By Pam Martens: April 22, 2014 There is now overwhelming evidence that Wall Street firms have entered a race to the bottom in high-tech trading wars. To grab the best programming talent, Wall Street firms are paying top dollar for the best and brightest coders and developers and potentially sapping the ability of other U.S. industries – those that make real products – to compete. Just this month, Jamie Dimon, CEO of JPMorgan, told the firm’s shareholders in his annual letter that JPMorgan employs “nearly 30,000 programmers, application developers and information technology employees who keep our 7,200 applications, 32 data centers, 58,000 servers, 300,000 desk-tops and global network operating smoothly for all our clients.” According to Anish Bhimani, Chief Information Risk Officer at JPMorgan Chase, in an interview published at the Information Networking Institute (INI) at Carnegie Mellon, JPMorgan has “more software developers than Google, and more technologists than Microsoft…we get … Continue reading →

By Pam Martens: April 21, 2014  Since the launch of the new Michael Lewis book, “Flash Boys,” at the end of March with wall to wall media coverage, including his pronouncement on 60 Minutes that the stock market is rigged against average investors, there has been a whirlwind of damage control. The FBI announced that an investigation was already in the works, the New York State Attorney General is issuing subpoenas and a civil war (frequently not so civil) has broken out among industry titans staking out their media turf on whether the market is or is not rigged by high frequency traders. Not in dispute is the fact that these high frequency traders have armed themselves with superfast computers, algorithms and artificial intelligence programs, all of which the New York Stock Exchange and NASDAQ have obligingly allowed – for annual fees running into tens of thousands of dollars – … Continue reading →

By Pam Martens: April 17, 2014 Bloomberg News is reporting that New York State Attorney General, Eric Schneiderman, has issued subpoenas to six high-frequency trading firms. The article, however, names only three firms, none of which are household names. According to the article, Schneiderman is asking the firms, which include Chopper Trading LLC, Jump Trading LLC and Tower Research Capital LLC about the “special arrangements they have with exchanges and dark pools as well as their trading strategies.” This is a curious approach. Why not ask the three big stock exchanges, the New York Stock Exchange, Nasdaq and BATS to hand over the names of all high frequency traders to whom they have sold expensive perks that have the effect of rigging the stock market against the average investor. On March 18 of this year, Schneiderman gave an address at New York Law School indicating his intimate knowledge of the … Continue reading →

By Pam Martens: April 16, 2014 As far as we can tell from his online bio, George Melloan has never worked a day inside a Wall Street firm – at least not in the past half century since that time has been spent writing or editing for the Wall Street Journal. But that small detail does not in any way inhibit Melloan from telling those of us who had long careers inside the belly of the beast how we should revise our thinking about what we saw and heard with our own eyes and ears. Michael Lewis, Yves Smith, Frank Partnoy, Gretchen Morgenson, Greg Smith, Nomi Prins (all with a strong foundational basis for their writings from having worked on Wall Street) apparently need to be set straight by Melloan’s outsider views. Nomi Prins has just come under the sharp pen of Melloan in a  Wall Street Journal review of … Continue reading →

By Pam Martens: April 15, 2014 In the past two years, two of the most senior, long-tenured and talented women at JPMorgan, Ina Drew and Blythe Masters, have bid adieu to the bank and its CEO, Jamie Dimon, under less than ideal circumstances. Questions are now emerging as to whether Dimon required that these senior supervisors hold proper industry licenses for the work they performed for the bank. Ina Drew, the former head of the Chief Investment Office, who supervised the traders responsible for losing $6.2 billion of the bank’s deposits in exotic derivatives trading in London, resigned from the firm over that firestorm on May 14, 2012. Drew had been with JPMorgan and its predecessor banks for 30 years. In Drew’s testimony before the U.S. Senate’s Permanent Subcommittee on Investigations on March 15, 2013, Drew told the hearing panel that beginning in 1999, she “oversaw the management of the … Continue reading →

By Pam Martens: April 14, 2014 Since bestselling author Michael Lewis appeared on 60 Minutes on March 30 to promote his new book, “Flash Boys,” and explained how the U.S. stock market is rigged; and Brad Katsuyama, the head of IEX, an electronic trading platform who plays a central role in the Lewis book, did the same on CNBC a few days later, the debate has gone viral. But Lewis and Katsuyama were not the first to blow the whistle on rigged U.S. stock markets. Sal Arnuk and Joseph Saluzzi, Wall Street insiders and co-founders of Themis Trading LLC literally wrote the book on “Broken Markets” in 2012 and have been exposing details of the rigging  on their blog ever since. Wall Street Journal reporter, Scott Patterson, mapped out the exotic and corrupt order types permitted by the stock exchanges to fleece the little guy in his 2012 book, “Dark … Continue reading →

By Pam Martens: April 10, 2014 Too-big-to-fail Wall Street mega banks are now one part bank, one part legal defense and one part confidence-game. JPMorgan’s Chairman and CEO, Jamie Dimon, whose career has now survived more scandals in the past two years than most business titans ever see in a lifetime, has penned a masterful 32-page head-fake to shareholders. Dimon tells shareholders that the company has “consistently shown good financial performance” while distancing himself from the $30 billion the company has paid out in fines and settlements for a rash of misdeeds since January 2013. The word “fortress” appears five times in the letter with the oft-expressed “fortress balance sheet” morphing additionally into the “fortress control system” and the “fortress company.” Dimon’s photo appears alongside the letter, clad in a navy jacket and blue shirt. Next year he might want to complete the fortress analogy by donning a Knight’s metal … Continue reading →

By Pam Martens: April 9, 2014 The caribou have vanished on Wall Street and the wolves are in a feeding frenzy against each other. Yesterday, the Wall Street Journal reported that Goldman Sachs is considering shuttering its Sigma X dark pool, a business that brought in $7.17 billion from equity trading in 2013, before accounting charges. There are only three reasons that a Wall Street mega bank shutters a $7 billion business instead of selling it: it’s crazy; its regulators told it to shutter it; there’s more bad news ahead about this business and the firm is trying to get out in front of the fallout. We know Goldman Sachs is only crazy like a fox, so that leaves options two and three. On March 13, Bloomberg News reported that Goldman Sachs sent refund checks to some of its customers for trades that had occurred in August 2011 where it … Continue reading →

By Pam Martens: April 8, 2014 Most Americans are traveling with a blindfold on Wall Street’s rigged superhighway. Until bestselling author, Michael Lewis, blanketed the airwaves last week with the news that yet another cartel has formed on Wall Street to front-run the stock trades of ordinary investors with a super-speedy fiber-optic line financed by private investors, the public remained in the dark about the latest weapon in Wall Street’s high-tech arsenal for transferring the little guy’s wealth into the hands of the one percent. The plan was so insidious that it reminded us of the stealth practices carried out by Wall Street in the tech boom of the late 1990s to line the pockets of the corner offices while separating the small investor from his life savings. One of those practices is benignly called a “penalty bid” (every trick on Wall Street has some indecipherable name to disguise what’s … Continue reading →

By Pam Martens: April 7, 2014 The fallout from the new book, “Flash Boys” by Michael Lewis continues. Yesterday, Jonathon Trugman wrote in the New York Post that “These traders who use the HOV lane to get ahead of investors could not do their trades without the full knowledge and complicity of the New York Stock Exchange and Nasdaq.” Trubman went on to compare the two best known stock exchanges in the U.S. to houses of ill repute, writing: “What is clearly unfair and unethical — and, frankly, ought to be outlawed — is how the exchanges have essentially taken on the role of running a high-priced, high-frequency brothel…” While it’s true that the New York Post might possibly overuse sexual analogies (on August 10, 2011 it ran a front page cover comparing the Dow Jones Industrial Average to a “hooker’s drawers”), in this instance Trugman is spot on. Not … Continue reading →