FInRA fines Trillium Brokerage Services for high-frequency market manipulation

[ASH]

Fast-trading firm hit with big fine on Fortune

The Financial Industry Regulatory Authority, or Finra, said it censured and fined Trillium Brokerage Services of New York and 11 of its employees for improprieties tied to so-called high-frequency trading. The violations took place over a three-month period at the end of 2006 and the start of 2007.

All told, the group paid $2.3 million in sanctions, the regulator said. The firm and the individuals didn't admit to or deny the watchdog's allegations.

Finra said Trillium, two execs and nine traders fabricated "market moving orders" that induced others to buy or sell at prices that were advantageous for Trillium.

Once their own orders to buy or sell against this fictitious market were filled, the Trillium traders withdrew the phony orders, the self-regulatory body said. The Trillium traders pulled this scam more than 46,000 times, Finra said, reaping $525,000 in profits, which they now are ordered to give back.

"Trillium's trading conduct was designed to improperly bait unsuspecting market participants into executing trades at illegitimately high or low prices for the advantage of Trillium's traders," said Finra's Thomas R. Gira. "Finra will continue to aggressively pursue disciplinary action for illegal conduct, including abusive momentum ignition strategies and high frequency trading activity that inappropriately undermines legitimate trading activity, in addition to related supervisory failures."

[LargoWinch]

Re: FInRA fines Trillium Brokerage Services for high-frequency market manipulation

Once their own orders to buy or sell against this fictitious market were filled, the Trillium traders withdrew the phony orders

How can this be?

It is like me filling an order for Gold and one hour after saying "sorry not buying, the price is down"...

No wonder people lost faith not only in equities, but in the Wall Street mechanism to channel wealth and savings.

[jpatter666]

Re: FInRA fines Trillium Brokerage Services for high-frequency market manipulation

How can this be?

It is like me filling an order for Gold and one hour after saying "sorry not buying, the price is down"...

No wonder people lost faith not only in equities, but in the Wall Street mechanism to channel wealth and savings.

It's possible in an HFT environment where the quote-stuffing and cancellation takes place in a matter of milliseconds. If I can I'll see if I can get my brother to comment on this for us -- he lives and breathes this stuff.

Possible regulatory responses to this behavior (and it's *way* more wide-spread than you'd think) are:
1 ) Minimal charge (like a penny or nickel) for each order. Nothing to you and me, *serious* money to the HFT guys
2 ) All quotes have a minimum "lifetime" of say a few seconds. Again, would kill this kind of maneuver outright.

But, hey, can't do either of those, it would kill "liquidity".....

[doom&gloom]

Re: FInRA fines Trillium Brokerage Services for high-frequency market manipulation

it's still all a slap on the wrist. if i could make tens of millions or more a year and have to :give ack" the occasional couple million, it would just be a cost of ding business...

[c1ue]

Re: FInRA fines Trillium Brokerage Services for high-frequency market manipulation

More importantly, why is Trillium fined but the TBTF(*ckers) not?

I guess Trillium needs to ante up its political contributions...

[bpr]

Re: FInRA fines Trillium Brokerage Services for high-frequency market manipulation

More importantly, why is Trillium fined but the TBTF(*ckers) not?

I guess Trillium needs to ante up its political contributions...

FINRA is an industry trade group - a self-regulator - not a government agency. Their job is to maintain the appearance of legality in the industry on behalf of the industry.

[c1ue]

Re: FInRA fines Trillium Brokerage Services for high-frequency market manipulation

FINRA is an industry trade group - a self-regulator - not a government agency. Their job is to maintain the appearance of legality in the industry on behalf of the industry.

So Trillium was prosecuted based on sound regulatory principles?

Or failed to ante up to the right people? Government or no?

The Chairman and CEO of FINRA, for example:

http://www.finra.org/AboutFINRA/Leadership/p019335

Richard Ketchum is Chairman and CEO of FINRA.

Prior to becoming CEO of FINRA, Mr. Ketchum was CEO of NYSE Regulation from March 2006 to March 2009. He served as the first chief regulatory officer of the New York Stock Exchange, a position he began in March 2004. From June 2003 to March 2004, Mr. Ketchum was General Counsel of the Corporate and Investment Bank of Citigroup Inc., and a member of the unit's planning group, Business Practices Committee and Risk Management Committee.

Previously, he spent 12 years at NASD and The Nasdaq Stock Market, Inc., where he served as president of both organizations.

Prior to working at NASD and NASDAQ, Mr. Ketchum was at the Securities and Exchange Commission (SEC) for 14 years, with eight of those years as director of the division of Market Regulation.

[bpr]

Re: FInRA fines Trillium Brokerage Services for high-frequency market manipulation

So Trillium was prosecuted based on sound regulatory principles?

Or failed to ante up to the right people? Government or no?

The Chairman and CEO of FINRA, for example:

http://www.finra.org/AboutFINRA/Leadership/p019335

I don't see anything surprising about the revolving door between FINRA and the SEC.

I look at this FINRA action this way: by hitting a small player (even if it hit a big player, like GS) for $2.3 million, it can issue press releases and jawbone about how it's an effective regulator of the financial services industry, thus allowing larger players to move massive amounts of money with little oversight and the appearance of legality.

[c1ue]

Re: FInRA fines Trillium Brokerage Services for high-frequency market manipulation

I don't see anything surprising about the revolving door between FINRA and the SEC.

I look at this FINRA action this way: by hitting a small player (even if it hit a big player, like GS) for $2.3 million, it can issue press releases and jawbone about how it's an effective regulator of the financial services industry, thus allowing larger players to move massive amounts of money with little oversight and the appearance of legality.

I think you just said what I implied in the original post: that Trillium is being prosecuted because it is a small fish - even as the big fish gobble away.

And what I added: Trillium was the specific small fish chosen because they either didn't pay up or made the wrong person angry.

[bpr]

Re: FInRA fines Trillium Brokerage Services for high-frequency market manipulation

I think you just said what I implied in the original post: that Trillium is being prosecuted because it is a small fish - even as the big fish gobble away.

And what I added: Trillium was the specific small fish chosen because they either didn't pay up or made the wrong person angry.

I agree with your implications, and am happy to make them explicit, but your insistence on bribery falls into the tinfoil-hat category, and I don't expect that from you.

FINRA (formerly NASD) is an industry association. Read: a big lobbyist. Like PHARMA. Or AHIP.

It is impossible for them to bring down TBTF because they represent TBTF. TBTF is their membership, as is every two-bit, under $100B securities dealer in the country.

What they can do is provide cover for the industry's "self-regulation":
Goldman Sachs' Bayou Ruling: FINRA Tells Firm To Pay $20.6 Million In Hedge Fund Ponzi Scheme

No bribery is necessary here: they all pay their dues. Literally. It's a trade association, so they all pay for membership. Trillium pays for membership to FINRA every year so that it can bilk investors. So does Morgan Stanley, goldman, BOa, Citi... You name it.

You can make the case for membership into a trade association as bribery, since the trade association lobbies on behalf of its membership, but to assume that one guy hasn't gotten his blood money is ridiculous. We have institutional corruption.

Trillium or Goldman may be corrupt, but their corruption doesn't compare to that of FINRA.

FINRA is the brokers' version of PHARMA, which is the pharmaceuticals' version of AHIP, the health insurance lobby.

In other words, FINRA's actions are meaningless. They can never amount to more than a slap on the wrist, since they rely on their membership (the brokers) for their existence.

Way too much brainpower was wasted on this.

[unlucky]

Re: FInRA fines Trillium Brokerage Services for high-frequency market manipulation

Some thinking on the flash crash, from a firm that makes kit used by traders in this space:

http://www.nanex.net/FlashCrash/Flas...lysis_LOD.html

Or (better link):

http://www.nanex.net/20100506/FlashC...pleteText.html