HFT Stock Manipulation In Action - page 10

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The “players” behind this machine-driven process act as parasites that are destroying our financial markets (and, increasingly, even themselves)..

HFT firms have only increased in size and share of market activity. Here are some staggering statistics on how influential they have become: HTFs make up between 50-70% of the volume seen across market exchanges today 2% of the traders on many exchanges (HFTs, specifically) represent 80% of the volume a single large HFT firm (referred to as a Direct Market Maker) can account for 10%+ of a market’s volume on a given day Large HFT firms make between $8 to $21 billion a year HFT trades occur in milliseconds (i.e. a small fraction of the time it takes your eye to blink)

With such scale, speed and profitability, HFTs have turned the market away from being an efficient price-setting mechanism and perverted it into a casino where the clientele (i.e. “sheeple” investors) gets fleeced..

And our regulators are so outmatched by the scope, complexity and funding of these titanic HFT “players” that at moment, there are pretty much zero consequences for bad actors..

Interestingly, these HFT parasites, which live by generating fractions of pennies in millisecond-timed trades, may be sowing the seeds of their own demise through their blind gluttony and hyper-competitiveness. As their quest for incremental advantage begins to bump up against the limits of physics (such as the speed of light), the marginal cost of the next increment of advantage increases exponentially. Profitability is being squeezed out and will disappear entirely some day..

But a key question to ask should these parasites experience a self-induced mass-extinction effect:

What will happen to asset prices when all that so-called volume suddenly disappears??
 

Interesting - did not think it went so deep and far

 
techmac:
This might help too : high_frequency_trading_and_end_of_day_manipulation_preview.pdf

If people only knew ...

 

Why Goldman Is About To Become The Biggest HFT Firm In The World

When faced with the choice of perpetuating a fake facade of morality or continuing its old ways, was there ever any doubt what Goldman would choose.

One year ago, just as Michael Lewis issued Flash Boys, a book which summarized everything we have said about broken markets and HFT manipulation since day one, Goldman decided to not only keep a lower profile, but to miraculously take the side of the "little guy" by not only providing backing to the new anti-HFT exchange IEX, but having Goldman COO's Gary Cohn pen a WSJ Op-Ed titled "The Responsible Way to Rein in Super-Fast Trading" in which the firm lamented the rise of algorithmic trading, and market fragmentation:

With the overwhelming majority of transactions now done over multiple electronic markets each with its own rule books, the equity-market structure is increasingly fragmented and complex. The risks associated with this fragmentation and complexity are amplified by the dramatic increase in the speed of execution and trading communications.

In the past year alone, multiple technology failures have occurred in the equities markets, with a severe impact on the markets' ability to operate. Even though industry groups have met after the market disruptions to discuss responses, there has not been enough progress. Execution venues are decentralized and unable to agree on common rules. While an industry-based solution is preferable, some issues cannot be addressed by market forces alone and require a regulatory response. Innovation is critical to a healthy and competitive market structure, but not at the cost of introducing substantial risk.

Some were shocked by this moral position adopted by Goldman: after all, when in history has the great vampire squid with a penchant for parking its alumni in key central bank and regulatory positions ever foregone profits in order to do what is right.

More shocking, just a few days later, Goldman announced it would sell its designated market maker post on the NYSE, the last remnant of its legacy year 2000 $6.5 billion purchase of Spear Leeds & Kellogg, suggesting Goldman was waving goodbye to lit exchanges.

Even more shocking, a few weeks later Goldman was reported to be shutting down its own dark pool, the once massive Sigma X, thus exiting not only lit but dark exchanges as well.

Back then we said "That this is a momentous development, if true, needs no explanation."

Turns out it wasn't true.

In fact, all Goldman did was a well-orchestrated PR campaign to avoid the public backlash for the prominent role it had in destroying Sergey Aleynikov not once, but on countless occasions, a programmer first profiled here in 2009, and whose life ever since has been a living hell thanks to Goldman's army of lawyers. As a reminder, Aleynikov's plight was one of the main topics of Flash Boys.

Well, now that both Lewis' book has been long forgotten, now that Virtu has successfully IPOed (with Goldman Sachs as lead underwriter), Goldman can finally drop the facade of doing the right thing for once and as Bloomberg reports, "Goldman Sachs Group Inc., which called for reform of high-speed stock trading before Michael Lewis’s “Flash Boys” spurred an outcry last year, is diving back in."

Aka hypocrisy 101.

The bank’s electronic equity-execution unit is hiring executives including Keith Casuccio from Morgan Stanley and investing in software, trading infrastructure and its dark pool, according to people with knowledge of the plan.

Goldman Sachs emerged last year as an early supporter of the U.S. stock platform created by IEX Group Inc., portrayed in Lewis’s book as an antidote to the perceived ills of the super-fast, multi-venue electronic trading in today’s market. Now, after few major changes in the way stocks are traded, the investment bank is seeking to execute faster, catching up with competitors and leveling the playing field for its clients.

Goldman Sachs is one of the world’s top equity-trading banks, climbing to No. 1 by revenue in the first quarter after ranking second in 2014, when it produced $6.74 billion. The latest push, which included hiring Raj Mahajan as head of equity electronic-execution services this year, shows it’s focused on establishing itself as one of the top players in automated trading in particular.

But Gary Cohn warned about "fragmentation and complexity" risks... does that mean he was just pandering to the lowest common gullible denominator? And what about that stuff when Goldman said in a memo after the op-ed that "markets would be well-served if IEX achieved “critical mass,” even if that meant reduced volume at its own dark pool, Sigma X."

Why that was a lie too.

read more

 

"Is About To Become The Biggest HFT Firm In The World "

They are already for a long time. If they decided to come to open that means that they feel safe legally and politically. Forex is becoming bs

 
nbtrading:
"Is About To Become The Biggest HFT Firm In The World " They are already for a long time. If they decided to come to open that means that they feel safe legally and politically. Forex is becoming bs

Why should we have a market for ourselves? That would be a "disaster" Imagine a market that is not "regulated" by thieves A true "disaster" for "poor" HFT companies

 

There will always be people that will refuse to see that. Does not matter how many proofs are there

 

"Project Omega" - Why HFTs Never Lose Money: The Criminal Fraud Explained

Two weeks ago, without knowing the details of the most recent market-rigging and frontrunning scandal involving "alternative" market veteran ITG's dark pool POSIT, we explained what we though had happened:

ITG had an in house prop trading group, or "pilot", which operated for nearly two years, whose only signal was client order flow, which it would frontrun, and make millions in profits. In other words, once again precisely what we have claimed since 2009. But oh yes, not everyone is guilty of such manipulation. Only Liquidnet... and Pipeline... and ITG... and countless other ATS and HFT firms for whom clients are better known as either "easy money" or muppets.

And yes, we get the "trading experiment" narrative: calling it "criminal market manipulation and order frontrunning scheme" just does not sound like something the Modern Markets Initiative would spend millions of dollars to get Congressmen to agree on.

It turns out we were spot on, the only thing we missed was the name of this market manipulation exercise. Now, thanks to the SEC, we know: "Project Omega" (or as it was also correctly dubbed here the "criminal frontrunning scheme") is how ITG dubbed its secretive prop-trading desk whose only purpose was to frontrun clients.

Here are the details for all you suckers who still read the HFT apologists and believe the bullshit that all these algos do is provide liquidity, when in reality all the really do is frontrun your orders, assuring them of 6 years of trading without a single day's loss (or in the case of Virtu, one trading day loss). From the SEC:

Between approximately April 2010 and July 2011, ITG violated the federal securities laws and regulations in multiple ways as a result of its operation of an undisclosed proprietary trading desk known within ITG as “Project Omega” (“Project Omega” or “Omega”). During the period of April to December 2010, Project Omega accessed live feeds of ITG customer and POSIT subscriber order and execution information and traded algorithmically based on that information in POSIT and in other market centers. In connection with one of its trading strategies, Project Omega identified and traded with sell-side subscribers in POSIT and ensured that those subscribers’ orders were configured in POSIT to trade “aggressively,” or in a manner that benefitted Omega by enabling it to earn the full “bid-ask spread” when taking the other side of their orders.

Project Omega, which operated as part of AlterNet, traded a total of approximately 1.3 billion shares, including approximately 262 million shares with subscribers in POSIT. ITG’s proprietary trading gross revenues resulting from Project Omega totaled approximately $2,081,304.

A quick point here: since ITG was quick to settle at a cost of $20 million, one can be absolutely certain that the true damages to clients, aka Project Omega revenues, were orders of magnitude higher, however since it wasn't the SEC's intention to disclose just how criminal HFTs are in general but just to put a black eye on ITG's dark pool (as Goldman flexes its muscles and prepares for world algo domination by taking down its competition one by one), and since it is difficult to capture all the "externalities" and dollar benefit from rigging, the SEC was happy to only point out the absolutely bare minimum of damages which were probably the explicit documented loss by those traders who brough this case to the SEC's attention in the first place. Everyone else will have to wait in line for the class action lawsuits to begin when laying out their damages.

But back to the SEC's big picture "explanation" of what we have said for years:

While Project Omega was engaging in proprietary trading, including with ITG’s own customers, ITG was simultaneously promoting itself, and POSIT, as an independent “agency only” broker that did not have conflicts of interest with its customers and that protected the confidentiality of its customers’ trade information.

Project Omega was managed and overseen by an ITG senior executive who at the time served as the firm’s Head of Liquidity Management (the “Liquidity Executive”). The Liquidity Executive designed and directed Omega’s trading strategies even though they violated written policies set by ITG’s compliance department restricting Omega’s access to customer information.

ITG Inc. and AlterNet violated Sections 17(a)(2) and 17(a)(3) of the Securities Act by engaging in a course of business that operated as a fraud and by failing to disclose to ITG customers and POSIT subscribers, among other things, that: (i) ITG was operating a proprietary trading desk while at the same time promoting its brokerage services and POSIT by describing ITG as an independent “agency-only” broker; (ii) the proprietary trading desk, until December 2010, accessed live feeds of highly confidential order and execution information and used this information to inform its own trading decisions; and (iii) one of the proprietary trading desk’s strategies involved identifying sell-side subscribers with which the desk wanted to trade in POSIT, and ensuring that those subscribers’ orders were configured to trade “aggressively” in POSIT.

ITG Inc. violated Rule 301(b)(2) of Regulation ATS by failing to file an amendment on Form ATS at least 20 days before it launched Project Omega disclosing the commencement of its proprietary trading activities and that one of its primary trading strategies would involve accessing confidential information regarding subscribers’ identities and orders and trading algorithmically based on a live feed of highly confidential information regarding open orders bound for the POSIT dark pool.

And here are the details of Project Omega, ör as we called it in July for what it really was "the criminal market manipulation and order frontrunning scheme":

During the period of late 2009 to early 2010, ITG explored initiatives to increase diversification and revenues for the firm, including launching a proprietary trading operation that would engage in algorithmic high frequency trading. Thereafter, on the recommendation of senior management, Group’s Board of Directors approved a proprietary trading desk that was limited in scope to inform whether ITG should launch a fully-scaled and disclosed proprietary trading operation. This initiative at ITG, which was managed by the Liquidity Executive, became known as Project Omega.

When he began managing Project Omega, the Liquidity Executive had overall product management responsibility for all of ITG’s electronic brokerage products, including its entire suite of trading algorithms, its smart order routers, and for the POSIT dark pool. Prior to becoming Head of Liquidity Management in 2009, for several years the Liquidity Executive had been the Head of Product Management for ITG’s algorithmic trading group. In that role, he was responsible for designing and building ITG’s entire suite of trading algorithms and managing a team of software developers who wrote the computer code for the algorithms.

read more

 

ITG fined with only $20 million

They stole at least 10 times more!!!!

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