget the mark. Or as the case may be, several hundred million marks.

I say several hundred million because even though many people do not trade stocks or even have money "invested" in mutual funds, 401(k)s, variable annuities, IRA's etc etc, this type of fraud saps the life blood of the nation, thus affecting everyone.

Sun, 07/01/2012 - 04:35 | 2578171 SoCalBusted
SoCalBusted's picture

Marks, as in Deutsche Marks?  Are you Greek or something?

Sat, 06/30/2012 - 20:33 | 2577795 sullymandias
sullymandias's picture

I hope the book is better editted than this excerpt.

Sat, 06/30/2012 - 20:41 | 2577807 razorthin
razorthin's picture

Go fukk yourself.

Sat, 06/30/2012 - 20:49 | 2577819 DavidC
DavidC's picture

Joe Saluzzi and Sal Arnuk of Themis Trading have just recently had a book published, 'Broken Markets' - they've been on this for years now since Reg NMS and the proliferation of HFTs.


Sat, 06/30/2012 - 20:52 | 2577823 world_debt_slave
world_debt_slave's picture

ah, yes, I remember the heady days of the tech bubble.

Sat, 06/30/2012 - 20:54 | 2577828 ThisIsBob
ThisIsBob's picture

Real men don't trade for pennies.

Sun, 07/01/2012 - 11:15 | 2578459 Bodhi
Bodhi's picture

Yeah they did it in Superman III.

Sat, 06/30/2012 - 20:57 | 2577834 babylon15
babylon15's picture

Your orders are not safe in dark pools either.  WSJ had a piece on a dark pool firm that was front running every single order coming in.  The dark pool was Pipeline and they had their own prop desk (called Milstream) on a different floor that would frontrun the orders.  From 2008 to 2010 they had over $30 million in "profits".  No one went to jail and they had to pay a $1 million fine.

Here's a link:

Sat, 06/30/2012 - 21:01 | 2577841 LawsofPhysics
LawsofPhysics's picture

This points out the reason why we find ourselves here.  No real consequences for bad behavior.  Hang all the fucks, I promise you the markets will rally the following day.

Sun, 07/01/2012 - 01:02 | 2578084 RockyRacoon
RockyRacoon's picture

There's not enough wood in Oregon to build the gallows needed.

Sat, 06/30/2012 - 21:03 | 2577842 Golden monkey
Golden monkey's picture

Tap water is so radioactive now, drinking it is like sodomizing your own ass.

Sat, 06/30/2012 - 21:03 | 2577843 Newager23
Newager23's picture

So now we know how companies like JP Morgan can have 95% of trading days in the black, when the average trader can barely do better than 50%. This is criminal, yet they are like mob bosses who own the police department.

I love his reply, "How can you do that?" They guy smiles, it's all rigged my friend. And those who want it rigged are well connected. This goes back to Michael Lewis' book, the Big Short. The regulators are best buddies with the regulated, especially at the top of these organizations.

This corruption isn't going to stop until it all comes crumbling down.

It reminds me of the movie the Matrix, when Neo says, "I don't believe it! It can't be!"

Sat, 06/30/2012 - 21:31 | 2577872 hedgeless_horseman
hedgeless_horseman's picture



double tap

Sat, 06/30/2012 - 21:31 | 2577877 hedgeless_horseman
hedgeless_horseman's picture



...when the average trader can barely do better than 50%.

What the fuck are you trying to say?

Sun, 07/01/2012 - 08:03 | 2578269 dannyboy
dannyboy's picture

He's implying that hes bad and can't trade.

Sat, 06/30/2012 - 21:46 | 2577844 tahoebumsmith
tahoebumsmith's picture

The SEC should be shut down. They have allowed market manipulation, insider trading, high frequency nano second stealing and many other illegal activities to take place just to help prop up their Banking Cartel Cronies... What ever happened to investing in companies over the long haul to reap some of the growth rewards? This market is nothing more then a glorified Casino with a few pit bosses calling the shots. America should be ashamed of what is happening on Wall St., these cocksuckers have caused all the pain in America and have been rewarded for doing so. When pitchforks make it to the streets I recommend all you Crony Kleptocrats keep one of these in your pocket so you don't have to deal with your fate either... Yeah this fucktard was being tried for arson but he was an investment banker...Good riddens.

Sun, 07/01/2012 - 00:07 | 2578037 Gromit
Gromit's picture

Facilitators not regulators.

Sat, 06/30/2012 - 21:12 | 2577857 dolph9
dolph9's picture

So a muppet discovers he's a muppet, what's new.

Mon, 07/02/2012 - 05:40 | 2580018 MeelionDollerBogus
MeelionDollerBogus's picture

Muppet self-awareness?

Is there a Turing-test for that?

Sat, 06/30/2012 - 21:15 | 2577858 GlomarHabu
GlomarHabu's picture

I worked for WS firms for over a decade. I wrote management regualrly cautioning them on the sub prime thing. They told me to shove it.  I told them to shove it and left WS ..... prior to my decade plus on WS I worked for the CIA for a similar length of time.

Wall Streeters are total scum in my book and I have a scum index to reflect on such things. They are totally loathsome, and should all be hanged.

Sat, 06/30/2012 - 23:04 | 2577967 zanez
zanez's picture

The CIA is on ZH! I knew it! Hey Tylers- how are those government benefits treating you?



Sun, 07/01/2012 - 12:00 | 2578535 pufferfish
pufferfish's picture

'I worked for WS firms for over a decade.... I worked for the CIA for a similar length of time.'

'Wall Streeters are total scum in my book and I have a scum index to reflect on such things. They are totally loathsome, and should all be hanged.'

Wow, you've worked for wall street directly & indirectly for 20 years.

You dont have the right to call anyone scum.

Just feathing the nest for the Imperialist Empire of America. Keeping the poor poor and exploiting their resources without appropriate remuneration.

How do you sleep?

Sat, 06/30/2012 - 21:17 | 2577862 Goldtoothchimp09
Goldtoothchimp09's picture

We should get 'Fight Club' on them!


10 minutes to market open we all place orders -- the MM's and HFT algo's position to take advantage of them .... 2 minutes prior to open we all cancel all the orders wrecking their scamming plans!!

Sun, 07/01/2012 - 05:45 | 2578205 mrdenis
mrdenis's picture

It won't work .....any order entered at 9.28 or lated dosen't have to get the opening price .....

Sat, 06/30/2012 - 21:26 | 2577869 dcb
dcb's picture

I will be honest I didn't really understand the post well enough to comment, it would be nice to have a sort of example and what's going on.

Sat, 06/30/2012 - 21:36 | 2577884 hedgeless_horseman
hedgeless_horseman's picture



“The few who understand the system will either be so interested in its profits or be so dependent upon its favours that there will be no opposition from that class, while on the other hand, the great body of people, mentally incapable of comprehending the tremendous advantage that capital derives from the system, will bear its burdens without complaint, and perhaps without even suspecting that the system is inimical to their interests.”


-The Rothschild brothers of London writing to associates in New York, 1863.

Sat, 06/30/2012 - 22:44 | 2577948 Jones79
Jones79's picture

yeah, me too, didn't really understand the "maker-taker" and the price moving but staying in front of the queue while pushing others back.  could somebody please explain this or post a link that does?  i always thought hft was moslty about sending in orders and cancelling and then using some tricky proprietary algos, not exploiting loopholes in the exchange rules themselves, to which the exchange is apparently doubly beholden.   

Sat, 06/30/2012 - 21:29 | 2577871 SILVERGEDDON

I trade in physical metal at spot. Not getting fucked at all whatsoever. My boat keeps sinking on hte way home though. Am I doing it wrong ? Algos, dark pools, front running. Sounds like cheating people out of their money. One of these days, there's gonna be a Network TV moment. Other people will start trading physical metals with bankers. But, it will probably be lead and copper anti futures metals. You reap what you sow, fellahs. Just sayin'

Sun, 07/01/2012 - 12:01 | 2578541 pufferfish
pufferfish's picture

I'm going long on boat builders...

Sat, 06/30/2012 - 21:36 | 2577883 omi
omi's picture

Sounds like someone doesn't want to take blame for his strategy, but rather is looking for reasons like execution difficulties and light storms.

Mon, 07/02/2012 - 05:34 | 2580010 MeelionDollerBogus
MeelionDollerBogus's picture

No it sounds like someone who actually is part of the rigging that STOPS execution and profits from it finally told the person "ya, we're stealing your money, this is how we did it".

This is not trading incompetence. This is a combination of fraud & front-running insider trading, criminal activity for the most part.

Your failure to understand this is like blaming depositors at a bank for an armed robbery.

You're an idiot. Well, at least you're not a Maxi-pad. That MF'er is worse than anything, even a literal reading of MDB.

Sat, 06/30/2012 - 21:36 | 2577886 chinaboy
chinaboy's picture

Dark pool within the lit pool. I think some day the U.S. stock market is going to fail like Japan and China. The investment thesis was not strong in the first place. Now we know that the system is rotten to the core.

Sat, 06/30/2012 - 21:56 | 2577903 Roscoe
Roscoe's picture

Mechanic: Somebody set us up the trade.

Operator: Main algo turn on.

CATS: All your bid are belong to us.

CATS: You have no chance to survive up your bid.

Captain: Move 'ZIG'

Captain: For great justice.

Moral of the story: The whole f'ing world has become a parody of everything that was supposed to be fair and right, and it looks like there's no end in sight, and no hope for Everyman. Nothing is shocking anymore and nobody is held accountable for anything.

Cue Clark Griswold:

Hey! If any of you are looking for any last-minute gift ideas for me, I have one. I'd like (Insert heinous banker/politician name), right here tonight. I want him brought from his happy holiday slumber over there on Melody Lane with all the other rich people and I want him brought right here, with a big ribbon on his head, and I want to look him straight in the eye and I want to tell him what a cheap, lying, no-good, rotten, four-flushing, low-life, snake-licking, dirt-eating, inbred, overstuffed, ignorant, blood-sucking, dog-kissing, brainless, dickless, hopeless, heartless, fat-ass, bug-eyed, stiff-legged, spotty-lipped, worm-headed sack of monkey shit he is! Hallelujah! Holy shit! Where's the Tylenol?

Sat, 06/30/2012 - 23:57 | 2578023 StormShadow
StormShadow's picture

Greenie just for bringing Clark G into this. Brilliant!!!

Sat, 06/30/2012 - 22:05 | 2577911 caerus
caerus's picture

nonsense...there is a mathematics behind the markets that the players are unaware of

Sat, 06/30/2012 - 22:08 | 2577915 yogibear
yogibear's picture

And Wall Street wonders why more and more retail investors are exiting this slanted trading game. All the Wall Street MM and Investment houses can go F themselves. It's trading algorithm against trading algorithm.

Just wait until the chain of derivatives that you thought were going to protect you blow up.

Sat, 06/30/2012 - 22:18 | 2577920 RobotTrader
RobotTrader's picture

Retail investors are largely out of the market, most piled into bond funds.


Eventually, they will come back, maybe when the S & P 500 makes new highs next year.  When that money flow starts, you could see the markets head much, much, higher.

People will look back and all the "dark pools" and "sub-penny frontrunning" etc. will be an inconsequential blip on the 5-year charts.

Sat, 06/30/2012 - 22:59 | 2577962 techstrategy
techstrategy's picture

That's what all you condescending f'ks think of "retail", but it turns out retail investors are far savvier than WS gives them credit for.  They are not coming back until it collapses.  the greater fools arebthe folks like you that expect the, to reengage in this scam.  you mistakenly think time is on your side.  it's not.  People can sit on cash indefinitely with a little gold hedge for hyperinflation.  stocks are running into peak margins and slowing growth...  money will only be flowing out if the market and not nto it (you might need to consider the demographics of wealth and asset ownership...).  Stock will be fighting the current for the next 2 decades..,

Sun, 07/01/2012 - 20:17 | 2579506 MeelionDollerBogus
MeelionDollerBogus's picture

Bond markets are for hedge funds, pension funds and central banks. The retail investor is not there. The retail investor is still buy-and-hold medical, tech and financial companies like sheeple. The smarter ones are messing with mining, oil, forex & precious metals.

S&P is going DOWN, son, and QE will boost a lot of other things before & better than the S&P. Play SPY and VXX puts & calls if you like, RSU,RSW,FAS,FAZ if you dare but hold no shares or you're going bankrupt.

Then we'll spend another 6 months waiting for your mom to give you a personal bailout so you can yap from the basement.

Sat, 06/30/2012 - 22:31 | 2577932 rufusbird
rufusbird's picture

I think the post could have been more informative with more information about the trading price of the underlying security and the prices of the orders given in the example. I made a living trading and I had a litttle trouble following the logic. Just saying...

Sun, 07/01/2012 - 01:09 | 2578088 RockyRacoon
RockyRacoon's picture

It wasn't a self-contained piece.  You're now supposed to go buy the book.

...we present to our readers the following excerpt...

Get it?

Do NOT follow this link or you will be banned from the site!