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Former SEC Director Warns Against Automated and Secretive Market “Rigged Against Retail Investors”

Mac Slavo
March 11th, 2015
SHTFplan.com
Comments (62)
Read by 6,750 people

stock-market-correction
The former director of the SEC, John Ramsay, has stepped out to warn that market is rigged, and that the system is headed for a major correction “one way or another.”

Today’s financial ‘ecosystem’ is a set up for unfair advantage to those playing a game controlled by high frequency trading (run by automated computer algorithms) and secret ‘dark pool’ investors, as Ramsay sees it. Bloomberg reports:

The SEC’s current trading rules, known as Regulation NMS, are partly responsible for the flourishing of high-frequency trading and the dispersion of trading across more than 40 venues, [Ramsay] said.

Ramsay’s denunciations come during a period of unprecedented scrutiny of equities trading. A chorus of criticism, sparked by the claim in Michael Lewis’s book about Katsuyama and IEX, “Flash Boys,” that the market is rigged against retail investors, has questioned the tactics involved in using algorithms to buy and sell shares in fractions of a second. 

In an interview, Ramsay said his opinions grew more critical in recent years as he watched the market fragment into 11 public exchanges and more than 40 less-regulated private venues such as dark pools. Trading became more complex and prone to technological malfunctions in the face of rules that were supposed to boost competition and create new choices for investors, he said.

Technological malfunctions… maybe a euphemism for a new age of high-tech market dominance. As Zero Hedge point out, Ramsay’s declaration that the market has been tailor-made to benefit insiders is tantamount to a full-on admission that the market is rigged. Tell us something we don’t know:

He outlined how the market lost its way: conflicts of interest among brokers, a two-tier system favoring the speediest and a general sense that today’s rules have been crafted to the benefit of insiders.

Zero Hedge asks: Is “crafted for the benefit of insiders” not the very definition of a rigged game?

The rise of dark pools have allowed some of biggest players in the game to make huge moves in secret and in a way that hides the impact of huge trading bloc purchases, with the help of technology. Via Wikipedia:

The bulk of dark pool trades represent large trades by financial institutions that are offered away from public exchanges like the New York Stock Exchange and the NASDAQ, so that such trades remain confidential and outside the purview of the general investing public.

One of the main advantages for institutional investors in using dark pools is for buying or selling large blocks of securities without showing their hand to others and thus avoiding market impact as neither the size of the trade nor the identity are revealed until the trade is filled.

To combat it, the former SEC head has joined IEX, a private market he sees as a “populist” solution to the domination by a few on Wall Street.

According to Bloomberg, IEX:

IEX doesn’t pay firms to buy or sell shares, shirking a practice that many markets use to lure high-speed traders. Amid concern that markets are more vulnerable to mistakes because trading is faster and largely automated, IEX requires a 350-microsecond delay between requests to trade and actual executions. That might not sound like a lot, but it’s a length of time almost considered old-fashioned buy-and-hold investing in an environment where shares can trade faster than an eye blink.

Allowing innovation by firms such as IEX is preferable to making wholesale regulatory changes that could have unintended consequences, Ramsay said. It should be companies, not government, that develop viable alternatives.

Ramsay’s decision to join IEX, a tiny private market with a populist mission, was an unusual move for a former regulator, Burns said. He could’ve used his intimate knowledge of the Volcker Rule to land a job at a law firm or a bank. Instead, he found something “that’s fun and a little bit edgier,” Burns said.

“This is a space that is ripe for change and some element of disruption,” he said.

If free market solutions don’t attract enough energy to change the system, something else will.

Ramsay warns the the current system isn’t sustainable and can’t last forever. “Significant changes are coming one way or another,” the regulator told an audience back in September.

One thing is certain: all the regulators and rules in the world won’t matter if the computers are programmed to trade for the insiders at rates no human could follow. The current market is based around automation – automation in turned set to the tune and parameters that allow insiders working together from complimentary positions to jockey markets around, while secretly pooling money to make their desired outcomes inevitable.

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Author: Mac Slavo
Views: Read by 6,750 people
Date: March 11th, 2015
Website: www.SHTFplan.com

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62 Comments...

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  1. 1 John 2:2 says:

    Not to worry the stocks are covered:

    • Rebel in Idaho says:

      I love Ron Paul, voted for him twice, and I know he’ll continue to fight the good fight.

      It’s just too late. Collapse is baked into the cake at this point.

      • Warchild Dammit! says:

        Rebel,though believe in many ways would make a great leader/idea man if Ron became potus the crash would already be here with all the bullshit he would expose.My guess if Ron came even close to being potus he would have a “accident”.As the line in the movie says goes for the country,”You want the truth,you can’t handle the truth!”.

        • durangokidd says:

          The markets have always been rigged. In the old days there was a “market maker-floor specialist” in the pit buying and selling a particular stock and making a profit in his “book”, either way.

          The only difference today is that the spreads are lower, the volume much higher, the frequency of trading greater, and the profits staggering.

          Nothing to see here; nothing new anyway. 🙁

          • The Old Coach says:

            LOL! True ‘dat. Was just reading the bio of Cornelius Vanderbilt, “The First Tycoon”. There was hardly any railroad stock that wasn’t rigged.

            • sixpack says:

              “today’s rules have been crafted to the benefit of insiders”

              Of course it is, or congress wouldn’t have gotten together and exempted themselves from “insider trading” laws.

  2. PC SUX says:

    You know it is a rigged game…one way or another they will end up with your money…even if you think you made out big during the current market.

  3. oicu812 says:

    The ole, blow up the balloon until she pops trick.

    Although this isn’t new, the high speed trading has gotten out of control.

    When coupled with the current environment of the illegal, or at least unscrupulous tactics by banksters, the whole shootin’ match is about to blow up.

    • oicu812 says:

      Sadly, for most, it will have a ripple effect throughout the world.

      As most folks know, timing is everything; and to get it right with “timing out” investements of any kind, it could mean the difference of boom or bust.

      As an example, I was anticipating the coming financial collapse of ”08 and ”09. Not the exact timing, nor the actual degree of the basic collapse of the retail real estate market, but with enough hindsight that I had a gut feeling that my real estate investments would not hold out long enough for the big pay off that I had intended them for.

      So, I decided to get busy with advertising my investment about ten years earlier than I had wanted. I got lucky and found a willing and very able buyer in 2007.

      That same property now would not bring half as much.

      Anyways, how many will hang on with all profits in the pot, trying to make every possible dime?

      Many, hundreds of thousands of investors and pensioners, could be stuck holding an empty bag by years end and headed for bankruptcy and homelessness.

      It is sad to say, but property taxes will be the death of many a good man, (and woman), if they loose big in the markets and banks. With life savings and pensions gone in hours, how will they pay the insurance,taxes, and utilities on those mega homes? Many will be jobless and homeless within months. Tribulating times a comin for a sinful world, I think.

      • Mountain Trekker says:

        Timing is everything! Ever reply to a comment and some one else replies to the same comment in another time zone, and bingo you end up ten times down the list and sounds like you made the same comment someone else made, only they did it 30 minutes after you did. Wow, I must be a copy-cat. Can you fix this MAC. Trekker Out.

        • oicu812 says:

          It happens to all great thinkers that make regular posts, MT.

          The regulars know how it works and don’t pay to much attention to us as copy-catters. I am not all that absorbed with myself, as I sometimes come across; I just relate stories that I know about as a way to possibly cause others to wake up. If I get dubbed as a copy cat, then so be it. It ain’t like I gotta face any people from this site, in church on Sunday. Mainly cause I quit goin to church many decades ago.

  4. Gonetoolong says:

    These markets are moving on pennies one way or the other to make the trader money. It has gotten way out of hand. It moves like a school of fish and could get scary real fast. However it also is like a ratchet with only one direction allowed. If the outlook is very bad for the trading session, rule 48 is put in play and the trading is halted. This is to protect from a drop too far too fast. Sounds great, right? However, there is no such a rule for when it goes up too far too fast. Over time it is ever inflating the bubble. Factor in the “plunge protection team” that buys when things need to be buoyed up and you have one hell of a correction setting up. Glad I am out at this point.

  5. possee says:

    ok..we’ve been told this time and time again

    It’s a rigged game..yup

    It’s going to collapse..yup..

    This rigged designed to fail train wreck is still speeding along the tracks in full speed…

    So where’s the crash?

    After 08 and still counting..7 years later..

    possee

    • Sharon says:

      Surprise, surprise, surprise.

      The only thing that surprises me is that the average American hasn’t already figured this out and most probably won’t believe it anyway.

      The stock market is just a money transference system that takes it from the many -who for some reason continue to give to it- and gives it to the few over any extended length of time.

      People seem to want to constantly complain about the rich getting richer while the poor are getting poorer but then stringently defend their taking part in the process at the same time.

    • Cellar Spider says:

      Possee,

      The whole economy collapsed in November of 2012. When QE3 (a.k.a QE Infinite) was put in place, it was a dire admission that the whole thing was unfixable. The economy as we knew it is now gone. It’s increase the money supply until it pops. They’ll do it physically and virtually (don’t print, just relend) for as long as it takes.

      Where is all the money going????? Of course to the wealthy…..who can’t spend it fast enough. They have so much wealth they can’t count it.

      Why no signs???? Because the collapse seems to have a negative logarithmic decay rate to it. Very slow at first…..then boom…it becomes really noticeable. We’re only 2 1/2 years into the collapse. It’s here and it is real.

    • Woogie says:

      This country has gone where no one has gone before since 2008 and going further. We may have to circle around Ur-anus and wipe out a few cling-ons before we crash.

  6. Copperhead says:

    The RUG Oh the RUG is about to be pulled out from under us soon. My thought is sit down and roll with event. If you are standing the fall will be very painful. Roll with it and survive or fall and die. IMHO!

  7. Satori says:

    “THE” crash may never occur

    the “crash” is happening as we speak

    Kunster The Long Emergency

    emphasis on the word long

    • Genius says:

      Kind of like a 20 year impalement. Or being burned to death with a match. Or being drawn and quartered by 4 dogs. Or being dragged through the bushes by a self propelled lawnmower. Or being cooked to death in a 110 degree hot tub. Or being staked to the ground and being eaten alive by mosquitos. Or geeting dumped in the lake with cement boots and a 5 year supply of air. Just keeps draggin on lol.

      • Warchild Dammit! says:

        Genius,you seem to have some degree of interest in,well,more then average ways to die!I hope this has not become a hobby you practice in,well,unless you have a invasion of progressives in your neck of the woods!

        • Genius says:

          WC, no worries my man, it’s just things Iv’e read throughout my life. Mob hit’s etc. I think they would be best for the banker’s, politicos, etc. One thing I DO KNOW, is you have to know your enemy. One has to be able to get into their mindset to figure out what they might do next. Never go into battle with a tiger if you don’t know what a tiger is!

          Good to see you my man, I hope all is well and you get home soon! We’re considering some moves of our own. I had an idea too. Shoot all the federal and reload the cases from those that fired lol. Then I will have some accurate, reliable stuff with annealed cases… 🙂

  8. Allowing High Frequency Stealing would have been a mistake in the first place . . . if it hadn’t been intentional and the consequences well known to the “regulators”.

  9. Satori says:

    Islamic State To Target Saudi Arabia Next

    http://oilprice.com/Geopolitics/Midd…abia-Next.html

    oh this will be good
    if 10 million barrels of oil a day gets taken off the world market
    all hell will brake loose

  10. Satori says:

    Prepper Tip of the Day

    8 Ways Your Phone Doubles as a Wilderness Survival Tool

    http://mashable.com/2012/07/10/smartphone-apps-for-camping/

    these are for your smart phone
    so they only last as long as civilization does !

  11. KAYNINE says:

    I’m guessing most Preppers here do not have a vested Intrest in the market,so for me it is a non issue. However!!! it will effect all those that do,have a pension or a 401k that is in the market.You have to read between the lines? what did he not say? Everyone has been screaming at the top of there lungs,a crash is coming.It is but on there time table,not ours.I’m really not looking forward to this dark event.It makes me sad to think of the bleak future that await’s our children,and grand children.It is up to us to teach,not preach.(I told you so) is not a good enough answer!!!WIDE IS THE GATE AND NARROW IS THE ENTRANCE!!

    • TheGuy says:

      Right because there’s ever been a generation in all of recorded history that did anything other than preach(I too) to their kids.

      This actually happening? (Teach)? I put better odds on the Ducks winning the Superbowl, and they aren’t even a football team.

      • TheGuy says:

        (I told you so)… how the hell did that come out as “(I too)” No edit feature. Nice. It keeps skipping keystrokes. I. h. a. v. e. t. o. t. y. p. e. l. i. k. e. t. h. i. s.

  12. Warchild Dammit! says:

    The market rigged?!Say it ain’t so!Hardly news to those who pay any attention to the finance world at all.I may catch some flak here but love the widget rating system(i.e. thumbs)is either down or just gone!Pages and comments load much faster,tis the way to be!You disagree with me will now have to actually respond a bit instead of just pushing a button,the way all responses whether positive or negative should be in my (correct)opinion!

  13. Anonymous says:

    At the moment cash is king, our dollar here in US is strong at the moment, as a last ditch effort to keep equities up. Next it will go to nothing and then maybe SHTF. We shall see, but the market tricks, smoke & mirrors will soon not work anymore.

  14. swinging richard says:

    There is to much at stake for the game not to be rigged.

  15. TEST says:

    Well… MY money is safe! I invested it all with Obama crony Jon Corzine, so I’m good to go.

    Or am I?

  16. Ass hat says:

    I wouldn’t say it’s rigged completely I look at it like buying lottery tickets the chance of success is so slim it damn near impossible. If I designed the market I would make it work for me first too. How could you have inside info and not use it to your advantage. Withholding info is not lying saying something that is not true is.

  17. the Lone Ranger says:

    George Soros got out of the stock market about 1-2 years ago.

    When the rats leave the sewer you gotta pay attention.

    Enough said, right?

    Greed, and, the desire for riches makes the stock market run. If you detach from greed and riches, you’ll have more than you will ever need.

    On the other hand, silver and gold are much more secure and safer markets.

    So prep up, keep minimal cash in the bank, and stack some silver, preferably off-site. Martial law IS coming, it’s just a matter of time and sadly, their false flags.

    In the Heath Ledger Batman (Joker) movie, Alfred tells Master Bruce about the men who roamed Africa burning down village after village.

    Master Bruce asked why.

    “Because, Master Bruce, there are some men who just enjoy burning cities.”

    And there are men who enjoy rigging markets and everything else no matter what.

    The world calls them super rich people.

    We call them sociopaths: they are the destroyers, they have no conscience, no empathy, they are authoritarian, and they kill you if you criticize them.

    No wonder they want to make the Internet a “utility” so they criminalize free speech and tax the hell out of it.

    I’ve got news for everyone: this generation will witness the return of Jesus Christ, but first, there will be even more incredible evil. Evil is happening at such a rate that I personally cannot keep up with reading about it all. Second, the Christ Illumination of Conscience will happen to every living human being– it was first prophesied in 1961 at Garanbandal. Third, weeks thereafter, the antichrist will declare himself. Fourth, after the 3.5 years of the Tribulation, the Comet of Chastisement will return to send all evildoers to Hell.

    You all didn’t think we were NOT living in the times of the Book of Revelation now, do you? One major clue: the (underreported) beheadings of Christian boys, girls, women, and men everywhere.

    Wake the flock up.

    More importantly, pray, and pray for God’s Mercy as our Heavenly Parent will send chastisements for greed, hundreds of millions of aborted children, the Worldwide Culture of Death.

    Do NOT take the chip (The Mark), AVOID the fema death camps including shopping malls, call on Christ to send you your Guardian Angel when we become invaded, and above all, Trust God!

    God is MUCH bigger than the evildoers.

    – the Lone Ranger

    “Pray, hope, and don’t worry.” – St. Padre Pio

  18. Ass hat says:

    Retail is cutthroat industry anyway. I wouldn’t be in it myself. I’ve never worked in retail or food in my life. The horror story’s I hear kept me away. Retail is a tough business.

  19. Jim in Va. says:

    Elections are rigged….oh hell everything these days is rigged. Its running as fast as you can but its still a treadmill.

  20. Satori says:

    US begins to feel impact of H5N2 in commercial turkey farms

    http://crofsblogs.typepad.com/h5n1/2015/03/us-begins-to-feel-impact-of-h5n2-in-commercial-turkey-farms.html

    “The latest discoveries, especially in major poultry producer Arkansas, are elevating concerns that the H5N2 strain could disrupt production in the heart of poultry country.”

  21. Ass hat says:

    The cement boots genius is what the mobsters on federal hill say around here funny shit that wise guy lingo is big around here. I love it it’s funny watching a bunch of old timers sitting around a table shooting craps. The biggest crime family around here was patriarca huge mob roots here in New England damn good Italian food too. My wife is Italian and is a great cook better than my mom though I wouldn’t tell her that. They used to find people dead in the trunks of Cadillacs a lot just like the movie goodfellas I love this movie fuckin hilarious.

  22. Satori says:

    Breaking: Shots Fired at Police in Ferguson.

    http://www.dailykos.com/story/2015/0…ce-in-Ferguson

  23. Enemy of the State says:

    whats behind curtain 2 ?

  24. John says:

    BREAKING NEWS
    EBKAfile reports that Russian websitesThursday morning began running unconfirmed reports that Russian President Vladimir Putin had suddenly died. This has not been confirmed by any official in Moscow. But a short announcement of Putin’s death was seen briefly on Prime Minister Dmitry Medvedev’s website early Thursday, only to be removed after 20 minutes. According to officials in Moscow, Putin was expected in Kazakhstan Thursday for meetings with its leaders, but failed to turn up.

  25. Old Guy says:

    Two cops shot in Fergison Mo. just happened!

  26. DISHONEST Money leaves room open for all sorts of Evil.

    HONEST Money shuts and bars all the doors.

    http://www.IVAMU.com/ ~>is the way UP and the way OUT.

    Using partial grams inserted into the Hybrid paper currency, bridges the gap making it the DOABLE Solution.

    One that can be swiftly implemented Restoring all prospects for REAL Prosperity.

    Shutting down the ability of Tyrants to function, and for
    co-conspirators to be put OUT of business.
    Come and see how EASY it is to do this, then let your Members of Congress KNOW, there is NO EXCUSE not to do this ASAP.

 

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