A week ago, when we commented on the latest publicly available data for Barclays' fraud-embroiled LX dark pool, whose volume as we reported had tumbled 37% in the week of the lawsuit announcement, we said that the downward volume trend "is about to get a whole lot worse for Barclays as the trickle becomes an avalanche." Sure enough, following today's reported by Finra's ATS database for the week of June 30, we find just that, and one can largely say lights out to Barclays LX operation, whose total shares traded plummeted from 197 million (and 312 million the week before) to a paltry 66.4 million, a two-week drop of 79% from its recent highs, putting it, in 12th total dark pool volume place, below ITG and above BIDS trading. So much for any ambitions of becoming America's top dark pool. Last on the other hand...
In case there is still any confusion on whose behalf the US regulators work when they "fine" banks, the latest announcement from Finra should make it all clear. Recall the spectacle full of pomp and circumstance surrounding NY AG Scheinderman's demolition of Barclays after it was announced that the bank had lied to its customers to drive more traffic to Barclays LX, its dark pool, and allow HFT algos to frontrun buyside traffic. Yes, it was warranted, and the immediate result was the complete collapse in all buyside Barclays dark pool volume, meaning predatory HFT algos would have to find some other dark pool where to frontrun order flow. Such as Goldman's Sigma X. Which brings us to, well, Goldman's Sigma X, which moments ago, in a far less pompous presentation, was fined - not by the AG, not by the SEC, but by lowly Finra - for "Failing to Prevent Trade-Throughs in its Alternative Trading System." The impact: "In connection with the approximately 395,000 trade-throughs, Goldman Sachs returned $1.67 million to disadvantaged customers." The punchline, or rather, the "fine": $800,000.
Ever since Goldman's anti-HFT Op-Ed less than a month ago, and since the even more recent full-hearted support by Goldman of Michael Lewis' most recent entry into the anti-HFT crusade (one promoting the Goldman-supported IEX exchange), one thing has been clear: the days of market structure in its current format are numbered. This was further confirmed after Goldman exited both its legacy Spear Leeds & Kellogg designated market making post at the NYSE, and is said to be winding down its market-dominating dark pool, Sigma X. Sure enough, Post reports that just three weeks after the Gary Cohn Op-Ed, the SEC is "preparing to remove some high-frequency trading firms."
In a world filled with innuendo, false flags, and more one thing remains constant: What is Goldman Sachs (GS) up to and more importantly – why?
- Sensitive Market Data Leaked After Government Phone Call (WSJ)
- This is a actual Bloomberg headline: China Fake Data to Skew More Export Numbers (BBG)
- This is another actual BBG headline: U.S. as Global Growth Engine Putt-Putts Instead of Purring (BBG)
- Ukraine wants to buy European gas to boost energy security (Reuters)
- JPMorgan Profit Falls 19% on Trading, Mortgage Declines (BBG)
- Record Europe Dividends Keep $2.8 Trillion From Factories (BBG)
- Why is Goldman shutting down Sigma X: SEC eyes test that may lead to shift away from 'dark pools' (Reuters)
- Ebola Outbreak Empties Hotels as West Africa Borders Closed (BBG)
- Australian PM says searchers confident of position of MH370's black boxes (Reuters)
- Gross Says El-Erian Should Explain Reason for Exit (BBG)
I contend that Lewis should have done a lot more to identify the parties involved and tell the full story of latency arbitrage in Sigma X.
- Top Medicare Doctor Paid $21 Million in 2012, Data Shows (BBG)
- Separatists build barricades in east Ukraine, Kiev warns of force (Reuters)
- Greece launches sale of five-year bond (FT)
- High-Frequency Trader Malyshev Mulls Accepting Outside Investors (BBG)
- U.S. defense chief gets earful as China visit exposes tensions (Reuters)
- GM Workers Who Built Defective Cars Fret About Recall (BBG)
- Kerry, Congress Agree: Superpower Status Not What It Was (BBG)
- Crimeans Homeless in Ukraine Seek Solace in Kiev Asylums (BBG)
- JPMorgan's Dimon says U.S. banks healthy, Europe lagging (Reuters)
Back on March 21, before the release of Michael Lewis' Flash Boys and before the infamous 60 Minutes interview, when Goldman COO Gary Cohn wrote his infamous WSJ Op-ed bashing HFT, it was clear that something was afoot. That something became promptly clear when it was revealed that Goldman is among the core backers of the pseudo dark-pool IEX exchange popularized as the protagonist in Flash Boys, and juxtaposed to the frontrunning, and faceless, HFT antagonist that Lewis maanged to demonize so well in the span of a few hundred pages, he promptly provoked a renewed investigation by the FBI, the SEC and DOJ into HFT. A few days later, the shocker became a double whammy when Goldman announced that in addition to turning its back on HFT which had served it so well for years, the firm would also say goodbye to the NYSE and its designated market maker post, the last remaining legacy of its $6.5 billion Spear Ledds & Kellogg acquisition from 2000. Moments ago we got the third and final "shocker" in this series of stunning disclosures by Goldman, this time involving Goldman's own "unlit" venue - one involving its own Dark Pool - the infamous, and market dominant Sigma X, which according to the WSJ, is about to be shut down!
In what is a true double whammy of market structure stunners from Goldman over the past week, not only has the firm done an about face on HFT (we eagerly await Goldman's pardon of "HFT market manipulator" and former Goldman employee Sergey Aleynikov) and is now actively bashing the high freaks (much to the chagrin of Virtu and its pulled IPO, whose lead underwriter Goldman just happened to be), overnight it was reported that Goldman is also in the process of selling its "designated market-maker" unit to Dutch firm IMC Financial Markets to sell the trading business.
We know what you're thinking... why didn't Virtu Financial's CEO Chris Concannon ban Twitter and YouTube? It seems that is the only thing the HFT firm is incapable of as just too much public scrutiny from various fact-full blogs and a major expose of the reality of the US stock 'market' was too much for even the greatest fools in the market to be fooled by:
- *VIRTU SAID TO DELAY IPO AMID FUROR OVER MICHAEL LEWIS BOOK
As we warned previously, it was only a matter of time before the hubris of VRTU's own trading perfection swung around and crushed it: "Simply put, first it was their boastful trading record that got the NYAG involved, and then Lewis slammed the door shut."
"Retroactive Market Conditions": Nasdaq Says Would Have Called Off FaceBook IPO If It Knew Then What It Knows NowSubmitted by Tyler Durden on 05/22/2012 18:07 -0400
First of all, let's get one thing straight: if instead of about to breach a 20-handle, the Facebook stock price was in the $60, nobody would care about anything that happened in the past 3 days, everyone would be happy and delighted, and increasing the velocity of money with the comfort that some greater fool would be willing to pay even more for ridiculous overvalued ponzi, pardon, portfolio holdings. Alas, we are not there, and as a result, the fingerpointing phase has come and gone. Now come the lawsuits, because people, led to believe in huge short-term profits, are now faced to face with a grim sur-reality in which the tooth fairy was just exposed as the cookie monster. And the latest farcical development: Nasdaq finally pulling market conditions, but not just any market conditions - retroactive ones.
Last Wednesday we put up the following blurb: "Five months ago, when Italian yields were still tame in the 3% ballpark, and not 7% where they are today, we suggested that based on trading patterns and overall volume in Goldman's dark pool, Italy may be about to experience a "Greek episode." Days later we were proven right as Italian yields and spreads started their relentless move wider, with only those who had access to Sigma X being able to get an advance whiff of what was about to happen. Well today we are happy to report that the German diversion may have worked: the truth is that nobody appears to care about Germany. Instead what everyone does seem to care about, is the nation with the greatest combined debt (government, corporate and household) to GDP in the world. Yup. The UK." Following that, a quick Twitter update from this morning indicated something was again going on with the UK from the perspective of the world's most connected insiders: "UK's LLOYDS and RBS top of most active on Sigma X this morning." Sure enough, here's Fitch with what may well be a precursor to the bond vigilantes finally focusing their attention on the last, latest and greatest AAA credit.
- FITCH: UK GOVT MAY BE MOST INDEBTED OF AAA SOVEREIGNS EX U.S. -BBG
- FITCH: NEW UK FISCAL VIEWS 'SIGNIFICANT DETERIORATION' VS MARCH - BBG
- And the punchline: "the capacity of UK public finances to absorb adverse economic and financial shocks that would result in yet higher public debt while retaining its 'AAA' status has largely been exhausted"
And cue the imminent downgrade rumors - and ensuing safe-haven outflows to TSYs.
Five months ago, when Italian yields were still tame in the 3% ballpark, and not 7% where they are today, we suggested that based on trading patterns and overall volume in Goldman's dark pool, Italy may be about to experience a "Greek episode." Days later we were proven right as Italian yields and spreads started their relentless move wider, with only those who had access to Sigma X being able to get an advance whiff of what was about to happen. Well today we are happy to report that the German diversion may have worked: the truth is that nobody appears to care about Germany. Instead what everyone does seem to care about, is the nation with the greatest combined debt (government, corporate and household) to GDP in the world. Yup. The UK.
For years Zero Hedge has been exposing the persistent fraud that goes on behind the trading scenes, not only in High Frequency Trading, but also in various dark trading venues, known better as dark pools where exchanges, typically the banks themselves get to match buyers and sellers without any indication of a trade having occurred, until much later if at all. Recently, and very much as we expected, trading firm Pipeline was smacked down by the SEC for gross violation of customer orders, an offense which can be summed up simply as: frontrunning. We now learn that, as the Wall Street Journal reports, Pipeline is pretty much finished after the Chairman and CEO have both quietly left the sinking ship. The WSJ adds: "The case was the SEC's first enforcement action involving dark pools, and it shocked the trading community, according to traders and other operators of electronic-trading systems. People who know Messrs. Berkeley and Federspiel said they were highly regarded among their peers. Mr. Berkeley was a former president and vice chairman of the Nasdaq Stock Market. Mr. Federspiel once worked at the Los Alamos National Laboratory as a nuclear physicist." Well, we certainly were not shocked, having predicted the demise of dark pools as early as the summer of 2009. What will shock the trading community, however, even more is if the SEC decides to go after not some tiny unknown firm, but the real dark pool transgressors, the biggest one of which is and has always been Goldman's Sigma X. Of course for that to happen, Mary Schapiro would actually have to do her job. And that, unfortunately, ain't happening.
Intesa may be halted for trading on the MIB, but that sure doesn't mean that Goldman's Sigma X clients are prohibited from dumping their shares on the hedge fund's dark pool, which incidentally is always happy to accept and match client orders. Sure enough, as the puke fest in European banks resumes (and both Italy and German CDS are now materially wider on the day, the Italian 2-Year Note yield rising 30 bps to 3.95%, and the 10-Year up 20 to 5.60%), the top traded names on Goldman's dark pool once again is the who's who of insolvent European banks, starting with Italy, passing through the UK and rounding up the top 5 with Germany. But, but, the second European bailout was supposed to work? What happened?