Prosecutors investigate market manipulation through quote stuffing

Section:

U.S. Prosecutors Probe High-Frequency, Algorithmic Trades

By Joshua Gallu
Bloomberg News
Friday, April 29, 2011

http://www.bloomberg.com/news/2011-04-29/high-frequency-trades-manipulat...

U.S. prosecutors have joined regulators' investigation into whether some high-speed traders are manipulating markets by posting and immediately canceling waves of rapid-fire orders, two officials said.

Justice Department investigators are "working closely" with the Securities and Exchange Commission to review practices "that are potentially manipulative, like quote-stuffing," Marc Berger, chief of the Securities and Commodities Task Force at the U.S. Attorney's Office for the Southern District of New York, said today at an event in New York.

While regulators previously said they were probing possibly abusive algorithmic trading practices, the attention of criminal authorities ramps up the stakes.

... Dispatch continues below ...



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Wall Street Journal Publishes Lewis Lehrman's Call for the Gold Standard

In its April 26 edition The Wall Street Journal published an important essay by the Lehrman Institute's chairman, Lewis E. Lehrman, explaining why a gold-convertible dollar is critical to eliminating the shocking federal deficit.

"Experience and the operations of the Federal Reserve System compel me to predict that U.S. Rep. Paul Ryan's heroic efforts to balance the budget by 2015 without raising taxes will not end in success -- even with a Republican majority in both Houses and a Republican president in 2012. ...

"What persistent debtor could resist permanent credit financing? For a government, an individual, or an enterprise, 'a deficit without tears' leads to the corrupt euphoria of limitless spending. For example, with new credit the Fed will have bought $600 billion of U.S. Treasuries between November 2010 and June 2011, a rate of purchase that approximates the annualized budget deficit. Commodity, equity, and emerging-market inflation are only a few of the volatile consequences of this Fed credit policy."

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The SEC and Commodity Futures Trading Commission sharpened their focus on technology-driven trading after the so-called flash crash on May 6, which temporarily erased about $862 billion from the value of U.S. equities in less than 20 minutes. Regulators have placed limits on price moves and proposed rules limiting other practices, and lawmakers banned "spoofing," in which market participants try to trick other computers into making decisions that can be exploited for profit.

A joint SEC-CFTC report released in October found no evidence that the May 6 selloff was triggered by manipulation.

The SEC last year established a market-abuse unit to investigate cases of manipulation. At the securities law conference in New York today, SEC Enforcement Director Robert Khuzami said investigators need better technology to adequately police markets and detect possible misconduct coming from high- speed and algorithmic trading.

"The question is: Do we have enough transparency to detect wrongdoing if it was going on?" Khuzami said, adding that SEC investigators are probing other matters arising from the May 6 market crash.

Berger said market manipulation was among six of his task force's priority areas, which include insider trading, Ponzi schemes, accounting fraud, asset forfeiture, and structured financial products.

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Canuc Resources Pursues Ecuador and Nova Scotia Gold Projects

Canuc Resources Corp. (TSX: CDA) has confirmed high-grade gold and the potential for large-tonnage, low-grade copper and gold mineralization at its primary asset, property in the historic Nambija gold mining district in southeastern Ecuador.

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