When Will We See Handcuffs? (Market Manipulation)

“Free markets”?

“Honest markets”?

Where?

Gee, certainly not here:

Then something very disturbing dawned on us. If the average or base quote rate is around 10,000/second, then it only takes an additional 10,000 quotes/second to reach the magic 20,000 quotes/seconds where a corresponding delay is seen in CQS. This 10,000 quotes/second can be in any stock or combination of stocks that NYSE sends quotes to CQS for.

The high occurrence of strange crop circles we have noted elsewhere, are suddenly beginning to make sense.

Oh really?

Let me decipher this for those who are not up on the “lingo”:

There appears to be a limit beyond which the rate of quotes “overloads” the commodity - ”everyone but a few” – quote services that virtually all investors and traders have access to.

This limit has been “discovered.”

This fact now allows those people who buy a premium quote product from the exchanges to discern a market price that is different than everyone else sees.

And that, in turn, would allow those same participants to create a dislocation in pricing that they can then exploit – effectively creating a “front running” opportunity that would not otherwise exist.

Let’s decipher this chart: It shows a massive spike in quote volume at a time when there is no change in price.  The change in price follows the quote spike, strongly implying that a quote-dislocation was caused, and then that dislocation was exploited. 

Repeatedly.

The obvious questions that arise from such a discovery are:

• Why is it legal to sell a “premium” quote product that has as it’s only reason to exist and thus its only value being “more current” than the standard consolidated product offered to everyone else?  Is this not a direct and blatant violation of the fundamental precept of a public securities market – that is, open, fair and even access for all participants?

• If market manipulation is illegal, and if quotes are being inserted into the market in bulk that are not intended to be executed, but rather are being rapidly inserted and canceled, and given that it appears divergence between CQS-disseminated quotes (that which 99+% of the market sees) and “premium” quotes (which 1% of the market sees) can be forced by this sort of activity, how is it that this does not evidence intent to manipulate the market?  It is one thing to take advantage of a pricing disparity.  That, provided you do not participate in causing the dislocation, is probably not unlawful.  But if you do cause it, either directly or in concert with others who also are issuing the quote flow that creates the dislocation in the first place, is it not clear that you’re acting like an ambulance company that drums up business by reprogramming the traffic lights at an intersection so they all show “green” at the same time?

NANEX is doing yeoman’s work here in analyzing that which nobody else is willing to look at, bringing it into the light of day.

Again I ask: Where the hell are the cops?

For those of us who are in the 99% of investors and traders you need to consider carefully how you can reasonably invest or trade in what is increasingly being documented as a rigged casino with willfully-blind “regulators” that have and continue to refuse to enforce both the letter and spirit of the law that is supposed to protect your right to fair dealing and equal market access?