SEC admits HFT fraud, but does nothing.

[agamemnus]

http://www.marketwatch.com/story/her...lly-2015-07-13

There also was a curiously high percentage of so-called self trades — when the same entity is taking both sides of the trade. The government suggested that high-frequency trading firms’ separate trading algorithms interacted with each other.

Another way to put it — there was a high percentage of the same firm’s robots betting against each other.

Self trades can be, but aren’t always, illegal. It depends if they are so-called wash sales (sic -- should be trades). The report didn’t say whether these particular trades were or not.

If you trade yourself, that's a wash trade, and illegal. Further proof that wealthy manipulators own the market.

[Loki]

I love how your own 4-line quote contradicts what you wrote.

[agamemnus]

I know. The writer of the Marketwatch report is clueless.

[wiggin]

Ag, it isn't at all clear that what they are referring to in your link is actually a wash trade. It's entirely possible that the same company has different funds or algorithms that will trade with each other. In fact, it's quite probable. That doesn't necessarily mean it's a wash trade; the trades could be completely legitimate from both algorithms without any intention of market manipulation. Of course they could be problematic, but that is hardly proof of wrongdoing.

'Trading with yourself' isn't what's really happening here. If Vanguard funds are on both side of a transaction, is that a wash trade? Hardly; they are separate entities with different investing strategies that just happen to be managed by the same company. Ditto for competing HFT algorithms from a single source. It's quite likely in the case of HFT funds, actually, since these companies provide a large chunk of liquidity to most markets. The real problem only arises if the two algorithms are in any way linked other than through their ownership.

[agamemnus]

Vanguard is not strictly an HFT firm, though. But, ok, if they are completely different entities, then maybe this is okay... maybe.

Here's an article from 2013 with similar allegations: http://www.wsj.com/articles/SB100014...66491497070204

[GGT]

....The real problem only arises if the two algorithms are in any way linked other than through their ownership.

The real problem is that the SEC (or any other federal regulating agency) is always several steps behind the "markets" they're monitoring. "Markets" are more nimble and innovative, and move faster than government bureaucracies by design. But in the grand scheme of things, that's a lame excuse for hiding manipulation, exploitation, or even fraud.