Wall Street Firms Using Their Dark Pools To Make Markets in Their Own Stocks

These self-named dark pools are operating as private exchanges, with a faux type of specialist system managing the order book, with all the insight and power that it entails.  The layman may not quite comprehend this, but anyone familiar with Wall Street operations and history will certainly do so.

That they are trading for their own parent company stocks, and possibly for their own books, ought to raise more than a few eyebrows. 

We ought to have internalized the lesson by now that markets are not naturally efficient and self-regulating.  But even moreso when the business of price setting and order matching is being done in darkness, and apparently with lax regulatory oversight and institutionalized conflicts of interest.

The lack of integrity in the Western financial system must seem appalling to anyone whose ears are not firmly taped to the corporate news feeds droning out of New York and London to their jaded listeners.  Another lie, another fraud, another abuse of oaths and trust.    Tra la, tra la, comme ci comme ça.

The Banks must be restrained, and the financial system reformed, with balance restored to the economy, before there can be any sustainable recovery.

After Charges of Running a Price Fixing Cartel on Nasdaq in the 90s,
Wall Street Banks Are Now Trading Their Own Stocks in Darkness
By Pam Martens and Russ Martens: June 3, 2014

On July 17, 1996, the U.S. Justice Department charged the biggest names on Wall Street, names like Merrill Lynch, JPMorgan and predecessor firms to Citigroup, with pricing fixing on the electronic stock market known as Nasdaq...

Yesterday we learned that the very same Wall Street firms charged with price fixing in the 90s have somehow conned their regulators into allowing them to own their own dark pools – effectively unregulated stock exchanges – and make markets in the stock of their very own Wall Street bank.

The Financial Industry Regulatory Authority (FINRA) – a self-regulatory Wall Street body (which under a previous name was responsible for missing the Nasdaq price fixing for more than a decade) released trading data yesterday for the dark pools operating the week of May 12 – 16. This was the first time such data has been released. The data releases are set to continue..."

Read the entire article with the details here.

Gold Daily and Silver Weekly Charts - Cap and Fear

There are some very significant events happening behind the scenes, even though the markets would seem to hide this with their sleepily accommodative nature to the status quo.

I thought Volcker's call for a new Bretton Woods agreement was significant, in a Chamberlain-like manner. Volcker is certainly out of power, riding the tide of events more than shaping them now. But he certainly still has insights into what is going on.

I am a little surprised at the push by the neo-cons at this point to advance the New American Century. It makes me wonder.

There is plenty of room for speculation here. I will take a pass on it for now, and wait to see some indication of what is happening, before ranging out onto the seas of possibilities, and legends.

But I do know that this too shall pass.

Have a pleasant evening.

SP 500 and NDX Futures Daily Charts

They had to restate the PMI number a couple of times this morning before they got it right.

I had not realized that they seasonally adjust these surveys. Do they seasonally adjust opinion polls too?

These markets are already acting like the dog days of summer, with an upward bias on sleepy volume.

There is a yawning divergence between Bonds and Stocks. I suspect this might be due to Fed interference on the Bond side, which we know about, as well as some free range tinkering with values on the Stock side.

Either way, this is going to end badly. I have an open mind to a summer slump, but unless something happens to provoke more selling at higher volumes we may just muddle along until something more traditional in the autumn, and event inspired. This is a midterm election coming up after all.

I found these words from Daniel Ellsberg below about Snowden and some other things to be worth hearing.

Have a pleasant evening.

Gold Daily and Silver Weekly Charts - Why The State Might Prefer a Purely Digital Form of Fiat Money

"This place is like somebody's memory of a town, and the memory is fading.
It's like there was never anything here but jungle."

Rust Cohle, True Detective

Gold and silver took it on the chin for this week, as we welcome the active month of June.

This is a historically weak period for precious metals, and the metals bulls should be glad of it, because contrary to the portraits being drawn on the paper charts, they are in a highly vulnerable position with regard to physical supplies. They are never so brazen as when they are desperate, and seek to put on a bold face, while quietly shitting their pants offstage.

I have been meaning to say something more about digital money, and the recent blurbs in its favor by some of the Western central banks, and their kindred voices amongst the economists. I intended to write a follow up to yesterday's Arbiters of Value, expanding the discussion to pure fiat in purely digital form, but became distracted by other matters. As I have noted before, sometimes procrastination has its benefits, because someone else speaks up, and says what one is thinking, and sometimes even better and more concisely.

I think Janet Tavakoli 'hit the nail on the head' with this recent letter she sent to The Financial Times with regard to Kenneth Rogoff's proposals for purely digital money. It was of course a nonsensical piece, but one might ask themselves why such a thing would be put forward now in this manner.

Here is an excerpt from the letter. You may read the entire piece at the link provided below.

It seems to me Kenneth Rogoff’s commentary, “Paper money is unfit for a world of high crime and low inflation” (May 28), is less about deterring crime and the problems of “low” inflation – food consumers in the US know double-digit inflation – than it is about eliminating the zero bound on interest rates and preventing people from bailing into cash.

 

In other words, Mr Rogoff proposes to machinegun one of the lifeboats by eliminating paper currency as an alternative to unlimited digital currency..

 

His specious argument about the anonymity of paper currency facilitating tax evasion and crime is propaganda..."

Janet Tavakoli
Tavakoli Structured Finance
Chicago, IL USA

Read the entire letter at The Financial Times

'Negative interest rates' are a hightoned euphemism for systematic confiscation, a highly regressive form of bail-in.

I could not have said that better myself.  When money is purely digital, the state obtains a significant control over all money everywhere, no matter what 'security' and 'algorithms' are said to be built into it.   Digital anything requires a exceptional amount of trust in what those who manage the system do while no one is watching.  And I would like to think that we are well beyond that point by now.

Non-Farm Payrolls report next week. We are now in the June delivery month, and the relevant chart shows the initial positions stood for below.  Gold fell to a deeply oversold level on heavy volume for the option expiration 'mini-puke.'

As a reminder, the importance of the Comex is fading, and it will begin to fade even more quickly as the year progresses until it falls into irrelevancy, unless it is reformed.

Have a pleasant weekend.

SP 500 and NDX Futures Daily Charts - Markets Most Complacent Since March 2013

We will be getting a Non-Farm Payrolls report next week. It will likely be closely watched as a more contemporary indicator of the economy since we saw the big negative revision on 1Q GDP.

That does not mean that the NFP report will be valid, since the monthly headline number itself is subject to significant revisions in its first few months. But that is how the markets are likely to take it.

VIX is at its lowest level since early in 2013. While it can certainly continue on at these levels, especially given the coddling of the big trading desks by their friends at the Fed, it still leaves the equity markets vulnerable to even a relatively small exogenous shock.

The bond bears have been taking a beating, and that is probably more a technical trade than anything else, and supported and even promoted by the Fed.

Have a pleasant weekend.

Gold Daily and Silver Weekly Charts - The Arbiters of Value

"'When I use a word,' Humpty Dumpty said, in rather a scornful tone, `it means just what I choose it to mean -- neither more nor less.'

`The question is,' said Alice, `whether you can make words mean so many different things.'

`The question is,' said Humpty Dumpty, `to be master -- that's all.'"

Lewis Carroll, Through the Looking Glass

If you look at the metals calendar below, tomorrow is first notice day for June.

It is hard to tell, but I think the worst of the sell off for June option expiration is about done. But let's see what happens.

I must have heard ten times on the financial news, as they discussed the awful GDP revision, that there is no inflation because gold is down. Ron Insana said that since gold is down $35 the last couple of days, that shows that there is no inflation.

Well, this is all perception management. They took most of the damage in the GDP number now. Why didn't they take it in the upfront number? Because it was too close to the fact. In this second revision they took it down dramatically to the negative. But now it is further a long, and the story about the odd winter weather effect has had time to gain traction.

The net result is that the next number is now important, and we are not looking at what just happened because it is so two months ago. And the comparison is set rather low for the next quarterly number, which I predict will come in much higher. All hail The Recovery™, fait accompli, just in time to influence the midterm elections.

Here is a link to a nice, concise description of what the basic tenets that Modern Monetary Theory stands upon.

I think I have made my own analysis of the theory fairly explicit. It has been tried many times. The key phrase is 'a currency issuer can never run out of money.' This is true. They can print all that they want. The critical variable is the 'value.'  And as for value, 'the Jobs Guarantee Wage determines the value of the dollar.' And the Jobs Guarantee Wage is a function of the government.

It is a self-referential fiat standard, in the manner of the Alice in Dollarland  in which we are beginning to find ourselves today.  It will stand only so far as the force of law can reach.  Generally that ends at the borders, but one can always hope for a one world government that is able to dictate the value of everything to everyone at their own discretion.  

It is not that we need better financial engineers, or more virtuous custodians of society, a kind of a priesthood of economic virtue, worthy of the burden of being benevolent tyrants.  There is NO class that is capable of wielding such raw power, without falling into a destructive cycle of self-destruction.

As an elite impoverishes their homeland, they find it necessary to engage in various types of colonialism, to create new markets for their excess supply, since paying living wages to their people creates a blur in class distinctions. 

How can I know I am sufficiently rich, unless many are exceptionally poor?  This impulse to economic expansion and marriage of force and economics was the story of the British Empire.  And it explains much of the otherwise odd behavior of this New American Century, and its many wars and adventures.  They make a desert and they call it peace.

I hate to pick on MMT like this, because so many otherwise nice, sensible people seem to be drawn to it.  But I can see such a revolutionary move is already in the cards from other corners.  Nothing attracts the unworthy like the power to dictate and distribute wealth.  And the more arbitrary it is, the greater the allure.   As Abraham Lincoln said, it is the crux of human society. 

"They are the two principles that have stood face to face from the beginning of time, and will ever continue to struggle. The one is the common right of humanity and the other the divine right of kings...No matter in what shape it comes, whether from the mouth of a king who seeks to bestride the people of his own nation and live by the fruit of their labor, or from one race of men as an apology for enslaving another race, it is the same tyrannical principle."

Abraham Lincoln, 1858

And like most utopian exercises, some of the well-intentioned may promote it, but the worst end up controlling it for their own ends and personal enrichment.  We have seen this tendency so far, at the dawning of the sixth year of The Recovery™ from the Great Recession, which formally ended in June, 2009.  And isn't life grand.

Have a pleasant evening.

SP 500 and NDX Futures Daily Charts - Faltering Economy, Spinning Pigmen

The GDP revision came in firmly negative as expected.

The partnership of business and government spun this heavily as an anomaly that was due to the weather.

I doubt we will get anything much deeper in the further revision. The point of this exercise was to take all the bad results now, and dismiss them as old news and a winter storm phenomenon.

This has the added benefit of providing an easy basis of comparison for the next quarter and possibly the one after that, just in time for the midterm elections.

Tomorrow we get Chicago PMI and sentiment.

The real economy is struggling, because of stagnant wages and slack demand. When they don't have money from wage income, and the illusion of wealth they can borrow against from a housing bubble, people tend to cut back. duh.

The danger for the pigmen is that their crowd is doing so well, and the equity market is providing them such a nice sinecure, that they will carry this out too long, and trigger some unfortunate blowback.

It is interesting to see some bellwether elites, mostly nervous high profile figureheads, warning about this now. I doubt they will be heeded. Greed has the ball, and is heading in for the big win. What could go wrong?

Have a pleasant evening.