dark pools

dark pools

How Barclays Got Caught Red-Handed With "Pernicious HFT Fraud"

First it was gold, now it is HFT - poor Barclays just can't get away with any market rigging crime these days: "In sum, Barclays’ courting of high frequency traders, and its willingness to falsify the extent of high frequency trading activity in its dark pool, was contrary to Barclays’ representations to clients that Barclays operated with “transparency” and provided a safe venue in which to trade. As described by one former senior Barclays Director:  “there was a lot going on in the dark pool that was not in the best interests of clients. The practice of almost ensuring that every counterparty would be a high frequency firm, it seems to me that that wouldn’t be in the best interest of their clients . . . It’s almost like they are building a car and saying it has an airbag and there is no airbag or brakes.”

NY AG Sues Barclays For HFT Fraud - Live Feed

In what appears to be the first real action post-Flash Boys, NY AG Eric Schneiderman will announce at 4pm ET that Barclays will be sued over fraud allegations related to its Dark Pool's preferential treatment of high-frequency traders. As Bloomberg notes, Barclays runs one of the market's largest dark pools. This comes 2 months after the NY AG sent requests for information to various major HFT shops. It seems, just as we noted here, that a potential scapegoat is being primed 'just in case' this 'market' can't withstand the Fed's pullback.

Frontrunning: June 13

  • Tea Party struggles to repeat Cantor-style shock in Tennessee (Reuters)
  • Iran Deploys Forces to Fight al Qaeda-Inspired Militants in Iraq (WSJ)
  • Oil Rallies as Militant Advance in Iraq Threatens Crude (BBG)
  • Gold Set for First Back-to-Back Weekly Gain Since April (BBG)
  • Hedge Funds Get Stung by Slow Markets (WSJ)
  • Sterling nears 5-year high after Carney speech (FT)
  • Britain Warns Boom in Real-Estate Prices Threatens Economy (WSJ)
  • East Europe Leaders Urge EU Unity to Counter Russia (BBG)
  • Formula One Said to Be Valued at $8 Billion as Malone Seeks Stake (BBG)
  • Dumb and dumber: Abe Plans Company Tax Cut in 2015 as Kuroda Warns on Budget (BBG)

Sorry, You're Not Allowed: Capital Segregation and Rising Inequality

If capital is not treated equally, political equality is an illusion, for capital buys political influence and power. Capital that can buy political power gains political protection of its extraordinary privileges to control rentier income streams, income which furthers its political power.

Frontrunning: June 10

  • Ukraine, Russia Fail to Reach Deal in Natural-Gas Talks (WSJ)
  • Boko Haram Kidnaps More Girls in Nigeria (WSJ)
  • Déjà vu: echoes of pre-crisis world mount (FT)
  • Money market rates hit new low as ECB moves gain traction (Reuters)
  • 'Dark Pools' Face New SEC Probe (WSJ)
  • Buffett Ready to Double $15 Billion Solar, Wind Bet (BBG)
  • White House-Congress rift over Bergdahl deal deepens (Reuters)
  • Taxpayers Face Big Medicare Tab for Unusual Doctor Billings (WSJ)
  • Lean Retirement Faces U.S. Generation X as Wealth Trails (BBG)
  • Employers’ skills gap claim does not show up in US wage data (FT)
  • He is holding out for the Zuckerberg overbid: Donald Sterling says LA Clippers not for sale (WSJ)

Small Caps Surge To Best Week In 2014

The US Dollar, gold, and oil closed the week unchanged... Treasury yields rose 6-8bps on the week... and the Russell 2000 had its best week in 2014... Sure, why not? VIX was crushed back to a 10-handle as managers lifted hedges and the Tepper-induced short-squeeze from yesterday followed through (+2.5% against a 1% rise in the S&P). The Dow and S&P 500 both closed at record highs (notably rich to the Fed balance sheet). Volume was 20% below average (and that was a payrolls day!). Copper tumbled over 2% - its worst week in 3 months as China's warehouse probe continues.  VIX closed at its lowest close since Feb 2007 (and once again the strange shadowy figure of massive after-0hours volume spikes in VXX appeared).

 

SEC's Mary White Pays Lip Service To "Rigged" Market Structure Changes

Committees, investigations, concerns... but no actions. The SEC's Mary White spoke about market micro-structure this morning but mereley asked a lot of questions - as opposed to answered any. Two things she did mention of note: increased transpraceny for dark pools and internalizers; and forcing more high-frequency traders (and prop shops) to register as broker-dealers (and thus come under closer regulatory scrutiny). However, by the time any of this becomes 'law', we suspect the lobbyists will have created loopholes the size of Draghi's ego for HFTs to walk through. As WSJ reports, the SEC's enforcement division is investigating whether some high-speed traders are using order types - commands exchanges provide that determine how traders' buy and sell orders will be handled - in ways that can give them an advantage over less-savvy investors. We apologize for not seeing this 'investigation' as a positive but we've been here before with every other regulator... vested interests remain strong.

Wall Street Has Always Been Corrupt Or About To Be Corrupted

When obnoxiously wealthy pricks with the ability to bribe stock exchanges to place their trading computers on the floor of the exchange and financially induce the Wall Street banks to funnel trades through their dark pools in order to know what is happening a nanosecond before everyone else, and use this information to front run unknowing investors to generate risk free profits, it’s wrong. It really is black and white. I don’t care that it is supposedly “legal”.  By complying with Regulation NMS the smart order routers of institutional investor firms like Vanguard, Fidelity and Schwab simply funneled naïve investors into various snares laid for them by the unscrupulous high frequency traders. The bad guys always win and the good guys always lose on Wall Street. And no one does anything because they are all on the take. Lewis puts it in terms the average person can understand.

Furious Selling Slam Sends Silver Red For 2014: No Limits Triggered

With gold holding gains over 6% year-to-date (and the best performing asset-class), this morning's silver slamdown has taken the precious metal notably into the red for 2014 (-2%) and makes it the worst performing asset-class. Silver is back under $19 and near its lowest price since July 2013. Of course, it all started with the futures market where the sudden fiduciary need to dump over 2000 contracts 0505ET sent the complex collapsing, sending the gold-to-silver ratio to its highest since 2010.

"Timestamp Fraud": A Rigged Market Explained In One Simple Animation

The topic of High-Frequency-Trading quickly dissolves into a smorgasbord of mnemonics and 'inside-baseball' technical terms - just complicated enough to lose everyone that matters or should care about its implications. Despite the fair-and-balanced defense from the mainstream media business channels (sponsored by the belief in the status quo fair markets that 'America the free' is known for), the fact is that HFT does front-run (perfectly legal under the umbrella protection of Reg NMS) order flow, but there may be one more wrinkle - one which would cement the Michael Lewis (accurate) allegation that the market is rigged.

HFT Purge Begins: SEC Prepares To "Remove" Some High Frequency Trading Firms

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."

The HFT Blowback Continues: Fidelity Creates New Trading Venue

In what the firm believes will be an improvement over other so-called dark pools because it will be a collaboration among big mutual-fund firms, WSJ reports that the giant fund manager is quietly building a new trading venue designed to let big money managers sidestep many of the problems that they argue lead to unfair or costly trading - i.e. avoid the HFT predation. Fidelity, with $1.95 trillion of assets under management, is in the initial stages of planning the trading venue and has just begun to pitch the idea to other large asset managers. It seems 5 years of vociferous exposure and a Michael Lewis book may be beginning to starve the HFTs of their prey.

Triple Whammy Shocker: Goldman Shutting Down Sigma X?

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!