Reasons Why Wall Street Manipulators Need to be Prosecuted

As a small investor (and yes, I’m very small, probably laughably small to some) nothing burns me up more than to learn about all these ways that the big guys get to manipulate things. Between the flash orders and the dark pools and the giant servers whose orders cut in line and drive up the price of stocks, basically the little woman investor is screwed. From MSN:

3. Dark pools
Technology gives privileged insiders an edge in another way — by connecting big players inside exclusive electronic trading venues. Because they are private and trading is anonymous, these secretive venues are known as “dark pools.”

Inside dark pools — like one called “Sigma X” run by Goldman Sachs and another run by Investment Technology Group — huge amounts of stock are bought and sold every day at prices that outsiders may know nothing about until well after the fact.

This gives big players two advantages: lower fees on the actual trades and secrecy. When you’re making big moves, you don’t want competitors to notice what you’re doing.

Apparently the SEC is trying to decide if the 7% of trading that is estimated to be going on in these dark pools is messing up the whole “free market.” If so, they may apply an extra dollar or two to investigating and prosecuting this manipulation. How reassuring.

If there isn’t a decent effort to ensure the average small investor that he or she is able to safely invest in the stock market, the market is only going to get more corrupt.

I really wish Sheldon Whitehouse or Jack Reed would lead the charge on prosecuting white-collar Wall Street crime.

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13 thoughts on “Reasons Why Wall Street Manipulators Need to be Prosecuted

  1. Even if you’re not investing, this is a concentration of power and secrecy that can’t be good for the rest of us.

  2. Jack Reed?Are you serious?Do you just conveniently overlook the fact that these manipulative string pullers gave him $3.5 million for his “campaign fund”-I guess you believe such funds are sacrosanct and Reed benefits personally in no way?Who did Reed campaign against?Chris Young?Bob Tingle?Real tough challenges with thise two.Reed didn’t even HAVE to campaign to win.You are in denial here.
    BTW nice to meet you the other night.Small world that we share an alma mater,although I got my degree at another division of the CUNY system.

  3. I will need to contact Reed’s office to find out if they can take a stronger stance on this issue. Also Whitehouse. I sense a big wave of public disgust rising over this as more and more people realize that they’ve been raked over the coals and their 401K has basically been stolen by the Wall St. manipulators. I’m looking forward to Michael Moore’s new film helping to galvinize the public outrage.

    Nice meeting you too, Joe! I’m not sure how I survived Hunter because I hate crowds and elevators. It’s almost like I did it to test my anxiety tolerance on these things. I did have some very excellent teachers.

    • When I started at Hunter(Bronx)in 1963 and even when I eventually got my degree from John Jay(1973) the CUNY system was tuition free for city residents and there was a nominal tuition for non-city NY state residents.Aside from foreign students I don’t know if out of staters were admitted.
      Sometime in the early 70′s CUNY embarked on a policy of making college available to anyone wanting to attend.They expanded the community college system,but also the four year system.It got bigger and bigger in a very short time.I don’t know how they found qualified staff(assuming they did),but the whole free tuition thing went down the tubes.
      Even in 1972 when I was attending,they had remedial reading classes!Admission standards ceased to exist.I don’t know if CUNY has ever recovered.was Hunter a good social work school?I recall the “downtown” branch as a school mainly for teachers.
      Talking about admission standards-in 1963 I couldn’t get into Brooklyn College(putrid math scores),so I commuted from Flatbush to the Bronx and back every day.If you don’t like crowds be glad you didn’t travel the old IRT during rush hour.You could die and not fall over.Oh,yeah-no A/C in the old cars.
      Barbara Boxer graduated my high school
      before I started there.It was named for the founder of the NRA.I’ll bet Boxer doesn’t know that.It would sure get her shorts twisted.
      I always thought people gravitated to the New School for that.

      • My last line was out of sequence.I was referring to where people would have gone to study social work.

      • I went to Hunter for undergraduate. For social work school I went to Smith. The Social Work school for Hunter is not at 68th street where I went as an undergrad.

  4. Gee Joe, CCNY? Hunter?

    South Bronx here, Hunts Point; 41st Precinct (Ft. Apache); Southern Blvd; Longfellow Ave….the armpit of the world that makes Kabul seem like a peaceful paradise. Tony Curtis came from there; Jan Murray, Herman Wouk and Colin Powell (Morris High School).

    Simpson St. IRT; transit police even had a tough time–their guns were too small! Over at the other edge the Pelham Bay Line, just as bad, but underground.

    One wonders where we forgot to be responsible for our own actions. No one is forced to buy stocks, open retirement accounts and not do some research, and just be adult in decisions. The victim mentality solves nothing, explains nothing, except an inability to control one’s own life.

    • I don’t know how old you are,but I’m almost 63 and I spent a lot of time around the places you mention.My friend Dave lived on Fox Street-the whole area was an insane asylum in the mid 60′s.
      My wife grew up on W135th in Manhattan and then when she was about 10,her family bought a two family house on Cedar Avenue way on the west side of the Bronx,overlooking the Harlem River.Her brother went to Clinton and she and her older sister went to Walton.That was a better area than the South bronx.Fort Apache became an abandoned wasteland in the 70′s when the Bronx burned every night.Now it’s supposedly come back since the affordable homes programs of the 80′s and 90′s.I wonder how the foreclosure crisis affected things.
      You realize the Fulton Fish Market moved to Hunts Point,right?The Washington Street meat market also.
      I still visit a friend who lives around 211th and Laconia.That area hasn’t changed that much in over 40 years.
      Remember the Bronx section of the Third Avenue El that ran for years after the main section was torn down in 1956?
      Check out a site called Forgotten NY run by a guy named kevin Walsh.It’s a labor of love and one of the best stops on the Internet if you’re from NYC,No politics-just discoveries of remnants of the past.

  5. Mr. Wolberg, I’m not sure whose “victim mentality” you are referring to. My own mentality is one of reading and researching every investing decision and taking my lumps when necessary. I would like the more enforcement of laws protecting the markets from manipulation that unfairly privileges the already-privileged.

  6. The market was at 149th St, before Hunts Point–was where I had my first job at “16″ (was really 14 but there were ways to work), at night (11PM to 7 AM) loading and unloading apple trucks, veggies and XMAS trees. My father drove trucks there–he figured he went to the 8th grade and that was enough education for anyone, including me. The market moved to Huunts Point after I was gone. As a kid the Bronx River caught fire at least 2-3 times a year; I think it’s cleaner now. I also have heard that the rebuild has stalled and the “newer” housing is deteriorating. I did see the Lost NY book.When I finally returned to NY, it was to NYU in Washington Sq and the Village on scholarships. NY had not changed, NY had changed, and luckily so had I.
    Such is life.

  7. Donald, people are forced to buy stocks.

    The vast majority of stock owners own their stock through their 401(k)account. The vast majority of these folks don’t have much control over where their money is invested.

    As such, they have to go where the fund manager of the fund they’re in takes them. Generally, it is into stocks.

    Ergo, since the number of people being forced into 401(k)accounts is growing because companies are shedding defined benefit (i.e. traditional pension) plans, then they are more or less forced to buy stocks.

    So, what was your argument again?

    These sorts of insider deals hurt a huge number of people for the benefit of a very, very few.

    How is that just? It’s no different that insider trading. Some small group is making their purchases on the basis of information (prices) not available to the general public.

    Don’t get shook, Joe, but this time I agree with you that Reed taking that much cash from the banking industry is problematic.

    Wealth = power, and wealthy companies use their wealth to purchase favorable regulation, or lack thereof.

    So, Donald, what was your argument?

  8. This issue of forced investing is quite real.
    The federal civil service retirement system switched from defined benefit(CSRS) to a 401(k) based plan as of 1/1/84.
    I had been hired in 1976 so I didn’t have to switch.People who were covered by the new plan have been completely screwed by the market collapse of 2008.a lot of people I know who were going to take advantage of the 25 years and out at any age feature now are unable to do so.
    CSRS operated on a time/age combination.People like myself in hazardous duty positions had to do 20 years and be at least 50.We could then add on military active duty time.Other employees had to be 62 and I am not sure of the length of service involved.
    I never invested in stocks because I didn’t understand them.But the point is,I wasn’t compelled to.Millions and millions of people across the country are.The small investors got wiped out and those at the top didn’t seem to lose any quality of life.
    I always thought the rapidly rising market was too good to be true.
    Most people in the Senate of both parties are probably too compromised to approach this issue with a straight face.

  9. Interesting…been away in the field at 7300 feet, looking at rocks and fossils…tough work but someone needs to do it! I wonder what all the concern is about 7% of trades using comlex math? I would be more concerned that 93% of the trades do not use all the mathematical tools available. There is nothing secret about mathematical models and they are available to anyone, one supposes. I also wonder why there is no real data except a “suspicion” that 7% of trades use these models…why it could be 1% or it may also be that these “models” are like the race track systems of picking horses, or point counting at blackjack, or any other system supposedly giving an edge to gamblers. Most of the time we end up with coin flipping–flip coins often enough and half will be heads, and half will be tails.

    Most everyone saw their 401k accounts nose dive, berhaps as much as 50% because of the economic contraction. If they could, and of course not everyone could, most sensible folks would have had a cash reserve and perhaps been only partically committed to stocks.

    The Dow is back to 9500 or so and may get to 10,000 again. If it does, the best thing to do would be to cash out and roll some of those 401k funds into CD’s, especially since my ill-informed mathematical model sees the miserable economic and spendthrift policies of the present administration, with $9 trillion debts looming, being the real ruination of the nation’s economy. One forgets that a trillion is 1000 billion–real Everett Dirkson dollars. So we will be in debt $9000 billion.

    The other item of interest is of course the Dow itself. At 9500, there is some robustness to the DOW, not the 13,900 high, but not the 6000 low either. In 1929, the DOW was at 380, and then collapsed to 42 by 1932, a loss of almost 90% in value. At even 9500, the current perturbation of the market is minor by comparison. Similarly, at a GDP of $13.4 trillion, the real enemy is government interference in the market, and disasterous spending, not the %1-7% complex math traders use. I suggest that a look at a current microeconomics textbook used in undergraduate college courses is very esoteric and mathematical but hardly secret!

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