March 11, 2013 at 06:00 AM EDT
The FBI and the SEC Are Cracking Down on People Just Like You
Some people will do anything to make money in the market. Believe it or not, folks have even resorted to manipulating stocks to fatten their wallets. And, crazy as this sounds, there are more people doing it than anyone imagined. Now, I know you'd never do that. But the SEC isn't so sure. Neither is the FBI. According to yesterday's Financial Times (the pink paper that some financial types read), the FBI is joining forces with the SEC in order to "tackle the potential threat of market manipulation... that [has] taken markets beyond the scope of traditional policing." What's hilarious to me is that, before the FBI goes looking for market manipulators (like you) along with the SEC, it should be looking at the SEC! But I digress... To continue reading, please click here...

Some people will do anything to make money in the market.

Believe it or not, folks have even resorted to manipulating stocks to fatten their wallets.

And, crazy as this sounds, there are more people doing it than anyone imagined.

Now, I know you'd never do that. But the SEC isn't so sure. Neither is the FBI.

According to last week's Financial Times (the pink paper that some financial types read), the FBI is joining forces with the SEC in order to "tackle the potential threat of market manipulation... that [has] taken markets beyond the scope of traditional policing."

What's hilarious to me is that, before the FBI goes looking for market manipulators (like you) along with the SEC, it should be looking at the SEC!

But I digress...

The Feds (that's the FBI) are throwing their lot in with the other Feds, the SEC's (who aren't Fed enough) Quantitative Analytics Unit that looks at abuses of certain market data and information.

Apparently, some abuses result in manipulators keeping an excessively large amount of money - over above what they pay their lobbyists and what they donate to keep the SEC in Dunkin Donuts and internet sleaze while they do their manipulating thing.

But I digress...

The good news is that this "crack" team isn't just smoking the stuff. They're following the smoke trails of crack-the-market, manipulator types like hedge funds and - crazy as this sounds - you.

That is if you happen to do something that you probably do, and have been doing. Only, you didn't know it was "abusive manipulation." Well it is now.

I don't know where the SEC got this notion, that high frequency trading (HFT) shops and trading desks - located in hedge funds, brokerages, and banks - have been manipulating stocks. They only flood the markets with quotes (quote stuffing) to set up suckers. They only place millions of orders - and cancelling them quickly (layering) - to set up suckers. HFTs are able to construct the National Best Bid and Offer quote for any stock before the exchanges consolidate quotes to disseminate any NBBO to the world, so they can trade before and against any incoming quotes and sock it to the suckers. Just harmless, innocent stuff like that...

I just don't know where they got that notion.

I hope they the SEC doesn't read this, but I hope the FBI does:

Hey, Feds! The SEC are the gangsters giving the HFT lads and lassies preferential access to all their servers to read all of the data they can get their hands on before the exchanges even get it. Hint: start there you idiots!

But I digress...

This is about warning you that you're on their Watch List.

What's frightened me is that I, too, am a market manipulator - and I didn't realize it.

The Financial Times article reported that, among all the other front-running and other abusive manipulation that's going on, "Also on their radar is artificial intelligence trading, an algorithm that predicts market reactions based on history."

My God, they're targeting technical analysis! We're all manipulators. It's not those high frequency traders...

It's us!

Predicting market reaction based on history. Lord help me, I've been doing that for years.

Who knew that a head and shoulders pattern was blatant manipulation?

Who knew that our recognition of rising wedges was giving other innocent market players a wedgie?

Who knew that looking at lines on a graph was the real reason we've all been so successful lining our pockets... at the expense of all those other innocent market suckers?

Oh the humanity! I am so sorry that I ever bought that graph paper to make my X's and O's on all those point and figure charts. I swear I wasn't trying to manipulate anything!

Wait a minute. What am I worried about? History is always prelude to the future. That means nothing will come of any of this new do-si-do dance of the Flailing Feds.

The HFT shops, desks, banks, and the manipulators - like you and me - are free to trade.

Someone ring that bell. There's money to be made today.

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