Comments on: Dark Pools and Stealth Exchanges Mean Unregulated Stock Markets

By: earlofhuntingdon

earlofhuntingdon — Sat, 17 Oct 2009 04:39:46 +0000

Derision is deserved in this case. Not just because Storch’s sole experience is with Goldman, but because of his lack of experience.

Goldman’s BI department may be beyond the “gold standard”, but in whose interest does it operate? Goldman’s, its clients, the marketplace, private investors, the government? Possibly one and two, certainly not the last. What was Storch’s leadership role in that department?

Even were it not, five years experience is inadequate to be the Street’s top cop. It’s giving a star lieutenant an aircraft carrier to run. Wrong tool, wrong job.

By: jonerik

jonerik — Sat, 17 Oct 2009 02:16:50 +0000

OK, a broker is: “any person engaged in the business of effecting transactions in securities for the account of others.” My experience with federal administrative agencies from the 1980′s and 1990′s (look at the FCC for instance) is that novel interpretations of the laws and definitions to address new situations is allowed great deference. Why shouldn’t laws which are designed to protect common investors be given the same interpretation as when agencies interpret the laws for the benefit of insiders, as they did in the Reagan and Bush eras?

Like I said above, I’m not trying to be a contrarian. I’m just asking questions. If you have a point, maybe it needs to be that the Securities and Exchange Act is obsolete in understanding the realities of modern trades. Maybe Congress needs to investigate the agency and the “business of brokerage”. I’m somewhat attuned to the fact of who really owns this country and it’s not people like me (I don’t know about you). So who is a “person engaged in the business of effecting transactions in securities for the account of others.” As Lewis Carroll said:

“`The question is,’ said Alice, `whether you can make words mean so many different things.’

`The question is,’ said Humpty Dumpty, `which is to be master — that’s all.’”

“Through the Looking Glass”.

By: john in sacramento

john in sacramento — Sat, 17 Oct 2009 02:08:13 +0000

Thanks for bringing this subject up again Cynthia. I only found out about this about two years ago ... and look who's in the middle of it Goldman Sachs Creates Private Stock Exchange for Unregistered Securities, Clients with $100 Million Minimum

By: jonerik

jonerik — Sat, 17 Oct 2009 02:01:08 +0000

What is “private”? What is “public”? This is really a technical or maybe rather an old fashioned question: if organizations like Directexchange “hold themselves out” to the public as willing and able to deal in trade with anyone who has the requisite cash, then by definition, they are an “exchange” and subject to the Securities Exchange Act as an exchange. Whether the SEC chooses to subject these entities to the law as “exchanges” is another question. Maybe that is the question for a New Pecora Commission?

By: Cynthia Kouril

Cynthia Kouril — Sat, 17 Oct 2009 02:00:26 +0000

Go look at the link. Direct Exchange is a brokeage firm. It belongs to FINRA and SipIC and is just like Smith Barney or Merril Lynch

By: Cynthia Kouril

Cynthia Kouril — Sat, 17 Oct 2009 01:55:30 +0000

No, I don’t know know what his capailites are. But I do know that the Business intelligence group does do due diligence, money laundering investigations, and similar work.

Until recently, the BI Group at Goldman was not only the gold standard in the indutry, it was so far out in fornt of the next best, that you could see the curve in the Earth’s horizon.

Now, of course, all things Goldman are suspect, but that does not mean the derision is deserved by every component of Goldman

By: jonerik

jonerik — Sat, 17 Oct 2009 01:55:18 +0000

If Smokry, an individual investor, trades directly over what he believes to be an “exchange”, what prevents Directexchange from being an “exchange” subject to regulation under the law as now written?

By: Cynthia Kouril

Cynthia Kouril — Sat, 17 Oct 2009 01:52:00 +0000

These are not
exchanges” these are private contract transactions. They just happen to move 10% of all the stock traded

By: Cynthia Kouril

Cynthia Kouril — Sat, 17 Oct 2009 01:50:48 +0000

Direct Edge is a brokerage. And they belong to public exchanges like NYSE.

We are talking about non Exchange trades

By: jonerik

jonerik — Sat, 17 Oct 2009 01:33:54 +0000

No, The principle is that the regulatory agency sometimes gets to interpret the scope of its own regulations and jurisdiction which sometimes, no, often, means restricting the scope of the law as written by Congress (here in 1933-1934) to a much narrower field than is obviously intended. The question is: do you need an act of Congress to undo what prior restrictive interpretations have undone or you do administratively do what the the law obviously intended you to do in the first place? I say if Obama wants this SEC to clamp down on this BS, then it doesn’t need an act of Congress.

But that doesn’t answer my first question: how as a practical matter does any regulator, however well intentioned toward doing the right thing and enforcing the law, enforce a law which can be easily circumvented by certain players as individuals who are no different, but for their means, than the rest of us? Maybe having a lot of money and having done a certain number of transactions which violate the law would qualify for a warrant. So maybe I can easily answer my own question. But how do you know who the violators are to begin with?