"The markets are not rigged."
That's what U.S. Securities and Exchange Commission Chairwoman Mary Jo White told a House of Representatives panel on Tuesday.
She went on to say, "The U.S. markets are the strongest and most reliable in the world."
Of course she's right. The U.S. markets are the strongest and most reliable in the world.
But she's either blind or deluded if she doesn't know they are also rigged…
The SEC's Case of Cultivated "Confusion"
What prompted Chair White's defense of the markets she and the SEC are charged with regulating to ensure they are fair and transparent was a point-blank question posed by Congressman Scott Garrett, a New Jersey Republican.
Mr. Garrett, who sits on the House Financial Services Committee, was referring to Michael Lewis' explosive book, Flash Boys, and Lewis' claim that high-frequency traders have rigged the markets.
Mary Jo White is not only not deluded, but she is extremely bright.
She has a B.A. from the College of William & Mary, an M.A. in psychology, and a law degree from Columbia Law School, where she was the Writing and Research Editor of the Columbia Law Review. In March of 1993 Ms. White was appointed by President Bill Clinton as U.S. Attorney for the Southern District, which reigns over Wall Street.
In other words, she's no stranger to what insider trading really is.
She claimed that using high-speed access to exchange servers to determine market bids and offers before they are disseminated to the public, which is what high-frequency traders do to jump ahead of unsuspecting investors, doesn't actually meet the legal definition of "unlawful insider trading."
"There's some confusion about that," she said. It must have been Ms. White's law background and her tenure as a U.S. Attorney that so carefully measured her response.
What there isn't any confusion about is that the SEC has opened up an investigation into high-frequency trading. So have the FBI, the Justice Department, and the New York State's Attorney General.
The only confusion here is on the part of Ms. White. It boggles the mind to listen to the top regulator on Wall Street, of equity trading and all the stock exchanges, to say front-running public orders isn't at least some form of "insider trading."
Of course it is. The truth is the American public can't handle the truth.
The truth is that the Securities and Exchange Commission knows exactly how high-frequency traders operate, that they have unfair access to market data ahead of the public, and that they make billions of dollars a year plying their middleman, toll-taking techniques.
Mary Jo White, like her predecessors, has simply turned a blind eye to what's become of the markets. And the reason the regulators have turned a blind eye is that they have been paid to do so.
The SEC Won't Turn Off Their Money-Making Spigot
High-frequency traders pay exchanges for their order flow. That means even a start-up exchange with no business to speak of has a chance to grow into a bona-fide exchange that pays all kinds of registration and other fees to the SEC.
Exchanges want orders from brokers; their job is to match them and execute trades.
About the Author
Shah Gilani is the Event Trading Specialist for Money Map Press. He provides specific trading recommendations in Capital Wave Forecast, where he predicts gigantic "waves" of money forming and shows you how to play them for the biggest gains. In Short-Side Fortunes, Shah shows the "little guy" how to make massive size gains – sometimes in a single day – by flipping large asset classes like stocks, bonds, commodities, ETFs and more. He also writes our most talked-about publication, Wall Street Insights & Indictments, where he reveals how Wall Street's high-stakes game is really played.