FINRA Drowning In Complaints About Market Manipulation

Tyler Durden's picture

Whether it is due to the general investing public finally realizing that the market is neither fair nor efficient, that the scales are tipped against the common man from the moment the 'Buy' (or, more rarely, 'Short') button is pressed, or that as the past two years have shown the market is dominated by insider trading, "expert networks" and big legacy investors surviving only due to the government's intervention on their behalf at critical times, is unknown, but Finra is now officially and finally drowning in a barrage of complaints about market manipulation. And to be sure such glaring reminders as 30 year-old UBS traders being singlehandedly responsible (of course, nobody noticed anything over the months and months of creeping illegal trades) for massive cumulative losses that amount to more than the entire net income for the bank (an odd and convenient scapegoat that), will surely not make Finra's life any easier. As Reuters reports: "A Wall Street regulator said industry complaints about market manipulation and trade reporting have spiked this year, raising questions about the adequacy of banks' internal controls over their traders. FINRA has received complaints this year about banks' audit systems, canceled orders, and brokers misrepresenting whether orders were on behalf of customers. "These are areas that for a long time we were not receiving complaints in, and all of a sudden this past year it's really spiked up," DeMaio, senior vice president in FINRA's market regulation unit, told a FIA options industry conference." That's great: so US investors can sleep soundly knowing full well fiascoes such as UBS' Delta One implosion will be confined to the UK (where, incidentally, the director of market at the local regulator, FSA, just resigned - it is unclear if he will follow a recent previous FSA departure straight into the willing clutches of such a non-market manipulative entity as JP Morgan), and that manipulation is being rooted out in the US at its core at a brisk pace.

Right? Maybe not:

The UBS rogue trading case could intensify pressure on regulators to ferret out wrongdoing. In the United States, it will also put more pressure on rulemakers to craft tough regulations as they implement the Volcker rule, a part of the 2010 Dodd Frank financial oversight law that limits banks from betting their own money in financial markets.


FINRA has made stopping manipulation a priority the last couple of years. The regulator, funded by the financial services industry, monitors trading and reports to the U.S. Securities and Exchange Commission.


"We're seeing a large number of order misrepresentations, we're seeing problems with our audit trail," DeMaio said, adding some brokerages have identified orders as customer orders when in fact they originated from the firm itself.


FINRA has asked firms if they have seen some of the problems internally, and whether they've taken steps to address them, DeMaio added.

And while, rhetoric aside, everyone knows that Finra is completely incapable and actively dissuaded from handling anything that could potentially harm any of the real market "manipulators", because after all Finra is a self-regulating organization which in a market that depends on manipulation means it can't really do much if anything, concerns about record plunge in market confidence are pushing regulators to extend the Volcker Rule to overseas banks with US operations to make sure the Kweku Adoboli incident does not spread to the US courtesy of lax internal risk controls such as that exhibited by UBS, and present the optics they are doing at least something:

Regulators writing a rule limiting proprietary trading by U.S. banks are considering extending the restrictions to overseas firms with operations in the country, according to four people familiar with the proposal.


“There is no question that we would lose jobs,” said Wayne Abernathy, vice president of the American Bankers Association in Washington. “A lot of what the banks have been doing in recent years to diversify their services are activities that can easily be done by foreign competitors.”


The rule, named for the former Federal Reserve Chairman Paul Volcker, includes exemptions for government-guaranteed investments, hedging, market-making and insurance-company transactions. It also exempts proprietary trading conducted “solely” outside of the U.S.


The language of the bill is subject to interpretation by regulators at agencies including the Federal Reserve and the Federal Deposit Insurance Corp. Dodd-Frank, signed into law by President Barack Obama last year, requires regulators to adopt rules to carry out the provision by Oct. 18.


Regulators are considering how to define operations conducted “solely” outside of the country. Trading managed in the U.S. or involving U.S.-based advisers may be subject to the rule even if it takes place overseas and has no U.S. investors, the people said.

Well, courtesy of the staged UBS scandal, that will not be the case any longer.

What also won't be the case, is the plan to promote Delta One in replacing and recycling the correlation-cum-prop trading revenue generator that was implicitly eliminated with the Volcker Rule, but was merely morphed over to a new form of correlation desk trade only this time with a fancier name.

The WSJ reports on the imminent demise of yet another form of pseudo-hedged prop trading:

Delta trading has gained momentum in a markets environment in which the mortgage-bond trading business is on the skids and global regulations require banks to set aside expensive capital for loans.


Wall Street is counting on trading large volumes of stocks and derivatives to bolster revenue.


There is nothing inherently improper about such Delta trading. And many large financial institutions employ this strategy, including Société Générale SA, BNP Paribas SA and Goldman Sachs Group Inc. in Europe and Goldman and Morgan Stanley in the U.S., according to a J.P. Morgan Chase & Co. report.


The trading requires state-of-the-art technology systems and can produce as much as $1 billion in annual revenue at top banks, J.P. Morgan said, which noted, "Delta One products in one area of growth in our view, with strong growth in client volumes, resilient margins and untapped potential in emerging markets."


But it earlier gained notoriety in 2008, when French bank Société Générale said that Jérôme Kerviel had worked on a Delta One desk while trying to hide $7.2 billion in losses in another rogue trading scandal. Last year, Mr. Kerviel was sentenced to three years in prison.

It is safe to say that in an attempt to scapegoat their stupidity and to cover up for internal bank risk control lapses, regulators will once again lash out at banks (which they themselves saved and in doing so encouraged them to take any and all risk knowing too well they can never fail again), making "Delta One" a thing of the past. In the meantime, we are confident that Wall Street is already hatching plans of "financial innovation" for the next big "revenue" thing: probably called Vega 100 or Gamma 69. In the same time, we also expect the following chart showing the relentless outflows from US domestic equity mutual funds - the truest indication of what the US investor thinks about the stock market - to continue bleeding mutual funds dry until there is nothing left.

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SeventhCereal's picture

Duh most people lose.  Where is the money going to come from to make everyone a winner?  I guess they are too lazy to pull up a picture of the parabolic DJI and realize that they are about 30 years late in the game.  Long term short, but the market is rigged right now to keep the equities up.

Bottom line, markets exist so companies can raise cash without having to pay them back like a bond.  But the markets can only mortgage its future so far and so long with P/E's in the +50's before the redemptions start kicking in.  Can't buy a burger with a share of AAPL sorry.

Popo's picture



You need to send some fucking people to jail.   This isn't rocket science.


...corrupt fuckers...



Snidley Whipsnae's picture

"and that manipulation is being rooted out in the US at its core at a brisk pace."

LOLOLOLOLOL... Thanks, I needed a good belly laugh.

Wake me when JPM/HSBC are forced out of their manipulative shorts.

Kat's picture


The SEC's own rules (enforced by FINRA) are the entire reason markets can now be easily manipulated and asset prices can deviate so much from fair value and for so long.

Reg Sho rule 204 is a huge culprit.

Of course, the public is too stupid to realize that the rules it wants passed hoping they will help them are the ones that screwing them.

FINRA is already driving broker dealers out. If it increases fines and harassment of regulated firms, it'll just drive out everyone except the too big to fails, making the market thinner and more easily manipulated.

jackinrichmond's picture

someone should post the finra website address so that we can all place a complaint.   it sounds like now is the time.

Cdad's picture

You typed my exact thoughts this morning.  I have seen plenty of "in house trading."  You know, as in when markets RISE on huge SELLING because market makers BID LIFT into options expiry...aka this whole last week.

I've seen tons of matched lot trading on the burrito supreme stock, supposedly wildly bullish "buying" while at the same time said firm wildly also sells through an alternative exhange.

I've seen lots of magic short selling on stocks for which there is no borrow available.  Has everyone forgotten how many folks became filthy rich selling Lehman shares that did not exist?  I'm sure FINRA will, any day now, put together its report on that fiasco.

We've all seen the crocodile algo at work thanks to the folks over at Nanex, and I'm sure those guys could provide quite a lot of data for FINRA to look at.


It is quite interesting how the "regulators" have, in recent weeks, begun to express their concern about various problems within the market.  It's pretty clear that we are approaching the point when market credibility absolutely collapses....causing a complete lack of capital formation...for a generation or two...prompting Dark Pool managers to demand that people be "forced to invest." ['Larry Fink]  Hey...where have you been reading for months that forced capital allocation was coming?

Cdad's picture

Oh, and as an aside, and if FINRA wants to get a jump on things, maybe just a quick check into the options action in AMZN yesterday would be a solid place to start.  

A special hat tip to the firm that took yesterday's expiring Amazon 235's from $.03 to $5.15 in one session, magically finding a buyer for that mark up within 2 hours of the close.  You guys are the best, the tip top of the criminal syndicate Wall Street double dealing firms.  Very impressive.

fiddy pence haff pound's picture

out of manipulative shorts?

you mean, the emperor is naked?

say it ain't so.

WSP's picture

"Bottom line, markets exist so companies can raise cash without having to pay them back like a bond"

That is true, but let me add that public corporations also exist so that individuals can "Cash out" of the equity in their money losing businesses at market inflated prices and then get paid ongoing above market rates for compensation (e.g. perpetual printing of stock options).  Never ceases to amaze me that all of the stock propaganda pumpers never consider that what little "Growth" exists AFTER inflation and accounting fraud are taken out is usually looted by the executives via stock option grants.  One does not need a sophisticated trading platform to see this----most mainstream financial news sites list "insider trading" under each ticker and even slow growth stodgy corporations that pay outrageous salaries to their corrupt leaders display continuous monthly stock debasement via stock options----that, in ADDITION to outrageous salaries.   It truly is unbelievable that the criminals that run public corporations are able to get away with what is basically a smaller version of the Federal Reserves "money printing" every day.  

One thing I can tell you for SURE.  Every morning excecutives of most corporations wake up and say "God, what a great country".  You would too if you could play golf, then meet with your friends to decide on how many stock options to print this month to reward yourself and friends.   Unbelievable but this has been going on for many, many years and nobody seems to care!   Wall Street promotes this behavior and writes stellar analyst reports on the corrupt corporations provided Wall Street gets ther "cut"; most workers are too stupid too even recognize it, and even worse, the average investor is ----well, retarded!

Unbelievable how screwed up our fascist system has become!

Rastamann's picture

#13. Rampant cronyism and corruption

Those in business circles and close to the power elite often used their position to enrich themselves. This corruption worked both ways; the power elite would receive financial gifts and property from the economic elite, who in turn would gain the benefit of government favoritism. Members of the power elite were in a position to obtain vast wealth from other sources as well: for example, by stealing national resources. With the national security apparatus under control and the media muzzled, this corruption was largely unconstrained and not well understood by the general population.

Fourteen Defining Characteristics Of Fascism

Kat's picture

Yes, sir!

Small firms are regulated out of existence by FINRA and the SEC so that there is no choice but to deal with the government cronies who can rape and pillage at will.

And "national resources" are, of course, the productive population of the country. There is no greater national resource.

Nolsgrad's picture

that tiny little up in flows late August... yeah me, fat fingered it.

Absalon's picture

These complaints are being made by traders against traders.  When they run out of retail investors to cheat,  Wall Street starts cheating each other. When that game ends, Wall Street will implode.

AmCockerSpaniel's picture

FINRA, is a private corporation. It replaced National Association of Securities Dealers, Inc. (NASD). Just what do you expect?

cowdiddly's picture

Ever notice how to set up a criminal enterprise? You have brokers are regulated by the SEC but they  supposedly settle each and every trade through a private organization, the DTTC, then the SEC says they do not have any authority over.

Or maybe the taxpayers and the treasury and then Fed a private organization not auditable.

I love our own shining corrupt money scam right here in Oklahoma. Taxpayers pay highway taxes. These funds are added with road tolls and given to you guessed it The Turnpike authority, a private organization that does not have to report how the money is spent or where it went.

X.inf.capt's picture

second try....

rogue trader, what about prosecuting these ROGUE BANKER CEO's.

yeah, i know.....fat chance.

p.s. we had a major crash here at the air races.

some of the boys and i just got done donating blood

watched a HUEY that was on display get fired up and start evac'in people to renown hospital. maybe people will pull together when SHTF.

the world wonders

fxrxexexdxoxmx's picture

    Thanks for your help. Got in late and just watched a video of the crash. Unbelievable, the plane ,WWII mustang, nosed dived into a portion of the box seating and disintegrated.

X.inf.capt's picture

About 4:30 local, caught a phone call about 10 min later. We headed to the 'bank'. Girlfriend got called in to work early, yeah, she's wears white.
One hell of a mess, if you see a close up of that plane hitting, that's what artillery looks like, up close.
53 wounded, 3 aren't getting back up, so far.
Poor people, didn't know what hit them.
That's why I avoid events and large groups of people...

navy62802's picture

If there were some hypothetical agency within the US government that was designed specifically to identify and eradicate all of the fraud and corruption from the stock markets, our economy would collapse overnight. Because the only thing keeping it afloat right now ... the only thing driving "growth" is fraud and corruption. Eliminate those two things from the overall picture and it all goes poof into the wind.

Xibalba's picture

finra ain't gonna do shit....and we know it.

Kat's picture

Yes it will. It'll collar some firm on procedural issues (that is, a t wasn't crossed or an I wasn't dotted on some paperwork - they didn't actually do anything wrong) for headlines and fine it out of existence.

Firms actually fucking over their customers are the too big to fails. They are politically connected, backstopped with your taxes and untouchable.

The big banks love these complaints because it gives a pretext for FINRA to drive their competitors out of business.

digalert's picture

Gee Wally, nobody complained before. Complaints spiked? Perhaps the shit-can where all complaints go has overflowed from staggering to overwhelming. fuckin crooks

Let them eat iPads's picture

That UBS trader needs to be severely punished.

Anything less than a 2 week suspension with pay would be a farce.

Cdad's picture

Stop Dave.  Will you stop, Dave?  I'm afraid.  I'm afraid, Dave.

I can feel it.


SheepDog-One's picture

The market is just a joke at this point, even daily carrot and stick has lost its mojo, theyre at the end of the line here very soon as theres no point to it anymore.

espirit's picture

All casinos are rigged, and when the last of the sheeple forfeit their last dime it will be time for daBoyz to turn against one another for the pennies in front of the steamroller.

About time for a few to be run over.

Dingleberry's picture

will that rogue keep his bonus???  BTW, fuck FINRA. They have known forever about quote stuffing, front running, naked shorting, daisy chains, insider trading, reverse trades, etc.  But the thieving is just too damn easy and good. That's why there is no volume. Everyone knows the game is RIGGED.

xtop23's picture

 UBS needs to be punished ..... this "rogue" trader thing is bullshit.

 He's the guy with the landing party in the red shirt along with Kirk, Spock, and McCoy.

XRAYD's picture

With Congress and staffers allowed to trade based on inside information, and profit from manipulated markets, and with a toothless speechifier in the White House and his worthless justice department, Who is going to do anything about this?

xtop23's picture

 No one.

 Instruct friends and family on how to preserve their purchasing power for the upcoming pyrotechnics and ride it out.



SheepDog-One's picture

The market is just reduced to a manipulated crowd control tool, until they pull the rug out soon.

centerline's picture

It is the final battlefield.  Just thinking out loud, I see at least 3 dominant games being played:

The first is the government in cooperation with the Fed.  It is to keep reality from asserting itself.  For example, absent the manipulation we would see those municipal failures right and left as pension funds go bust overnight.  This might just be the distraction that allows the greater crime to be committed, because fighting reality is really just futile.  And of course, the rug could be pulled out at any time quite easily (flash crash demonstrated this).

The second is the banking institutions turned rogue casino players.  This is about pure profit.  About getting away with financial murder.  Making a killing and living like a rock star.  This could either be part of the game, or just noise.  I suspect it is alot of both.  That is, some is noise.  But not enough of it to hurt the game being played or we would see some sort of real takedown.  The component of this that is part of the game I would imagine is a "dumb" component because it is predictable (greed is easy to predict).  This component is probably just a tool for the greater game being played.  Just like the polticians... tools.

The third is the international stage.  This is the real deal in my opinion.  Who is in the driver's seat here is not clear.  I wager the central banks are in control - at least in Western countries.

slewie the pi-rat's picture

i think finra handles the NASCAR investigations, too, don't they? 

always tearing stuff down to check the restrictor plates and administer fines to those who win while pretending not to cheat?

new drafting rules?  just a little nudge and that rear end gets loose and instead of a slo-speed train wreck we get a hi-speed car wreck? 

and people on fire?

after they get slammed into the fuking wall?

sheeeee-it, man!  that's racing!

SheepDog-One's picture

Im on FIRE! A'm on FAAAR!! HELP!!

Ricky Bobby, youre not on fire, youre going 5 MPH....and why the hell did you take off your racing suit youre in your damn underwear man!

Smiddywesson's picture

Mom and Pop are not coming back.

nah's picture

gamma sixtey nine is over the top


maybe it would work

Zola's picture

Tyler, i could not agree more about legacy investors being bailed out by the government. This is a disgrace and is very detrimental to capital formation and growth. We have totally clueless investors still managing large amounts of money and directing this capital in totally the wrong direction. While a good cleansing would redirect this remaining capital towards new and more efficient people , this constant bailout of people like biggs , biryini, buffet is absolutely SCANDALOUS. Again recently, had the Fed not come out guns blazing SPX would sure be <1000 and the momo chasers would be shown to be totally clueless.

Cdad's picture

This is a disgrace and is very detrimental to capital formation and growth.

This is the key point to understand.  In the event that Ben Bernanke pulls out yet another bazooka [something more than buying the 30 year note], it will be central banks' continued declaration AGAINST capital formation and free markets.  It is the promissory note that the dollar will continue to be devalued for the sake of supporting bank assets AT ALL COSTS.  

Now, I don't think Ben Bernanke has another bazooka, myself...which I believe will cause the dollar to rise very quickly.  I think he will announce the Twist and nothing much more.  However, and if I am wrong, folks need to understand one simple thing.  A revolution in this country is urgently needed...and I am not talking about guns and guillotines.  I am simply talking about a movement in this nation to simply end spending and investing [the second part already well underway].   It really can be that simple.

The key to dealing with an unrepentant Federal Reserve Bank, as well as striking a blow against crony capitalism in this nation, is simply the refusal to participate in the false economy.  Yes, you may get a negative real return on cash in the short term.  You'll probably do better holding metals in the intermediate term.  However, the global Ponzi scheme now at its logical tipping point, cash will be king, to be sure. 

Capital Formation is the only true solution to our current problems, but capital will not form in a financial system as corrupt as the current regime is...and capital will not form until free markets are finally allowed to clear.  


cowdiddly's picture

BULLSHIT. They have been seeing tons of complaints since they implemented REGSHO years ago. Finra and the SEC have turned a blind eye to the corruption for at least 7-8 years that I am factually aware of and have direct evidence; probably much longer that I do not have direct evidence. This can only mean that the Agencys are in collusion with the crimes. Now it is getting so bad the markets do not even make any sense with reality, so now the only players are the HTFs vs the FED. You  two can have it, fight it out. BURN IT DOWN. 

SheepDog-One's picture

Theyll burn down soon! Theyre at the end of their game, there isnt any point in it anymore. Mom and pops gone, 401K's being cashed one left to rob, so no point in elaborate market manipulation now OTHER than crowd control and everyones calling BS on that too!

Kat's picture

Moms and pops were never a large enough portion of the market to matter.

HFT is here to stay. Trading costs have been increased so much by the regulator (for both customer traders and market makers) that algos are the only way to make money.

They're cheaper and more efficient than hiring traders. Plus, the bands you guys are such big fans of for market makers require algos. A market maker can't maintain a band around the NBBO manually. You guys are just going to have to make peace with algos - especially since you were asking for them. Or did you all not know that this is what you were demanding when you demanded it?

T-Bond's picture

Electronic market making is one thing. Quote stuffing, painting the tape and all the other structured theft that goes along in the current HFT brush stroke is not here to stay. Got it?

Cdad's picture

HFT is here to stay.

That is assured....NOT at all.  When the government finally decides that a collapse in market credibility must be addressed, the HFT is probably the first and easiest issue to deal with.  Slap  ten cent tax on each transaction, and these guys immediately have a huge problem.

And if you don't think that will happen, then I dare say you do not know how desperate Uncle Sam is about to be in search of the real economy continues to contract.

GoinFawr's picture

wouldn't a bid/ask latency rule be sufficient?

T-Bond's picture

Exactly Cow, 2003 is when things really went bad. The PTB will allow corruption to remain at a very high level in one form or another until it finally does burn down. This business had deteriorated exponentially in the last 10 years.