Market Manipulation

The U.S. Securities and Exchange Commission is “rigorously” investigating whether traders are using technology to manipulate markets, the agency’s enforcement and inspections chiefs said today.

And this time it is not those nutcases over at Zero Hedge making the claim, but the reputable New York Times, a place where even more reputable Mexican billionaires go to provide rescue financing. The NYT discloses how Chicago-based traders (what is it with Chicago style [blank] - first in politics (no comment needed there), and now in every story about market manipulation) Optiver, may have been openly gaming the commodities market using HFT strategies.

A favorite practice by numerous market makers, better known as "spoofing," in which order blocks, which will never be executed, prop up either side of an order book with the goal of manipulating the stock price, is starting to get much needed scrutiny across the Atlantic. In the meantime the SEC is resting on its Madoff laurels, as more and more investors are confirming a necessary and sufficient inventory of pitchforks.

There is much speculation and anecdotal information regarding the rally that began March 6 2009, which have suggested the gains are the result of massive manipulation on the part of the Federal Reserve (FR) and the large institutions that dominate Treasury securities dealing, program trading and the derivatives markets. Traders have reported that traditional indicators and metrics used for market analysis stopped working for periods of time or altogether, and that correlations among markets have been erratic and quick to change. Record program trading by Goldman Sachs as reported by the NYSE, heightened focus on high frequency trading (HFT), outsized profits by the large and well-connected banks, along with unprecedented intervention by the FR in the markets only fuel the manipulation speculation.

“The
bank has raised the possibility that there is a danger that somebody who knew how to use this program could use it to manipulate markets in unfair ways,” Facciponti said. “The copy in Germany is still out there, and we at this time do not know who else has access to it.”

The prosecutor added, “Once it is out there, anybody will be able to use this, and their market share will be adversely affected.”

The proprietary code lets the firm do “sophisticated,
high-speed and high-volume trades on various stock and commodities
markets,” prosecutors said in court papers. The trades generate “many
millions of dollars” each year.

With a subtitle like "From tech stocks to high gas prices, Goldman Sachs has engineered every major market manipulation since the Great Depression - and they're about to do it again" run, don't walk, to your nearest kiosk and buy Matt Taibbi's latest piece in Rolling Stone magazine.

With a subtitle like "From tech stocks to high gas prices, Goldman Sachs has engineered every major market manipulation since the Great Depression - and they're about to do it again" run, don't walk, to your nearest kiosk and buy Matt Taibbi's latest piece in Rolling Stone magazine. One of the best comprehensive profiles of Government Sachs done to date. Speaking of GS, they sure must be busy today, now that Bernanke is about to be impeached and take the fall for all their machinations.