Big Shocker - Half of Future trades in Chicago are actually "Wash" trades

[truedelphi]

Half of all trades in the Chicago Commodites market are "wash" trades

The most stunning allegation in the lawsuit is that an estimated 50 percent of all trading on the Chicago Mercantile Exchange is derived from illegal wash trades.
Wash trades were a practice by the Wall Street pool operators that rigged the late 1920s stock market, leading to the great stock market crash from 1929 through 1932 and the Great Depression. Wash trades occur when the same beneficial owner is both the buyer and the seller. Wash trades are banned under United States law because they can falsely suggest volume and price movement.
A lawsuit filed in Illnois is related to a belief that some fifty percent of all commodities trades undertaken in the Chicago commodities markets are "wash trades."

http://wallstreetonparade.com/2014/07/lawsuit-stunner-half-of-futures-trades-in-chicago-are-illegal-wash-trades/


The lawsuit says Duffy and his management team are tolerating wash trades “because they comprise by some estimates fifty percent of the Exchange Defendants’ total trading volume and also because HFT transactions account
for up to thirty percent of the CME Group’s revenue.” And then, the complaint
indicates that the plaintiffs have a “Confidential Witness A,” a high frequency trader, who has given them a statement that wash trades are used by high frequency traders as part of a regular strategy to detect market direction and “to exit adverse trades when the market goes against their positions.”

The strategy works like this, according to the complaint:

“HFTs [high frequency traders] continuously place small bids and offers (called bait) at the back of order queues to gain directional clues. If the bait orders are hit, the algorithm will place follow-up orders to either accumulate favorable positions or exit ‘toxic’ risks, a process which leverages bait orders to gain valuable directional clues as to which way the market will likely move. The initial bait orders are very small while subsequent orders, once market direction has been identified, are very large. A portion of the large orders that follow the smaller bait orders are wash trades.”

[Wellstone ruled]

1. Wow,missed this one

knew there was some case being put together as to the HFT's and the CME. Just another window into how the 1%ers and the Mobsters have corrupted and rigged our finanical system. Noticed the Allgo's took the market down today.

[elleng]

2. DAMN!

'Throughout this time, no one has been more adamant than Terrence (Terry) Duffy, the Executive Chairman and President of the CME Group, which operates the largest futures exchange in the world in Chicago, that the charges made by Lewis about the stock market have nothing to do with his market. The futures markets are pristine, according to testimony Duffy gave before the U.S. Senate Agriculture Committee on May 13.'

Deregulation, de jure or de facto, will KILL us, and here it is!

[truedelphi]

4. And apparently even Krugman seems oblivious:

http://wallstreetonparade.com/2014/08/paul-krugman-just-made-the-worst-call-of-his-career/

Krugman starts off with the subtitle “Dodd-Frank Financial Reform Is Working” and ends with this stunning pronouncement: “For all its limitations, financial reform is a success story.”

Judging by the comments section to Krugman’s column, that last leap of fantasy brought a gasp from readers of the Times business section who are greeted daily with one or another Wall Street crime cartel looting the country through some new derivative scheme or appropriately named “dark pool,” or “fixing.”

One commenter, Gary Henscheid wrote “…investment bankers will run amok until Congress restores Glass-Steagall.” (Glass-Steagall is the depression era legislation put in place after the 1929 stock market crash which bans firms speculating in stocks from merging with banks holding insured deposits. It was repealed under another ill-advised President, Bill Clinton, in 1999. The market proceeded to do a 1929-style crash just nine years after its repeal.) Another reader, Mark Thomason, wrote in the comments section: “Financial reform …did not go anywhere near far enough. It is not just the Republicans. The Democrats too, Obama insiders too, they all want to feed on the money they need in politics. None of them have a taste for real reform…They did nothing that displeased the bankers. They just papered it over and pretended.”

A commenter using just his first name, Jason, wrote: “The Dodd-Frank act of 2011 is 879-pages. The Glass-Stegall [Steagall] act of 1933 was 37-pages, and worked for 60 years. Despite its length, D-F was not complete with 243 rules left to be defined by regulators, who in turn asked the financial industry to fill in those blanks. Essentially the foxes were asked to not only guard the henhouse but to build it too.”

[Demeter]

3. Everything old is new again, and this time, it's different!

Right, sure.

[truedelphi]

5. Who was it that once said, "The most painful words in history are:

This time it will be different."

[Scuba]

6. Why that would mean the market is rigged! Who knew?

[Spitfire of ATJ]

7. Sure! It's not a private club of wealthy snobs. It's the whole public. Look at those volumes....

.....bastards.

[TRoN33]

8. That can explain why single purchase of soda can easily costs $1.80-2.30 dollars.

[rickyhall]

9. Love that capitalism, similar to grand larcenyism