That markets are rigged, at both the macro level, through central banks, and micro, through HFTs, dark pools and purposeful market fragmentation, should be painfully obvious to everyone by now. But when even the regulators engage in "jury rigging", or in this case blocking prominent HFT-critic Joseph Stiglitz, a Nobel prize winning economist (a prize which doesn't count for much on these pages but should - at least on paper - impress such statist cronies as the SEC), has been blocked from a government panel that will advise regulators on issues facing U.S. equity markets, it becomes clear as day that the rigging is not just in the markets: worse, it is openly involves the market's "regulator" and "enforcer."
“Financial markets are important and I have been worried about the way they have been working and whether they are serving the American economy,” Stiglitz said. “I was willing to serve. The next thing I knew, I was told you didn’t get it.”
According to Bloomberg, "Stiglitz’s rejection shows the partisan infighting that has bogged down Securities and Exchange Commission Chair Mary Jo White’s plan to set up a panel of experts to advise the agency on topics ranging from rapid-fire stock trading to dark pools."
Actually what it shows is that the SEC is a puppet of the wealthy and powerful HFT lobby, which has made a mockery of markets ever since the passage of Reg NMS, and which has been given free reign to manipulate anything and everything however it wishes: manipulation which, as described here first 6 years ago and most recently, by Michael Lewis, is now obvious to all investors and explains why the general public has decided to fully boycott the capital markets knowing quite well that it, and nobody else, would be the sucker when the Fed pulls the rug from underneath both carbon-based traders and vacuum tubes.
Stiglitz himself understands this, and as he said in a phone interview, "I think they may not have felt comfortable with somebody who was not in one way or another owned by the industry."
Not surprisingly, even the rigging of US capital markets is split according to political lines:
Republican Commissioner Daniel Gallagher opposed Stiglitz’s nomination in recent weeks as White sought to complete the list of participants, according to two people who asked to not be identified because the deliberations were private. Democratic Commissioner Luis Aguilar had pushed for Stiglitz, who has said high-frequency trading isn’t good for financial markets and should be curbed, possibly through a tax.
White said Jan. 3 that she will announce the members of the advisory market-structure committee in the coming days -- six months after she first proposed the idea together with a blueprint for renewed market oversight. Each of the five commissioners -- two Democrats, two Republicans and White, an independent -- was allowed to nominate one person to the panel. The commission then had to come to agreement on the final list, which is expected to have more than 15 members.
Gallagher declined to comment on the panel, as did Gina Talamona, a spokeswoman for White.
But that's not as bizarre as it gets: apparently none other than former Fed vice chairman, Roger Ferguson also wanted to be on a panel advising on, of all things, efficient equity markets.
Stiglitz, 71, wasn’t the only nominee that sparked wrangling. Earlier in the process, SEC Commissioner Michael Piwowar, a Republican, opposed the involvement of TIAA-CREF Chief Executive Officer Roger Ferguson, according to two other people familiar with the matter. Ferguson, whose firm manages hundreds of billions of dollars in retirement savings, is a former Federal Reserve vice chairman. He is married to former SEC Commissioner Annette Nazareth, who now advises some of Wall Street’s biggest banks on regulatory issues.
Piwowar wouldn’t discuss specific nominees but said that he opposed “a former Federal Reserve governor” who was included in an early list of candidates prepared by the SEC’s staff. Mike Tetuan, a spokesman for TIAA-CREF, said Ferguson declined to comment.
“My concern was about the institution of the Federal Reserve and not any particular individual,” said Piwowar, who has complained about the Fed’s role regulating companies overseen by the SEC. “I didn’t want to give them more undue influence in areas in which they have no particular knowledge or expertise.”
That said the panel won't be staffed entirely by current and former employees of the biggest HFT firms: present will be Brad Katsuyama who singlehandedly cost BATS CEO William O'Brien his job after the latter lied on CNBC about his business model.
The panel is expected to include representatives of Wall Street brokerage firms and academic researchers. IEX Corp. Chief Executive Officer Brad Katsuyama and former Senator Ted Kaufman of Delaware are expected to be named to the panel, two people with knowledge of the matter said.
Back in April, in a speech at the 2014 Financial Markets Conference hosted by the Atlanta Fed, Stiglitz said what Zero Hedge first posited 5 years earlier, namely that high-frequency trading makes markets less efficient while driving other investors to cloak their orders by placing them away from exchanges using dark pools, leading to less transparency, leading to premeditated market manipulation. Stiglitz' speech "Tapping the Brakes: Are Less Active Markets Safer and Better for the Economy?" can be found here.
Normally, we would be disgusted by this latest example of corruption, cronyism, and the realization that rigged markets can never become unrigged as long as the fallible and easily bribable human elements is present. At this point, however, there is little sense: with the macro manipulators, the world's central banks themselves, increasingly boxed in and with zero options left, what happens next not even the algos can prevent.