Is Part of the Stock Market Rigged?

Dark Pools of Liquidity.

Has this term ever come up in a conversation with your financial advisor?

Like the dark web, there seem to be stock markets that operate outside the view of most people. Not exactly what anyone with a brain would consider democratic.

The following is from an article from Dec. 2019 on www.wallstreetonparade.com:

“The public has no way to know just how deep in the red the mega banks on Wall Street might have closed yesterday or in recent months because the U.S. Securities and Exchange Commission (SEC) is, insanely, allowing these banks to trade the shares of their own bank, as well as the shares of their peer banks, in Dark Pools they own and operate. Dark Pools function as lightly-monitored stock exchanges owned by the major banks on Wall Street. (See Wall Street Banks Are Trading in Their Own Company’s Stock: How Is This Legal?)

During the week of November 25, the most recent week for which data is made available by Wall Street’s self-regulator, FINRA, Goldman Sachs’ Dark Pool, Sigma-X, traded 22,136 shares of its own stock in 228 separate trades. The mega bank, UBS, however, with whom Goldman does a great amount of counterparty business, traded 262,804 shares of Goldman Sachs’ stock in 4,074 separate trades in just that one week in its Dark Pool, UBSA.

The public has no way to know just how many shares of Goldman’s stock its own Dark Pools traded because in addition to its U.S. Dark Pool, Goldman owns Dark Pools that trade on three other continents.

For the same week, JPMorgan Chase’s Dark Pool, JPM-X traded 265,906 shares of JPMorgan’s stock in 1,912 separate trades. That made it the second largest Dark Pool trader of its own stock that week, just behind UBSA which traded 475,306 shares of JPMorgan’s stock in 5,238 separate trades.

But JPMorgan also owns another, algorithm-based Dark Pool, JPB-X, that traded another 88,182 shares of JPMorgan’s stock the same week in 1,308 separate trades.

Under a sane and functioning Securities and Exchange Commission or federal regulatory regime, banks trading their own stocks in darkness while holding trillions of dollars in federally-insured deposits would result in perp-walks, not in elevating their outside counsel to Chairman of the Securities and Exchange Commission

The data that FINRA is making available to the public has cleverly been gutted to make sure that no math whizzes in academia have the ability to reverse engineer the data into successful charges of market rigging, as occurred previously in a forensic probe by academics Christie and Schultz in 1994 into how Wall Street firms were engaged in tacit collusion on the Nasdaq stock market.

FINRA’s Dark Pool data does not show hourly or daily trading, just weekly totals; it does not show if the prices paid for the shares were in keeping with the rest of the market. And, it does not show what party was on the opposite side of the trade. For all the public knows, banks that own more than one Dark Pool could be making a two-sided market in their own shares.”

1 Comment

  1. Capitalism and Democracy are not synonymous. I hope Canada can never be as disastrously crooked. Fortunately we are a functional social democracy. We are a little to a lot nauseated by evil systems of unjust inequity. Right Mr. Ford?

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