The Market Ticker
Commentary on The Capital Markets- Category [Corruption]

I, and others, most-notably Nanex, have long believed and put forward the premise (and evidence) that HFT is nothing more than a scam in the main.  Oh, I'm sure there are parts of it that aren't, but we're not talking about the margins -- you can always find things at the margin of any activity that are <x> or <y>.

No, we're talking about what most of the people who do a given thing actually are doing.

I remind everyone what The Securities and Exchange Act says once again:

(a) Transactions relating to purchase or sale of security
It shall be unlawful for any person, directly or indirectly, by the use of the mails or any means or instrumentality of interstate commerce, or of any facility of any national securities exchange, or for any member of a national securities exchange—
(1) For the purpose of creating a false or misleading appearance of active trading in any security other than a government security, or a false or misleading appearance with respect to the market for any such security,
(A) to effect any transaction in such security which involves no change in the beneficial ownership thereof, or
(B) to enter an order or orders for the purchase of such security with the knowledge that an order or orders of substantially the same size, at substantially the same time, and at substantially the same price, for the sale of any such security, has been or will be entered by or for the same or different parties, or
(C) to enter any order or orders for the sale of any such security with the knowledge that an order or orders of substantially the same size, at substantially the same time, and at substantially the same price, for the purchase of such security, has been or will be entered by or for the same or different parties.
(2) To effect, alone or with 1 or more other persons, a series of transactions in any security registered on a national securities exchange, any security not so registered, or in connection with any security-based swap or security-based swap agreement with respect to such security creating actual or apparent active trading in such security, or raising or depressing the price of such security, for the purpose of inducing the purchase or sale of such security by others.

Now look at what Nanex has documented -- and this is not a singular case.

Looking at the table data, we note the first trade is 100 shares on BOST (NQ-OMX Boston) and belongs to our trader. Note, however, it was the 4th trade reported back to him ("4" in the last column). The first 3 trades, not shown here because they end up being reported dead last(!), were dark pool prints from Sigma-X (Goldman's dark pool).

The next trade is 67 shares at EDGE (New Bats Edge-A), but they weren't from our trader's order: someone else bought those shares ("X"). How does that happen?

Lines 4 and 5 are order cancellations of 100 shares and 600 shares from ARCA and NYSE respectively - all in the same millisecond!

Lines 6, 7 and 8 are trade executions from EDGE and belong to our trader - note the first trade (line 3) was also from this exchange but, as noted above, went to someone else. This also means that order cancellations from NYSE and ARCA happened before any size appeared.  

The next 19 entries (lines 9 to 27) show a flurry of order cancellations coming in from NYSE, ARCA, BATS, NQEX and EDGX. This is before the first trade execution at any of those exchanges! This flurry of cancellations removes 10,300 shares from the number of shares offered (Shares Avail. column drops from 21,400 down to 11,100)! Also note how the cancellations rotate through many different exchanges. That's one sure way to throw off, confuse, stall a smart order router.

In other words, roughly half of the so-called shares on "offer" were not really intended to be sold at all.

The reason these shares were "represented" to be available for sale is because the HFT boys get a feed of data faster than everyone else; they can thus discern that a large order is about to hit the exchanges before the trade actually gets there and thus can cancel their so-called "representation" of liquidity.

But for that privileged ability to know in advance what is about to happen they could never do this.  Not only does this make a mockery of RegNMS and the premise that there is to be one consolidated feed along with a National best bid and offer it further directly implicates The Securities and Exchange Act -- a law that broadly prohibits any activity that falsely represents shares on offer or bid that are not really intended to be bought or sold at the price advertised.

If a car dealer advertises a car for sale for $21,000, and when you go to buy it he then won't sell it to you, said car "magically" disappearing as soon as you show up waving $21,000 at him, we have no problem calling that bait and switch and criminally charging him.  Likewise, if a store advertises hamburger for $3/lb they better have some for sale at that price and be reasonably able to sell you the hamburger.

The "defense" of this sort of practice in the trading business makes an utter mockery of the so-called "markets."

Nanex has spent quite a bit of time and effort documenting this blatant activity, just as I have in various areas of our eCONomy.  And, it appears from this article, that Scott has had enough as well.

Just wind it down folks -- no more job creation, no more entrepreneurship, no more tax liability.  Say "**** you" to Washington and it's refusal to enforce the law, making it possible to compete on the merits, until the theft is stopped and those who have been doing it start going to jail.

 

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Oh my, the hits just keep coming, don't they?

With both public stock exchanges and the private dark pools, high-frequency traders typically pay for speed advantages — with direct data feeds containing pending buy and sell orders from the public exchanges, and by placing their servers near the dark pools. They also tease out information from the dark pools by constantly submitting (and then canceling) small orders.

Uh huh.  And what does the Securities and Exchange Act say?

SEC. 9. (a) It shall be unlawful for any person, directly or indirectly, by the use of the mails or any means or instrumentality of interstate commerce, or of any facility of any national securities exchange, or for any member of a national securities exchange—

(1) For the purpose of creating a false or misleading appearance of active trading in any security other than a government security, or a false or misleading appearance with respect to the market for any such security, (A) to effect any transaction in such security which involves no change in the beneficial ownership thereof, or (B) to enter an order or orders for the purchase of such security with the knowledge that an order or orders of substantially the same size, at substantially the same time, and at substantially the same price, for the sale of any such security, has been or will be entered by or for the same or different parties, or (C) to enter any order or orders for the sale of any such security with the knowledge that an order or orders of substantially the same size, at substantially the same time, and at substantially the same price, for the purchase of such security, has been or will be entered by or for the same or different parties.

(2) To effect, alone or with 1 or more other persons, a series of transactions in any security other than a government security, any security not so registered, or in connection with any security-based swap or security-based swap agreement with respect to such security creating actual or apparent active trading in such security, or raising or depressing the price of such security, for the purpose of inducing the purchase or sale of such security by others.

Really?

Well, if it's against the law, and this appears to say that it is, why is this crap still going on?

And, equally to the point, why are not the exchanges and exchange operators, who are certainly "one or more parties" and know damn well this is going on and in fact are earning revenue from the practice not also subject to indictment?

The people need to have faith in the integrity of the markets?

Well, then perhaps we could start restoring that faith by enforcing the law against what facially appears to be a flat-out middle finger erected by both the brokers themselves and the exchanges, along with the HFT "participants"!

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Ah, you see....

The National Oceanic and Atmospheric Administration, criticized for manipulating temperature records to create a warming trend, has now been caught warming the past and cooling the present cooling the past and warming the present.

NOAA claimed that July 2012 was the "hottest month on record."

The problem is that this was not true; it was in fact hotter in July of 1936.

So how did they make this claim?  They lied about the past.

This is not a singular lie either.  NOAA has been making data up and "adjusting" previous data (down) for a very long time.  They, and the IPCC, have been caught doing it as well.

At the time of Climategate I pointed out that manipulation was documented in the materials that were stolen at that time, in the very words of the so-called "scientists" that wrote the software in question -- via not only their programming but the comments in the code.  This should have been sufficient to invalidate all of the claims backed by any so-called "data" that had been processed by said software, and forced a full review back to the original, traceable and unaltered source data.

It didn't.

What's even better is that Antarctica just set their all-time record for end-of-June sea ice; recall that in the southern hemisphere their seasons are inverted compared to ours.  Oh, and before you say that this is "made up" for by the Arctic, no it's not -- don't look at the Arctic ice cover this year, as it's far more than normal (and temperatures are below normal) as well.

It's one thing to be wrong.

It's another to intentionally falsify data and use it to drive an agenda that includes taking funds from someone (anyone) for any purpose whatsoever.

That's fraud and theft, and we need no new laws.

Just lots of handcuffs.

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