By Pam Martens: July 15, 2013
Last Wednesday, Eric Hunsader, the outspoken executive from data feed company, Nanex, posted a letter at the company’s web site that the big Wall Street law firm, Skadden, Arps, Slate, Meagher & Flom LLP, had filed with the Commodity Futures Trading Commission (CFTC) last December.
The letter was co-signed by Mark D. Young and Jerrold E. Salzman and was addressed to Dan Berkovitz, General Counsel of the CFTC. Skadden demanded answers as to how Section 8 trading data had fallen into the hands of academics not directly employed by the CFTC. (The academics had the temerity to analyze the data as it related to potential market manipulation by high frequency traders and publish the findings for the public at large to scrutinize – a travesty if ever there was one in the eyes of Wall Street.)
As it turns out, Skadden lawyer Mark Young has been throwing his weight around the CFTC for years. A search at CFTC brings up 129 separate references to CFTC phone calls or meetings with Young or letters and comments he has made with the federal agency.
In an April 13, 2012 letter to the CFTC, Young wants the CFTC to skip requiring those small single family offices from having to register as commodity pool operators. Young says he represents 48 of these single family offices — who just happen to have bumped into each other somehow and formed a group called the Private Investor Coalition, Inc., which just happens to have enough money to buy the enormously expensive muscle of Skadden Arps.
A simple solution to the Section 8 trading data that Young wants to wall off from academics on the basis that it contains “trade secrets,” would be to simply remove the trading firm’s name from the data and substitute a number, such as, Trading Firm 1. Young doesn’t suggest that as a remedy.
One suspects there are deep memory banks in the biggest Wall Street law firms that recall that the disclosures of decades-long price fixing on Nasdaq and the attendant fines against virtually every major Wall Street firm came about as a result of an academic study looking at trading data. The U.S. Department of Justice, which settled the case against 24 firms on July 17, 1996, stated in its announcement that it had opened the investigation two years prior as a result of the publication of a study by Professors William Christie of Vanderbilt University and Paul Schultz of Ohio State University that examined collusive trading behavior.
The CFTC also seemed to be zeroing in on abusive high frequency trading activities early last year when Commissioner Scott D. O’Malia, the chairman of the Technology Advisory Committee, announced the creation of a Subcommittee on Automated and High Frequency Trading. Under the plan, there would be four separate working groups: one tasked with defining high frequency trading within the context of automated trading systems; another examining whether or not there should be multiple categories of high frequency trading. The third group would focus on oversight, surveillance and economic analysis; and the fourth group would address market structure issues to identify possible disruptions that might be provoked by automated trading systems and potential solutions to mitigate such events.
The Subcommittee was to be chaired by Andrei Kirilenko, the CFTC’s Chief Economist. Kirilenko was one of the names that Young raised concerns about in his December letter to the CFTC over the release of Section 8 trading data.
On June 19, 2012, the CFTC announced that Kirilenko would be leaving the CFTC at the end of the year to become a Finance professor at the Massachusetts Institute of Technology.