Möglicherweise bevorzugt behandelt

Possibly gave preferential treatment.

Hedge funds, unlimited short selling and now high-frequency traders have been for some time a regular source of concern for financial consumer protection advocates in Germany. The Frankfurter Allgemeine Zeitung recently reported on high-speed automated trading-related investigations that diverse U.S. financial regulators at various levels are making.

  • The F.A.Z. said the U.S. Securities and Exchange Commission is investigating whether certain software programs might accelerate transactions for some traders and not others.
  • The state of New York’s attorney general, Eric Schneiderman, accused U.S. stock markets of using computer hardware to give speed advantages to high-frequency traders, to the detriment of private investors. He said the markets are letting high-frequency traders set up their computers inside the markets’ data centers and giving them access to “ultrafast” cables connecting to the markets’ networks.
  • The U.S. Commodity Futures Trading Comission is investigating “complex agreements between so-called high-frequency traders and the [Terminbörsen: derivative exchanges, or futures markets] Chicago Mercantile Exchange and Intercontinental Exchange. The agreements have to do with rebates for the execution of stock orders.”

Last month the company Business Wire, which the F.A.Z. said is a competitor of Marketwired and a subsidiary of Berkshire Hathaway, agreed to stop providing similar services. Warren Buffet stopped the practice working with Eric Schneiderman after it was found that high-frequency traders had been able to obtain these data directly from Business Wire, rather than via the official route through high-speed subscriptions to intermediary news agencies such as Bloomberg, like everyone else.

A data specialist firm called Nanex said a 100-millisecond difference in publication delivery of a company’s press statement had at least once sufficed to earn a profit of US$800,000.

In a related F.A.Z. op-ed, the author commented that the S.E.C. in Washington, D.C., should have been doing much of this regulatory work, but lately Attorney Schneiderman has been “making them legs.”

Update on 03 Apr 2014: One of many interesting responses to Michael Lewis’s 60 Minutes interview about his new high-frequency trading book, Flash Boys, said the relevant wireless connections are faster than fiber optic connections.

The F.B.I. said it too is investigating.

(MIG lichh ah VISE ah beh FORD sooked beh HOND alt.)

DeuBa

Syllabbreviation for the Deutsche Bank. Whose co-chief, Jürgen Fitschen, has apologized for phoning Hessian governor Volker Bouffier (CDU) after the Frankfurt district attorney’s 500-man razzia on 12/12 (but before the Munich district attorney’s 10-man razzia on 12/20, the latest Leo Kirch-related search of DeuBa premises) to complain that the Frankfurt district attorney’s 500-man razzia may have damaged the Deutsche Bank’s image. Fitschen’s phone call has been roundly condemned by German politicians in a [2011 Anglicism of the Year].

One expert has speculated that Fitschen fell on his sword so that duarch Anshu Jain can remain unfired. I’m wondering how the press learned about the phone call.

Süddeutsche Zeitung journalist Klaus Ott said the Deutsche Bank was warned by the Frankfurt D.A. last summer. “There was a sort of yellow card, a dark-yellow card, half a year ago, and the Deutsche Bank knew that if they didn’t cooperate there would be a search.”

Update on 03 Apr 2014: A blogger reviewing Michael Lewis’s new book on high-frequency trading mentioned an interesting relationship between the Securities and Exchange Commission, Deutsche Bank and the global financial crisis of 2008:

“The SEC’s head of enforcement, Robert Khuzami, was general counsel for the Americas for Deutsche Bank from 2004 to 2009. And who did Lewis reveal to be one of the biggest instigators of the subprime short and related CDO sales? Gregg Lippmann of Deutsche Bank, patient zero of this strategy. Any serious investigation of CDO malfeasance would implicate Khuzami.”
—Yves Smith

(Doy! Bah!)

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