Third Largest Futures Broker Gets Record Fine For HFT Stock Market Manipulation

thenews 2013.07.11 13:14

When we tapered our coverage of HFT manipulation and stock market abuse some time ago, we thought that the message had been heard loud and clear: high frequency trading is a sophisticated market manipulating parasite, whose only real function is to abuse market structure and integrity, by making conventional market manipulation practices more difficult to spot and identify. It turns out some, i.e., Newedge, thought they could still get away with traditional manipulative practices such as spoofing, layering, momentum ignition, wash trading, bypassing, and others, if only they were wrapped in an HFT blanket. It did so for four years from 2008 until 2011. As it turns out it was wrong, and in a stunning example of actually doing its job, FINRA fined Newedge, which is one of the largest futures brokers in the world and ranks third in terms of U.S. customer assets on deposit, a record $9.5 million.

And while the mechanisms by which Newedge was engaging in market manipulation and outright fraud are largely irrelevant (one can always be found that works and escapes supervision for some period of time), what is more troubling is that seemingly "respected" brokerages continue to abuse markets and rule-abiding participants for the sole benefit of their clients, and their own bottom lines and bonuses of course, despite signing such ironclad fraud prevention mechanisms as self-policing, ethics and compliance manuals. Shocking.

Oh, and yet another reason - one which we have been pointing out for years - as to why the retail investor has given up on the manipulated venue where hedge funds and prop desks pass to each other the hot potatoes money printed up by the Fed.