NYT "Blows Cover Off Trading Scam." Schumer Flips On Wall St.

[arendt]

Source: Daily Kos

Finally! It's been just over three weeks since the July 3rd arrest of former Goldman Sachs IT executive Sergey Aleynikov inadvertently blew the lid off the intricacies of exactly how those great vampire squids on Wall Street manage (no past tense here) to suck Main Street dry.

The high frequency trading ("HFT") scam on Wall Street is being exposed to the masses as we blog.
And, at least to some degree, it is because we blogged and it is because we took the time to spell out the details of this story in obscure trade magazines, and not-so-obscure larger media outlets, that this is happening now.

The NY Times' Tobin Harshaw provides what may be the very best--and pretty damn even-handed, too--roundup of current commentary on the matter in today's NY Times: "Weekend Opinionator: 'Is Wall Street Picking Our Pockets?'."...Then Harshaw paraphrases Denninger:


Karl Denniger at the Market Ticker writes that Duhigg has "blown the cover off the dark art" but thinks that the traders' computer speed isn't most important advantage they have. Rather, he says, the "algos," rather than providing liquidity as they are supposed to, intentionally probe "the market with tiny orders that were immediately canceled in a scheme to gain an illegal view into the other side's willingness to pay..."

Read more: http://www.dailykos.com/story/2009/7/25/757765/-NYT-Blows-Cover-Off-Trading-Scam.-Schumer-Flips-On-Wall-St.

---

This is very important. I have not seen it at DU.

I don't comment here any more, so I will not respond.

[Sarah Ibarruri]

1. You know, it's so disappointing to find out how much we've been lied to by the rich

It's one lie after another.

[tavalon]

3. But is it surprising?

[Sarah Ibarruri]

16. Yes. Just when I think I know how criminal the rich are....

they surprise me by being even more criminal than I thought.

[Occulus]

19. Is it yet a reasonable presumption that people with assets above $X

obtained at least some of it by completely illegal means?

Or did they all really earn all that cash? Because somehow, my definition of "earned" never seems to jibe with their definition of "earned"....

[stlsaxman]

74. i ALWAYS lock my car in affluent neighborhoods and cul du sacs... when asked why

I respond- "Dude, how do you think these people got rich?!?!"

[truedelphi]

102. LOL funny. Thanks. n/t

[No Elephants]

42. Is it criminal, or immoral/amoral? If it's not criminal, we should be after the lawmakers to make

it criminal.

[AlbertCat]

85. "the Rich"

Not all "Rich" are criminals and in on this scheme. Some?...definately. Many?....perhaps I don't think the majority of wealthy people work in the financial industry... even if the financial industry is mostly rich.

I don't hate people just because they have more money than I do.

BUT I sure don't wanna hear the whiney "we're being screwed" rich complain. No one likes a rich jerk! There's "rich" and then there's "greedy rich jerk".


Jess sayin'...

[Lorien]

5. And how the conservative media repeats those lies, and the RW poor lap them

up. Shooting themselves for the benefit of the top 1%.

[Sarah Ibarruri]

14. Exactly, and how ignorant American people are.

There's a female in my family (by marriage, thank god) who is a right wing, Bible banging idiot, about as shallow as a dried up lake, and fake as a street-bought watch. These are some of her comments:

In response to a discussion about how jobs have been taken from us to other countries, and how so many states have become unemployed and hungry, she said:

"I think the Chinese make pretty good products"

In response to a discussion on the 4th of July about how few people can afford health care, and even those that can end up not being able to afford health care if they get very sick, she said:

"I thank God I live in the freest country on earth. God bless America."

Is it wrong of me to want to stick out my leg when she's walking, and trip that idiot? I really want to.

[Beartracks]

22. Don't kick her when she's down!

Sounds like she may have already sustained some kind of head trauma. :silly: (Perhaps the kind brought on by RW talk radio?)

[Sarah Ibarruri]

92. LOL! :-)

[Name removed]

31. Deleted message

Message removed by moderator. Click here to review the message board rules.

[DeeDeeNY]

54. with Dick Cheney

:rofl:

[Sarah Ibarruri]

93. LOL! I can just imagine what the post said lol nt

[Divine Discontent]

36. Sarah!!!! I'm so disappointed in you...

Why not go for the gusto - sticking out a leg only will cause a muscle pull or hairline fracture - make Tonya Harding proud!


BWAHAHAHAHA...

:hug:

:sarcasm: well, sorta...

HA!

DD (formerly known as themartyred)

[Sarah Ibarruri]

94. LOL! nt

[dgibby]

46. I don't think it would be wrong, especially if she DOESN'T have health insurance!

:evilgrin:

[Sarah Ibarruri]

95. Oh she does. She deserves to have it taken away by the ins. company

(Which is what ins. companies do when people get sick)

[gordianot]

82. Had a brother in law with similar views.

About a year and half ago I finally went off on him. When finally confronted after a veiled physical threat to his sister (my wife) he backed down. He and his spawn are gone from our lives for good. My offer stands (not a threat) good as long as I breathe and have a heart beat.

[Sarah Ibarruri]

97. Right wing pigs like that are truly spawn - good thing he's gone from your life

They're poison.

[WCGreen]

84. Then she would be able to find out how good her coverage is...

[Sarah Ibarruri]

98. Yep nt

[AlbertCat]

86. I thank God I live in the freest country on earth.

She lives in the Netherlands?

[Sarah Ibarruri]

99. ROFLMAO! She would be really angry at such a comment

You know, she's not the only piggy with a brain that functions that way tho. I think Republicans become Republicans because they're mentally diseased, genetically warped.

[valerief]

89. You should drop a piano on her! She's a waste of oxygen. nt

[Sarah Ibarruri]

100. She's so F shallow that it's a good thing she only hangs out with piggies like herself

Or somebody would've busted her teeth in or something

[DaLittle Kitty]

70. Not A F*cking Word In The Paper!

FASCISM Baby! It's Here NOW!

[KakistocracyHater]

101. I've noticed the Scrooge Media tells it ONLY from the wealthy point of view

Again, get rid of CEOs, they do nothing for the corps. except drives up costs & whip up bs to zoom the stocks for a short-term jolt. The Board can 'lead'.

[clixtox]

8. Lies? Lies? Of course they lie! They are literally killing us though!

The lives of quiet desperation most of us endure, somehow or another, are so grim because of the "system" they control.

That stark reality is displayed for all to ponder, appropriately, in the struggle for justice in our health care delivery continuing disaster.

Profits for our corporate masters trumps every consideration, even basic human rights.

They invented "public relations" to obfuscate the reality of their rancid, heartless cupidity.

Corporations have no conscience, their ONLY goal is maximizing profits by any means, even illegal means if the numbers pencil out indicating hefty enough profits.

Any positive activity is simply done to ensure their ability to maintain "goodwill", a hypocritical label for camouflaging greed.

[Amos Moses]

11. The Corporation

http://www.youtube.com/watch?v=Pin8fbdGV9Y

http://www.youtube.com/view_play_list?p=FA50FBC214A6CE87

[Sarah Ibarruri]

15. Yep! nt

[anonymous171]

30. It's expected though. They have no values or integrity.

All they care about is money.

[Swagman]

52. you mean the rich lie ? I'm shocked

:sarcasm:

[frogcycle]

57. couple of points here...

"the rich" is too broad a category

That said, the vast majority of rich people are the logical heirs to the set of personal ethics/morals of the medieval "nobility." Not too long ago Karl Marx was decrying their abusive attitudes. Unfettered capitalism is pretty much guaranteed to result in an elitist caste system, in which the "haves" abuse everyone else so thay can "have" more.

This is just plain human nature. It is the same tendency drivers have to refuse to allow anyone to merge into the highway: They have a lane; others don't. Let 'em eat cake.

You don't have to be rich to be a greedy, self-centered asshole. Most people are. It's just that when they get rich, they have more power to exercise their asshole-ness.

[rhett o rick]

66. I agree with you. The rich greedy are killing us figuratively and literally while

the greedy gullibles enable them.

[bbgrunt]

2. thanks for posting this.

[earth mom]

4. It's all a scam-just what many of us already knew. Thanks for posting the truth!

:thumbsup:

Great to see you again! :hi:

[xchrom]

6. anybody REALLY surprised? -- and not a soul in sight to really help us. nt

[depakid]

7. With a small financial transactions tax, Uncle Sam could get a nice piece of the action

while discouraging this behavior- and not hurting smaller- or longer term investors. Hey, if the administration can't beat 'em- better at least to join 'em.

[guyton]

23. trading vs. investing

I still unconvinced that market "fluidity" is worth the high cost in instability. I'd much prefer some enormous tax on short-term gains and almost nothing on long-term gains. Possibly redefining long-term to be say 3 months.

I.e. make the stock market a place for investing, not day-trading, or sheesh, microsecond trading.

[billh58]

35. Investing?

There are long-term "investors" (Warren Buffet), and then there are "traders" who hold a stock from minutes, to days, to weeks (me and millions of others around the globe). The advent of personal computer access to the market, and online trading, changed the whole paradigm of Wall Street forever, and it can never go back to an "investment only" environment.

It isn't the average "day trader" that causes instability in the market, but the Market Makers, brokerage houses, and large hedge funds, that are using high-powered computers to "anticipate" microsecond bid/ask spread arbitrage, in order to manipulate buy/sell orders based on limit orders manually entered by traders. Actually, it is just a high-tech version of the old decimal "scalping" game, but with a superfast digital advantage which requires no human decisions. Traders are the ones being taken advantage of, and long-term investors are not being affected much at all, because we are talking about a penny (or less) on each automated micro buy/sell order -- but with thousands of shares and trades daily.

So your call for an "enormous tax" on short-term gains would be counter-productive to the overall operation of the modern-day stock market. There are not enough "investors" to maintain the required liquidity in today's market, even though statistically over 90% of amateur traders lose money, and eventually leave the market, only to be quickly replaced by other amateurs looking to strike it rich.

The better answer, would be to re-regulate the Stock Exchange(s), brokerage houses, Market Makers, and hedge funds.

[truedelphi]

27. Or how about this - with a small bit of common sense, Congress wakes up &

Decides that Wall Street does not need our Bailouts Monies.

Of course, by this point, it would probably take a spaceship designed to bring a person to an alternate universe to see some Common Sense applied.

[No Elephants]

43. IMO,it's a lack of morality, not a lack of common sense. For example,

if you assume Dummya's goal in becoming President was to do what was best for America, he was a dismal failure. On the other hand, if you assume his goal in becoming President was to be re-elected and to make companies like Halliburton, Bechtel, Blackwater and GE much richer than they already were, he was successful beyond imagination. An Einstein of raping Americans economically.

Think of Congress similarly.

IMO, one of our problems is the endearing naivete of the American voter. As cynical as DUers think themselves to be, we are not cynical enough.

[enlightenment]

59. I believe this is the goal of all politicians, regardless of stripe.

"On the other hand, if you assume his goal . . . to be re-elected". It's not just the Republicans, either. It's ALL of them.

Everything they do - from the moment they are elected - has one goal. To be re-elected. For Presidents, since they know their time is limited, it is especially true. There is a reason we refer to them as "lame ducks" at the end of their second term; they have zero interest in doing anything - unless it is exacting some sort of payback upon those who opposed them during their tenure in office.

[truedelphi]

76. Oh for sure there is not a whole lot of

Morality to be found in the astute bodies of Congress.

But there is also stupidity. I forget who was complaining that when they went in to address the Senate, some Senators did not know what buying "short" or buying "long" entailed.

Which is fine if you are talking about the average Joe or Josie. But a Senator should know the basics of an economy and its marketplace.

[SharonAnn]

91. Molly Ivins called him "A CEO's wet dream." She was right.

[Zynx]

29. Thank you. I've been advocating this for years.

That would cripple this kind of activity which, rather than increasing liquidity, increases distortions.

[elehhhhna]

64. these trades never settle, though. no transaction, no tax.

[depakid]

83. I'm sure there's a way to deal with that.

computers leave a trail.

[nashville_brook]

9. good to see you arendt...

thanks for posting this.

[Karenina]

39. +1

[salin]

49. +2

[bluesmail]

10. The Federal Reserve was created to protect the intersts of banks.

1913. Everything that happened up till the final senate vote was secret. Secret it was beget and secret it continues.

[truedelphi]

28. And Bernanke has hinted that should Ron Paul succeed with his

Very popular Bill to audit the Fed, he will bring the economy to a halt!

[POAS]

38. Sounds like a terroristic threat to me! n/t

[progressoid]

12. "One might ask if Senator Schumer's current bloviations are just a pre-emptive smokescreen..."

"One might ask if Senator Schumer's current bloviations are just a pre-emptive smokescreen to stall or prevent more aggressive efforts by law enforcement officials going forward; IMHO, it's a legitimate concern. But, the point is, it's only been three weeks since this story started along its twisted path just to get to where we are today.

So, yeah, from a political standpoint, apparently Senator Chuck heeds the comments of that oft-quoted and highly-influential, former Dresdner Kleinwort honcho when he said those famous words: "You never want a serious crisis go to waste."


____________________________________

Good read. k/r

[spag68]

20. Schumer is a smuck

I'm ashamed to say he is my senator and we can't get rid of him. Our other senator is an NRA whore, and I have no clue as to why she got to fill Hillarys seat.

[No Elephants]

41. Maybe she, Schumer and Patterson can go hunting together.

[DaLittle Kitty]

72. Big Supporter Of Our Most Prominent Mid-East Ally Perhaps?

:think:

[KittyWampus]

78. NRA whore? And her latest vote on guns? You have any clue to the area she represents?

I"m from Long Island and smart enough to appreciate Gillibrand.

[clear eye]

88. I kinda like his behavior during and since the bailout.

He pounded on the table to get Paulsen to withold more of the money until after Obama took office. He also tried to get more Congressional oversight written into the bill. Not his fault that Obama took his cue from the same people advising the shrub and gave it all away. Schumer had every reason to kowtow to Wall St., a power in his state, and he didn't. For that reason, I don't accept the cynical explanations for his current actions.

I think being threatened w/ marshal law reminded him which side he was on (the people's), and he hasn't forgotten since.

[KoKo]

13. And so much of it started at "Zero Hedge" website...and GREW...

I'm so glad to see the Financial Bloggers digging the way we DU'ers did in the old days after after the Stolen Election/9/11/ and the illegal Iraq Invasion.

It gives a fresh wind to the backs of the "alternate media."

Thanks Arendt. Your voice is missed around here. Good to see this at Kos.

:hi:

[elleng]

17. Some Senator just proposed prohibiting 'flash' orders.

Read it yesterday. Was it Schumer?

Yes, Schumer:

http://www.nytimes.com/2009/07/25/business/25trading.html?scp=1&sq=flash%20orders&st=cse

[Skink]

18. Didn't anybody see the Grifters.

[cosmicone]

21. Investment banks need to be heavily regulated with an SEC office

"on site" armed with everything at their disposal.

Just when we are coming out of the death spiral convert scams, the long suspected but never proven HST scam breaks! God knows how many other scams are there.

[kirby]

24. I dont think this will go anywhere...

This basically screws the day-trader, not the investor, so I dont see political will to address that. Just my opinion.

[Odin2005]

25. Rat Bankster Bastards!

:grr:

[FourScore]

26. Thanks for posting, arendt! n/t

[BigBearJohn]

32. If there is a way to squeeze more money out of the little guy, the big guys will find it

[BigBearJohn]

33. Thanks for posting this.

[Greyhound]

34. Many recs, but few replies.

If we ever hope to take our nation back from the parasites, we simply must learn how things work and the currency and economic systems we have had foisted upon us are a great start.

[Vinca]

45. Maybe it's because the OP indicated he would make no responses.

Very important issue worth of more than a hit and run.

[nashville_brook]

69. and the replies we have are not exactly high quality...

maybe it's b/c high frequency trading is over most of our heads. maybe it's b/c DU doesn't have the brain power it once had.

it's like we've become nothing but gawkers -- completely disempowered. Oh, here's a new way the wealth of the world is being stolen. What's the point of discussing it with any depth, if the chances of reform are zero? so far we've seen no meaningful reform wrt the great wall st swindle. if we couldn't regulate "too big to fail" out of existence, what's to stop HFT? this financial mess is supposedly earth shattering, but we see no effort to reform it, so, it must not be THAT important.

[truedelphi]

75. What I hear an awful lot of is this refrain:

"Obama is so smart that I know it's best if I don't worry about things and let him take care of the economy."

And in a sense, what else can one do? Unless/until we have the type of worker's movement that was vibrantly alive in Chicago, New York, Seattle, Minneapolis, Detroit, etc during the 1920 anbd 30's, we have no base.

Twenty four states in the mid-thirties prohibited people being foreclosed upon! And neighbrohood groups would rally whenever the Sheriff came to the neighborhood to evict people for not paying rent.

[stumblnrose]

37. Goldman Sachs

Doesn't Obama sleep with Goldman...

[ozone_man]

51. Wakes up with fleas

His largest contributor by employer.

[DFW]

40. I think I heard about a pioneer of this scheme 3 or 4 years ago

A friend of mine in Brussels told me about an American guy he knew who was a computer genius but a social
basket case. He was divorced, broke, and sleeping on a friend's couch when he came up with what sounds a
lot like this trading strategy. I never knew the details, as it's out of my league, but as I understand it,
it involved the trading of millions and millions of shares of stock each day all by computer with the tiniest
of margins. He found out that if he micro-managed his program, that he could make over a million dollars a
day. Sure enough, within 2 years, he had made himself nearly a billion dollars. UBS in Switzerland offered
him one billion Swiss francs (about $800 million at the time) for his program, which was so complex that he
would have had to work for them to manage it. UBS had no one who could. The guy became completely paranoid,
and had nothing but money and zero social life, as he assumed that any woman even willing to talk to him
was after his money, even though he was so secretive, you probably couldn't even tell.

This was several years ago, and obviously someone else either found out, or thought up the same scheme on his
or her own. Once more than one person was doing this, obviously it would have led to major market manipulation.
Now, maybe 4 years later, the SEC might figure out how to put a stop to it, but there are a few brand new
billionaires out there that won't care any more.

[orbitalman]

62. Did I Hear... Ponzi Scheme?

[DFW]

73. nope, you heard computer geek

He wasn't selling anything to anyone, and would still be sleeping on
his friend's couch (or still is). He was just tinkering and got lucky,
from what I understand. He never sold his formula, and the one offer he
did get had the stipulation that he stay on to manage it, as none of the
bank's computer people could manage to figure out what he had done. It
would appear that in the meantime, someone else has.

[fasttense]

44. Just another welfare program for the uber wealthy in America.

While you are struggling to find and keep a job, while you pay more than 30% of your paycheck for some crappy health denial insurance, while you worry about how you'll pay for your kid's college, the government is funneling your hard earned tax dollars to a welfare program for corporate America.

"If you've closely followed the COP's reports, you'll notice a troubling similarity to previous reports in this latest finding. The panel's widely cited February report, which analyzed the Treasury's 10 largest TARP investments in 2008, found that the Treasury had received, on average, only $66 for every $100 spent, resulting in a $78 billion shortfall. (This while Berkshire Hathaway received $110 assets for every $100 when it invested in Goldman Sachs, and Mitsubishi received $91 in assets for every $100 invested in Morgan Stanley.) Which means that the Treasury received a 34-percent markdown on assets it bought (with taxpayer money) last year with its early TARP investments, and received only a 34-percent markdown for its early warrant sales back to banks."

http://www.motherjones.com/mojo/2009/07/next-big-bailout-bamboozle

[dgibby]

48. They ought to go after Congress while they're at it.

Anybody with 2 brain cells to rub against each other would know better than to give this much money to Wall Street without some sort of accountability program in place....unless, of course, there was something to be gained. Hmmm.....

[Turbineguy]

47. So Reagan

started this off with this IRA business. You can have your own retirement fund and Wall Street will manage it for you. Once the money starts flowing in, the problem then becomes: how to steal it legally. Enter deregulation, another repub wonder tool.

And we're off to the races.

People who stick-up banks are more honest.

[LaurenG]

50. Thank you for bringing this here

and I realize you said you don't post here anymore but perhaps you might change your mind.

[The Wizard]

53. The time has come

to release drug offenders from the prisons. There will be space needed for the leisure class elitists who have behaved like vampires and draind the life blood from our economy.

[bulloney]

55. Today's rich are two or three generations removed from the person who made the family fortune.

They never had to worry about paying for their college, finding a sustainable job, affording housing. They can afford luxuries regularly that most of us have to save up for most of our lives to get--if ever.

The ancestors of these people made their wealth despite tax rates on the wealthiest that were double or nearly triple the current rates. Money has come so easy for this generation's wealthy because of their family's predecessors that they want to find a way to make it easier. They don't want to do it by working longer or harder. They do it by buying off public officials to lower the tax rates on their bracket or eliminate regulations that increase their cost of doing business (never mind the long-term consequences).

I was hoping the current economy would be a wake-up call for these people. Instead, they've only hunkered down and are trying to horde even more of the pie that they already have.

[Enthusiast]

90. And their explanation?

"Poor people are poor because they are stupid and lazy."

[The Backlash Cometh]

56. Pinch me. Is it finally happening? The next step is...dare I say it?

Accountability!

[City Lights]

58. Thank you for posting this here.

Recommended.

[Vidar]

60. K&R.

[Joanne98]

61. You're suppose to always post a giant squid picture with every GS article.

[redqueen]

63. I've seen it on DU plenty... glad it's finally made it to the M$M.

Let's see where it goes from here...

[disndat]

65. Schumer is "shock, shock, shock"

that GS is doing nefarious HFT. Schumer is GS point man in the Senate. Schumer, the leopard does not change his spots.

[kenny blankenship]

68. Exactly, he is covering. Trading on insider information is ALREADY ILLEGAL.

Proposing a new law written to apply to the GS front running operation is covering up by claiming what that this practice wasn't illegal at the time they were doing it. Which is bullshit.

He hasn't changed his ways or "flipped" at all.

[salin]

71. Exactly. How is this NOT Insider trading?

Peek at other orders and then run costs up... with barely any money down (due to ridiculous margins)?

Arrest the outlaws already. Send them along side of Bernie Maddoff.

[rhett o rick]

67. Rec 110. This should not be a shock to anyone. Wall Street and the stock market are shams.

If you have money "riding" on Wall Street bubbles, you are gambling the same as if you were in Las Vegas. The stock market is designed to fleece the general public. But even when people know this their greed to "get theirs" keeps them coming back, one more stock, one more shot at the roulette wheel.

[lurky]

77. They have to address this, whether they like it or not.

If people think the market is rigged, they won't want to put their money there. Small investors already feel cheated, so even the perception that GS is gaming the system against the little guy could be really poisonous.

Maybe the average Joe or Jane hasn't heard about this yet, but they will eventually. And even if they don't understand the nuts and bolts of the scam, they can understand that the insiders have been allowed to steal from everyone else.

[marketcrazy1]

81. alot of curious facts involved here

think about these points RE Goldman, Zero hedge reports a few weeks back that according to data released weekly by the NYSE, Goldman is responsible for 40 to 60 percent of the daily trading volume of the NYSE wich sees between 2 and 3 billion shares change hands each day. now this is Goldman trading for their own account ( apparently ) not their customers. that would come out to as many as billion shares a day traded by Goldman. Goldman gets paid .25 cents for each trade they clear ( paid by the NYSE ). Goldman has recently been named a "special liquidity provider" to the NYSE. then news breaks that a former employee may have stolen Goldmans proprietary HFT software and the attorney general states in open court that should an outsider gain access to this program it could be used to "unfairly manipulate the markets". shortly after this news comes to light the NYSE decides that they will no longer publish their weekly program trading data ( conveniently hiding from view Goldmans trading volume ). next we hear that Goldman made a HUGE profit in the second quarter and that the bulk ( possibly all ) of those profits were generated by their trading desk. now we are hearing that high frequency trading can be used to front run the market ( illegally ) for profit.

[pleah]

79. K&R

[GeorgeGist]

80. Capitalism is deadly ...

especially when it's legal.

[Rex]

87. Capitalism finally got killed off by technology and greed.

Or maybe stupidity and evil.

[Richard Steele]

96. Sorry I saw this too late to REC it. nm