$34 Billion Asset Manager Says Market Prices Are Manipulated, Accuses NYSE Of Intellectual Property Theft, Debunks HFT “Liquidity Provider” Lies
Posted: June 13th, 2010 by Militant Libertarian
As part of the SEC’s process to fix the broken market, it is currently soliciting public feedback on a variety of issues. Why it is doing so, we don’t know – after all anything that does not conform to the SEC’s preconception of what the most lucrative market to the SEC’s recent batch of clients (see earlier news about an SEC director going to HFT specialist Getco) is, just ends up in the shredder anyway. At this point to believe that the SEC will do anything remotely in the interest of investors instead of millisecond speculators, is naive beyond compare. Nonetheless, while combing through some of the recent public responses on the topic of market structure, we came across the following presentation by $34 billion Southeastern Asset Management (SAM), titled “Comment & Analysis on Equity Market Structure” which must be brought to the attention of all those who have the temerity to defend HFT as an altruistic source of liquidity provisioning. SAM’s 4 points are simple, and laid out very easily so that even the mildly retarded public, pardon, GETCO servants at the SEC can understand it: “1) The intent of the Securities Exchange Act of 1934 as provided for in its preamble is being twisted and abused for the benefit of gamblers and to the detriment of investors. 2) The markets are not “fair and honest”, 3) Securities prices are presently “susceptible to manipulation and control, and the dissemination of such prices gives rise to excessive speculation, resulting in sudden and unreasonable fluctuations in the prices of securities. 4) The preceding three issues are fixable by the SEC.” Let’s dig in.
Before we get into the meat of the complaint, one of SAM’s primary concerns, is that the US stock market has become the functional equivalent of China: trading intellectual property is routinely abused, stolen and used against its very creator.
- The US equity markets are meant to facilitate investors’ allocation of capital to businesses, thus expanding production and improving the quality of life in America.
- The markets have strayed from this social purpose, and presently resemble casinos more than orderly markets.As a result, the economy is hindered, fewer jobs are created, and reasonable returns for true investors (not traders) are compromised.
- The property rights of creators of intellectual capital are being systematically and openly ignored by the exchanges and certain market participants. The order originator’s hard work, ingenuity, and prospective returns are being taken and sold by those who did not create it.
- Whereas trading was once a means with which to match long-term buyers and sellers of businesses, trading has now become an end in and of itself.
And while these are rather philosophical concepts which will stump the SEC for years, and even then Mary Schapiro’s lack of brain trust will still say evidence is inconclusive and the IP theft, as established, will continue indefinitely, SAM’s disclosure about the true nature of HFT should be read by everyone, especially by the industry increasingly more conflicted defenders (why else would a firm like Getco go out and hire a pathologically “confused” person from the SEC if not for the fringe benefits of regulatory capture)