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Wall Street regulation, supervision and enforcement post.
According to the WSJ, Wall Street M&A and IPO lawyer, Jay Clayton, is Trump’s leading candidate to become chairman of the Securities and Exchange Commission and could be announced as the nominee as soon as Wednesday.
Clayton, who met with Mr. Trump on Dec. 22, is a partner at Sullivan & Cromwell LLP, where he also worked on the 2014 IPO of Alibaba Group. His clients have included Goldman Sachs and Barclays Capital; he would succeed SEC Chairman Mary Jo White, another lawyer with a history of representing Wall Street banks before becoming a regulator. Clayton has spent his career working on the kinds of securities deals that the SEC has a hand in regulating.
Among his various listed deals are the following:
Last April, we commented on the most blatant (pre) revolving door we had ever seen at the SEC (and there have been many): the departure of the SEC’s head HFT investigator, Gregg Berman, who during his tenure at the agency (whose alleged purpose is to keep the “market” fair, efficient and unmanipulated) did everything in his power to draw attention away from HFTs. He did that, for example, by blaming Waddell and Reed for the May 2010 flash crash. This is what Berman, whose full title was the SEC’s “Associate Director of the Office of Analytics and Research in the Division of Trading and Markets” said in the final version of the agency’s Flash Crash report:
At the height of the financial crisis, when risk assets were imploding and counterparties were in danger of overnight collapse, Deutsche Bank avoided failure and nationalization by fabricating the value of its $130 billion derivative portfolio of “leveraged super senior” trades.
Some history: back in 2005, these trades were seen as “the next big thing” in the world of credit derivatives, something which DB at the time was building a massive position in. They were designed to behave like the most senior tranche of a typical collateralised debt obligation, where assets such as mortgages or credit default swaps are pooled to give investors varying degrees of risk exposure. Deutsche became the biggest operator in this market, which involved banks buying insurance against the possibility of default by some of the safest companies, the FT writes.
The SEC announced on Thursday that Bank of America’s Merrill Lynch unit admitted wrongdoing and has agreed to pay $415 million to settle charges that it “misused customer cash to generate profits for the firm.”
According to the statement, Merrill violated the SEC’s Consumer Protection Rule by misusing customer cash that rightfully should have been deposited in a reserve account, freeing up billions to finance its own trading activities as a result.
Monsanto Co will pay $80 million to settle civil accounting violations after it allegedly misstated its earnings in connection with its top-selling Roundup product, U.S. securities regulators said on Tuesday.
The Securities and Exchange Commission also said that three accounting and sales executives have also agreed to settle charges in connection with the case.
– “Project Omega” – Why HFTs Never Lose Money: The Criminal Fraud Explained (ZeroHedge, Aug 13, 2015):
Two weeks ago, without knowing the details of the most recent market-rigging and frontrunning scandal involving “alternative” market veteran ITG’s dark pool POSIT, which issued a vague 8-K it would settle with the SEC for “irregularities”, we explained what we thought had happened:
ITG had an in house prop trading group, or “pilot”, which operated for nearly two years, whose only signal was client order flow, which it would frontrun, and make millions in profits. In other words, once again precisely what we have claimed since 2009. But oh yes, not everyone is guilty of such manipulation. Only Liquidnet… and Pipeline… and ITG… and countless other ATS and HFT firms for whom clients are better known as either “easy money” or muppets.
And yes, we get the “trading experiment” narrative: calling it “criminal market manipulation and order frontrunning scheme” just does not sound like something the Modern Markets Initiative would spend millions of dollars to get Congressmen to agree on.
It turns out we were spot on, the only thing we missed was the name of this market manipulation exercise. Now, thanks to the SEC, we know: “Project Omega” (or as it was also correctly dubbed here the “criminal frontrunning scheme“) is how ITG dubbed its secretive prop-trading desk whose only purpose was to frontrun clients.
Here are the details for all you suckers who still read the HFT apologists and believe the bullshit that all these algos do is provide liquidity, when in reality all the really do is frontrun your orders, assuring them of 6 years of trading without a single day’s loss (or in the case of Virtu, one trading day loss). From the SEC:
Martin Armstrong The System Will Crack And One World Currency Is Coming
– Former SEC Director Admits The Truth: The Market Is Rigged (ZeroHedge, March 10, 2015):
For more than a decade, John Ramsay kept his mouth shut about how rigged the US equity market was.
As SEC Director of Trading & Markets, Ramsay tells Bloomberg her “had red tape over his mouth,” but now he is “uncorked.”
“I’ve been able to find my voice on these issues in a way I couldn’t have done when I was in the government, because you’re always limited by internal politics and not wanting to get too far out in front of the agency,” he said. “I feel like I’ve been a little bit uncorked.”