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How dare you suggest the markets are rigged!

April 4, 2014

There is something very interesting happening on Wall Street as a result of the frenzy around Michael Lewis’ new book Flash Boys. If you watched the “60 Minutes” interview linked to my last post, you will see that Lewis candidly — and accurately in my opinion — claims that the financial markets are rigged at the hands of high frequency traders (HFT). It is clear that the mouthpiece for Wall Street, the financial news stations like CNBC and Bloomberg, take serious offense to such a suggestion. It is as if they are saying, “How dare you even infer the markets are rigged!” and “Certainly you didn’t mean to use the “R” word?”

This reminds me of the furor created when Jack Lew suggested that the government’s official employment numbers were being monkeyed with around the time of the last presidential election. The pundits looked at Lew and essentially said, “How could you say such a thing; are you suggesting there was a conspiracy in our government?” You see, the best way to discredit someone who might challenge the status quo is to paint him or her as a conspiracy theorist. The funny thing is, many months later it was proven that the official government employment numbers had in fact been manipulated.

In the present situation Lewis and one of the characters from his book, Brad Katsuyama (who decided to start an exchange to even the playing field for investors), are immediately attacked for suggesting that the markets are rigged. The interview/exchange has been branded as “epic” and a “screamfest.” I’m obviously in the Lewis and Katsuyama camp, but on other programs, as well as the CNBC interview on the link below, these two are attacked for suggesting the markets are rigged. In a Bloomberg interview, the host suggests that they must also think there is a “conspiracy.” Uh oh, the dreaded “C” word connected to the dreaded “R” word!! All Lewis and Kasuyama are guilty of is pulling the covers back on the bottom feeders who have made it their business to skim from other investors and institutions through high frequency trading (HFT).

In one interview, Lewis is badgered by a host that keeps asking the same question: “You can’t really believe the market is rigged can you?” Lewis says, “I can’t believe you don’t think it’s rigged and why are we even having this discussion?” At another point Lewis responds to a host who suggested he is damaging the investors’ confidence in the markets by suggesting they are rigged by saying, “You mean am I adding to their existing distrust of Wall Street?” It goes to show just how little Wall Street can handle transparency. And insiders (blood-sucking-bottom-feeders who are willing to skim from your grandma’s pension fund) are legitimately pissed off by anyone who might question their practice, no matter how obscene it might be. Lewis states that HFT is incredibly complex and it is complexity that is used to hide the ills of a rigged market. He is absolutely correct. Complexity exists to disguise scams. This HFT revelation is just one more scandal and proof of how rigged and inappropriately incentivized the markets are. In my opinion, HFT provides fewer problems for investors than the subprime market, credit default obligations and the entire one quadrillion derivatives market do. Whatever happened to the manipulation of Libor rates? Talk about rigging of an epic proportion. Are the markets rigged? Absolutely, and those doing the rigging hate being flushed out into the open, as you can see here.

And then there’s this:

U.S. probing high-speed trading, attorney general says
The U.S. Justice Department is investigating high-speed trading for possible insider trading, Attorney General Eric Holder told lawmakers on Friday. The disclosure comes the same week that securities regulators and the FBI also confirmed they are looking into potential wrongdoing by high-frequency stock traders.

How ironic and how convenient that this happens after Michael Lewis releases his book on the abuses in this HFT front-running business. Wouldn’t it be nice to see those who are responsible for making the financial markets fair actually do their own front-running for a change? Zero Hedge puts it this way: “And all it took for the FBI, the SEC and now the DOJ to figure out the casino was rigged all along, was for a Michael Lewis book to do their job for them.”

And you’ve got to love the development late yesterday William O’Brien, BATS President and attacker in the CNBC debate shown in the link above, admitted he was not truthful when asked what he used to price trades. Here is the headline that ran in the Wall Street Journal: BATS Forced to Correct Statements by President O’Brien on How Its Exchanges Work. If I were on the board of directors for BATS, assuming they have a board, I would be calling for an emergency board meeting today to discuss Mr. O’Brien’s future.

Would someone tell him to stop it! What does he think we are? “Light bulbs?”

Would someone tell him to stop it! What does he think we are? “Light bulbs?”

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