FINRA Initiates Probe Into Goldman's "Trading Huddle" And Comparable Practices By Other Wall Street Firms

Could it be that the regulators are finally set on doing the one thing they are paid to do, i.e. regulatoring? Perhaps, especially when they are presented with all the data on a silver platter, as the WSJ did some time ago. The same WSJ reports that FINRA has now started a probe into the practice known as "trading huddles" which is merely another phrase for providing the best, most actionable data to one's preferential clients, and also a very politically correct and polite way of allegedly endorsing front-running.

The industry-funded regulator of securities firms doing business in the U.S. recently sought information from Citigroup Inc., J.P. Morgan Chase & Co. Morgan Stanley and other firms, including details of any meetings where unpublished research opinions or trading ideas were disclosed to nonresearch employees or clients.


The probe follows an article in The Wall Street Journal in August about gatherings at Goldman Sachs Group Inc. known inside the company as "trading huddles." During the meetings, Goldman analysts gave short-term tips to traders, followed by big clients. The tips sometimes differed from Goldman's long-term research...While large clients routinely get extra attention and service, Finra officials want to determine if the gatherings give an unfair advantage to certain customers.

Goldman, however, is not the only firm involved as this has long been a pervasive practice throughout the major brokerages:

Finra's examination of the trading huddles at Goldman was expanded last month to include about 10 other firms, according to people familiar with the situation. Responses were due earlier this month.

Surprisingly, this could end up being more than just more posturing by Mary Schapiro's former firm:

In its letter to securities firms, Finra asked for lists of all meetings held since July 2008 where "any non-published research opinion and/or information … regarding a company under research coverage by the Firm was disclosed … to non-research personnel or current or potential customers of the firm."


The information requested by Finra includes dates and minutes of meetings, names of attendees and the names of clients who might have received the information.

When FINRA is done with the trading huddle, it should consider evaluating the "impact" of expert networks, another topic Zero Hedge has written about extensively in the past (here, here and here)