Wednesday, August 12, 2015

How the freest market in the world really works

Short answer: Not on your behalf.

Longer answer from Matt Levine at Bloomberg News.

In 2009 and 2010, according to the SEC order, "ITG explored initiatives to increase diversification and revenues," and someone came up with a very clever initiative. ITG gets all these customer orders to buy stock, see.  So why not -- just hear me out here -- why not look at the customers' orders, buy the stock ahead of them, and then sell it immediately to the customers at a higher price? That's a pretty good risk-free profit.
You know, I remember when Bush II wanted to take all your Social Security money and give it to people like ITG. I don't recall his mentioning anything about front-running, dark pools and whatnot.

Some people think that free markets do not really operate to give everybody a fair shake, and they are right. Regulators even allow for special categories of players who known to enjoy insurmountable advantages.

Remember that the next time some big-time lawbreaker -- I am looking at you, Jamie Dimon -- tells Congress that more regulation would be a bad thing.

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