Tuesday, 27 April 2010

Computerized Front Running and Financial Fraud

While the SEC is busy investigating Goldman Sachs, it might want to look into another Goldman-dominated fraud: computerized front running using high-frequency trading programs.

Market commentators are fond of talking about “free market capitalism,” but according to Wall Street commentator Max Keiser, it is no more. It has morphed into what his TV co-host Stacy Herbert calls “rigged market capitalism”: all markets today are subject to manipulation for private gain.

Keiser isn’t just speculating about this. He claims to have invented one of the most widely used programs for doing the rigging. Not that that’s what he meant to invent. His patented program was designed to take the manipulation out of markets. It would do this by matching buyers with sellers automatically, eliminating “front running” – brokers buying or selling ahead of large orders coming in from their clients. The computer program was intended to remove the conflict of interest that exists when brokers who match buyers with sellers are also selling from their own accounts. But the program fell into the wrong hands and became the prototype for automated trading programs that actually facilitate front running.
http://globalresearch.ca/index.php?context=va&aid=18809

Check out the last paragraph or two about what happened to the legal records concerning who actually owns Keiser's trading program today. Hint: the building in which the records were stored was destroy about 9 years ago (along with papers dealing with the Enron scam) !

[Posted at the SpookyWeather blog, April 27th, 2010.]

No comments: