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Newedge Market Manipulation: Joe Saluzzi Exposed This Years Ago

Posted by Larry Doyle on July 11, 2013 7:51 AM |

I awake this morning and see a headline of a lead story on The Wall Street Journal jump out at me.

Brokerage Faces Record Fine

My interest is piqued.  What might it be? I quickly peruse the commentary and see words and phrases used that should concern any investor and/or trader including: manipulate U.S. markets . . . risks to the financial system . . . damage investor confidence . . . considerable systemic risk to the marketplace.

I then read of a new word for front-running, that is, “spoofing” and how traders utilized wash trades,”in which a firm acts as buyer and seller in the same trade to distort market activity. The practice can create the illusion of heavy trading volume that lures firms that are tracking for such activity.” 

The icing on the cake in this review was how this brokerage firm, Newedge USA, allowed some traders to engage in naked short selling, another manipulative activity.

I put my coffee down and thought I had entered the twilight zone or some other sort of time warp. Why so?

I paused to think that here I sit with the calendar showing it to be July 2013 and how it was this very month 4 full years ago when I first learned and shared with readers information on almost all these manipulative practices. Who brought them to our attention then and still does today? “The man in the arena”, Joe Saluzzi, and his sidekick Sal Arnuk at Themis Trading.

4 years and untold amounts of manipulation and investors are fed a $9.5 million fine as the cops flexing their muscle . . . NOW? Why is it that the activity at Newedge — and let’s be real, at so many other firms as well — is allowed to persist for years (from 2008 until late 2011, in the case of Newedge) and a token fine with no admission of guilt is allowed to pass as justice?

As we have come to learn all too well, this is what happens when the regulators are in bed with the industry.

Think there is a correlation with this sort of manipulative activity ongoing in the marketplace and the serious decline in real volume across a number of equity exchanges and other  market sectors as well?

I do.

A $9.5mm record fine?

I am not impressed.

Navigate accordingly.

Larry Doyle 

For those reading this via a syndicated outlet or receiving it via e-mail or another delivery, please visit my blog and comment on this piece of ‘sense on cents.

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I have no business interest with any entity referenced in this commentary. The opinions expressed are my own. I am a proponent of real transparency within our markets so that investor confidence and investor protection can be achieved.

  • Jack

    These writers in todays WSJ would seem to agree with you

    A Gallup survey conducted in April found that just 52% of Americans were invested in “an individual stock, a stock mutual fund, or in a self-directed 401(k) or IRA.” This is the broadest ownership of capital in the world, but it is down from a Gallup-survey high of 67% in June 2002. That’s not good for individuals, and it’s not good for the country.

    Investors are the lifeblood of the economy. They provide the capital that spurs job creation, innovation and entrepreneurship. No one will benefit if individual investors stop participating in the markets. But that is what’s happening at a troubling rate. Here are some reasons for that trend—and our recommendations for restoring balance:

    • High-frequency traders are gaming the system. Using sophisticated algorithms, high-frequency traders can trade stocks in an instant. Some flood the market with orders, then cancel 90% or more once they’ve glimpsed the state of the market and gleaned an advantage. Almost all “co-locate” their computer servers as physically close as possible to those of the exchanges to cut down the travel time of information by microseconds and then trade on that tiny speed advantage.

    Why Individual Investors Are Fleeing Stocks

    • Peter Scannell

      Uptick please!

  • Matt

    When I took the Series 1 (!!!) now known as the Series 7 back in 1974, this activity was known as “painting the tape” and was a major no-no!
    HFT is nothing but a mechanism to allow this activity (in addition to front-running customer orders)to occur in nanoseconds.
    Going on since 2008, generating hundreds of millions in revenue at the expense of legitimate investors and this is the best our regulators can come up with? See no evil, indeed.

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