Why is the assertion that “all markets are manipulated” generally greeted with scorn and derision? Because while manipulating any particular, single market is a relatively straightforward matter – using “tools” for financial crime honed through centuries of practice — rigging markets collectively has always been viewed as an endeavour infinitely more difficult than herding cats.
Markets diverge. It’s what they do. While overall economic fundamentals affect all markets, and all sectors. These fundamentals affect markets/sectors/companies unevenly. Coupled with that, every individual sector/market has its own, unique collection of economic fundamentals – almost entirely independent of the general fundamentals of the economy.
This absolute absence of homogeneity means that in (legitimate) markets we will always see most sectors (and individual companies) moving not only with varying degrees of magnitude, but frequently in opposite directions. This is what must happen in any/all legitimate markets, on most days. It is only at times where the general fundamentals are extreme (i.e. extremely bad or extremely good) where we will ever see markets exhibit herd-movement patterns.
What do we see in the Western-dominated markets of the 21st century? We see this herd movement not just occasionally, but virtually every hour of every trading day, something which is absolutely impossible. Suddenly our herd of cats is behaving – every hour of every day – like rats following a Pied Piper. Obviously when we see a herd of cats behaving like rats following a Pied Piper, this directly and necessarily implies the existence of a Pied Piper.
Enter so-called “high-frequency trading” (HFT): the Pied Piper. The disinformation which both the general public and the puppet-regulators have been fed is that this market-rigging apparatus is supposedly aimed at nothing other than bringing greater “speed and efficiency” to our markets. The reality is that this was never more than a minor consideration, and the One Bank’s “HFT” innovations were always aimed at totally-and-completely manipulating markets: its virtual Pied Piper.
This is very similar, in kind, to the lies fed to us by the bankers when they wanted to introduce “short selling” into our markets. It would induce “better price-discovery” in markets, and thus “make markets more efficient”, they told us. The reality is that (until the One Bank perfected its Pied Piper trading algorithm) massive, manipulative short-selling was the bankers’ most-important and most-often used weapon for distorting (and thus rigging) markets.
These two, campaigns of lies, used to “justify” two of the banksters’ most formidable weapons for market manipulation have several factors in common:
1) Both can/would only have a benign impact on markets if used in extreme moderation.
2) Both have obvious manipulative potential.
3) Neither have any legal/statutory limits as to the quantity of such trading which infests our markets.
4) Neither are subject to any meaningful degree of oversight by our blind/deaf/dumb “regulators”.
To call this a “recipe for disaster” is the ultimate of understatements. This is not merely allowing “the fox into the henhouse”. It’s allowing an unlimited/infinite number of foxes to enter the henhouse – all with unsupervised access. It is recklessness to an extreme which directly and necessarily implies corruption. No one can be this “blind”.
Yet, to this point, all of the evidence of a Master Trading Algorithm is theoretical, the process of necessary, logical deduction. We see a herd of cats behaving like mesmerized rats, ergo we know there is a Pied Piper. It is “circumstantial evidence”, and circumstantial evidence is the primary basis for the vast majority of all convictions in our criminal justice system. Strangely, however, the Average Person gives this evidence very little heed when encountered outside the courtroom, and then spends all his/her nights soaking-up this evidence as they watch their “crime dramas”.
For those readers however, we now have far more than (merely conclusive) circumstantial evidence to offer, and can now supplement inevitable logic with overwhelming empirical evidence. First there was theevidence offered in a lawsuit against the Chicago Mercantile Exchange, global focal point of commodities trading.
In that suit, the plaintiffs asserted they had evidence that half of all trades at the CME are “wash trades”, phony and illegal trading activity, which has no purpose other than to manipulate markets (in this case all the world’s commodity markets). Billions of phony/illegal trades every year. Half of all trading at the CME amounts to approximately 100 illegal trades per second – something utterly beyond human capacity. But not beyond the capacity of a computerized trading algorithm.
This is “old news” now, however. More recently, we have the first real attempt to study the obvious manipulative potential of so-called “HFT” trading. The findings are stunning (to most), and unequivocal. Researchers found vast quantities of what they euphemistically termed “quote-stuffing”, and then they went on to spend 50 pages dissecting the various ways in which this “quote-stuffing” distorted markets – and thus manipulated markets.
More damning was the endemic nature of this quote-stuffing. The data indicated that 74% of all U.S. equities (it was a U.S. study) showed significant evidence of quote-stuffing (i.e. market-rigging). Obviously when one speaks of “manipulating all markets”, on an individual basis it’s only necessary to manipulate important equities. Now we know what percentage of (U.S.) equities the One Bank considers “important”: 74%.
Note that this study proceeded with the assumption that there was no pattern to this quote-stuffing, i.e. no Invisible Hand which was engaging in this quote-stuffing on a systematic basis. Yet despite the assumption of a lack of such master control, the researchers also found:
“an abnormal correlation in message flow”
In other words, while the premise of this research was that such market manipulation was “micro” in nature, i.e. taking place separately, on an equity-by-equity basis, what they actually observed was a patternto this manipulative trading, a Pied Piper. Not only is market-manipulation via HFT-trading massive, it is alsosystemic.
At this point, it’s necessary to remind readers of more comprehensive research, which has been referred to in many, previous commentaries. Using a data sample of more than 10 million corporate and personal entities, a trio of Swiss researches concluded that a single “super entity” (a collection of more than 140 corporate fronts) controlled, by itself, 40% of the entire global economy. Furthermore, the researchers found that “3/4 of the core [i.e. super-entity] are financial intermediaries”. The Mega Monopoly discovered by Swiss researchers is primarily a banking monopoly – hence the name “the One Bank”.
Putting together the results of these two, very detailed studies along with the evidence introduced into the lawsuit against the CME brings us to this. We have empirical evidence of a single financial entity (the One Bank) manipulating all U.S. equity markets, and all U.S. commodity markets. Furthermore, this most recent study is conclusive that the majority of this market-rigging is perpetrated though the massive and systematic use of manipulative “HFT” trading: the Pied-Piper trading algorithm of the One Bank.
Markets cannot move in synch, every hour, every day. Our “markets” do move in synch, every hour of every day, ipso facto we do not have markets. Rather, we have a totally rigged casino, where a single Pied Piper controls all of the bets, and thus all of the bettors.
Theory tells us that nothing other than an endemic, computerized trading algorithm could transform a “herd of cats” (our markets) into a pack of docile, mesmerized rats, marching day after day in near-perfect synchronicity. Empirical evidence shows us how this is actually taking place. The prosecution rests.