The full Rolling Stone Article on Goldman

  • Posted: 03 July 2009 02:57 PM

    here

         
  • Posted: 04 July 2009 11:43 PM #1

    The saga continues.

    Taibbi: NYSE ends transparency to protect Goldman Sachs

    By Daniel Tencer

    Published: July 4, 2009

    The New York Stock Exchange quietly announced last week that it would end its practice of requiring companies to report all their program trading ? a move that helps shield large investment banks, particularly Goldman Sachs, from public scrutiny.

    The new rule means the public will no longer be able to tell if large investment banks are manipulating the stock market for their own gain, says Matt Taibbi, the journalist whose Rolling Stone article on Goldman Sachs? role in asset bubbles over the past century has rocked the financial world.

    According to previous NYSE rules, any company that carried out program trading ? essentially, large computer-automated trades worth more than $1 million ? had to report the trades to the NYSE, which then made the information publicly available.

    But, under new regulations (PDF) published last week, that requirement has been removed.

    ?The NYSE announced that it will no longer be releasing its weekly program trading data,? Taibbi wrote in a blog posting. ?This is quiet obviously a move designed to make it even more impossible to track what?s going on in the NYSE and shield, in particular, Goldman Sachs.?

    Taibbi argues that the move is designed to protect investment banks from bloggers who are exposing the companies? stock market manipulations. Goldman Sachs is singled out because the investment bank?s share of principal NYSE trading has gone from 27 percent at the end of 2008 to fully 50 percent of trades in recent months.

    Blogs such as Zero Hedge have been using NYSE data to argue that Goldman Sachs now has an almost unfettered ability to control stock prices.

    Responding last week to news of the NYSE?s rule change, Zero Hedge argued:

    The NYSE has taken action to make sure that nobody will henceforth be able to keep track of the complete dominance that Goldman Sachs exerts over the New York Stock Exchange. This basically ends our weekly Program Trading updates disclosed every Thursday indicating that Goldman has singlehandedly captured all of NYSE?s program trading.

         
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    Posted: 04 July 2009 11:59 PM #2

    Yeah…so no one knows who’s shorting the market when it falls again.

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    The ends don’t justify the means…

         
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    Posted: 05 July 2009 01:06 AM #3

    Legalized white-collar crime.  Is this ‘stock manipulation’ issue too small for Obama admin to care about?

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  • Posted: 05 July 2009 04:04 PM #4

    It’s even more sinister than you can believe…. A couple sharp observers noticed recently that Goldman Sachs program trading (Quant trading) was generating a significant chunk of the volume on the NYSE, they called out GS on it, and GS responded that they were taking part in a new Supplemental Liquidity Program being offered by the NYSE http://exchanges.nyse.com/archives/2008/11/roles.php (huh? you ask), well it turns out that the NYSE is offering liquidity rebates to traders who bring “liquidity” to the NYSE of up to 1/4 penny per share… See http://www.themistrading.com/article_files/0000/0348/Toxic_Equity_Trading_on_Wall_Street_12-17-08.pdf  . So GS and alot of NYSE broker dealers are just churning volume to collect this rebate…

    The NYSE also announced recently that they cut the execution time of orders to 5 milliseconds from 105 milliseconds!!! http://online.wsj.com/article/SB124649953114283829.html so people like GS are just salivating that they can literally nickel and dime your 401K to death.. With the NYSE deciding not to disclose who is churning the market , I think it’s going to create a crisis of confidence in the stock market.

    At the very least if you are trading options it’s so easy for these quants to peg the prices to something you’re not going to like..

    Goldman Sachs spokesman Ed Canaday confirms they are taking part in the NYSE’s SLP program…

    http://blogs.reuters.com/felix-salmon/2009/04/24/goldman-sachs-datapoint-of-the-day/


    Plain and simple, volume is gone from the exchanges (at least the NYSE) and these attempts to manipulate the markets don’t strike me as a good thing….

    [ Edited: 05 July 2009 05:02 PM by irieblue ]      
  • Posted: 05 July 2009 08:07 PM #5

    Less anyone forget, the NYSE was home to Dickhead Grasso http://en.wikipedia.org/wiki/Richard_Grasso who though he was entitled to 180 Million in compensation as head of the NYSE. No doubt we now clearly see whose interests the NYSE protects.

         
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    Posted: 05 July 2009 08:18 PM #6

    Quant espionage possibility re: GS.  Very interesting…

    http://zerohedge.blogspot.com/2009/07/is-case-of-quant-trading-industrial.html

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    The ends don’t justify the means…

         
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    Posted: 06 July 2009 10:28 AM #7

    Mayor Quimby - 05 July 2009 11:18 PM

    Quant espionage possibility re: GS.  Very interesting…

    http://zerohedge.blogspot.com/2009/07/is-case-of-quant-trading-industrial.html

    There seems to be a lot of fuss over very little in this case.

    I’ve worked on numerous financial systems for various institutions, and I can say that without a shadow of doubt a significant proportion of developers who work on these systems take copies of what they worked on with them. Having said that, very few of these copies ever see the light of day after they are made. I have had people give me code from their workplace to get my opinion on a thorny issue they might have had, but I can only think of one occasion where I “borrowed” a software trick from elsewhere to get something done, and that was one line of code.

    Knowing the mentality of the sorts of people that work on these systems and their often sizable egos, there is a prevailing belief that if the code wasn’t written there, then it can’t be any good. In fact most of the systems I worked on were really quite poor and riddled with bugs. IMHO, most of the best coders work in the games industry.

    So, in my view, stealing the code makes little sense. All they needed to take were the few basic principles behind the system, and most of those were likely quite simple and far from the “rocket science” that many think these systems employ. Often the more complicated something is, the more likely that it is not going to work as expected.

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    Throughout all my years of investing I’ve found that the big money was never made in the buying or the selling. The big money was made in the waiting. ? Jesse Livermore

         
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    Posted: 06 July 2009 10:48 AM #8

    wheeles - 06 July 2009 01:28 PM
    Mayor Quimby - 05 July 2009 11:18 PM

    Quant espionage possibility re: GS.  Very interesting…

    http://zerohedge.blogspot.com/2009/07/is-case-of-quant-trading-industrial.html

    There seems to be a lot of fuss over very little in this case.

    I’ve worked on numerous financial systems for various institutions, and I can say that without a shadow of doubt a significant proportion of developers who work on these systems take copies of what they worked on with them. Having said that, very few of these copies ever see the light of day after they are made. I have had people give me code from their workplace to get my opinion on a thorny issue they might have had, but I can only think of one occasion where I “borrowed” a software trick from elsewhere to get something done, and that was one line of code.

    Knowing the mentality of the sorts of people that work on these systems and their often sizable egos, there is a prevailing belief that if the code wasn’t written there, then it can’t be any good. In fact most of the systems I worked on were really quite poor and riddled with bugs. IMHO, most of the best coders work in the games industry.

    So, in my view, stealing the code makes little sense. All they needed to take were the few basic principles behind the system, and most of those were likely quite simple and far from the “rocket science” that many think these systems employ. Often the more complicated something is, the more likely that it is not going to work as expected.

    It ruffled their feathers enough for them to kill most of their program trading for the week.

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    The ends don’t justify the means…

         
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    Posted: 06 July 2009 12:14 PM #9

    Mayor Quimby - 06 July 2009 01:48 PM

    It ruffled their feathers enough for them to kill most of their program trading for the week.

    That doesn’t surprise me. Most of the people at the level to make that sort of decision have precious little clue of what things are like in the trenches, so have no idea whether it’s the crown jewels that have gone, or merely a few glass beads.

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    Throughout all my years of investing I’ve found that the big money was never made in the buying or the selling. The big money was made in the waiting. ? Jesse Livermore

         
  • Posted: 06 July 2009 05:42 PM #10

    It now looks like the NYSE stopped reporting GS’s programed trades because of the theft of their code.

    Former Goldman exec charged with stealing secret computer codes

    By Daniel Tencer

    Published: July 6, 2009

    UPDATE: Bail for Aleynikov set at $750,000

    A former vice-president for equity strategy at investment bank Goldman Sachs has been arrested by the FBI on federal charges related to the theft of program-trading codes, news reports indicate.

    A Reuters article states that Sergey Aleynikov, who worked for Goldman until last month, was arrested at Newark airport on Friday, July 3, apparently after the investment bank filed a complaint that its secret program-trading codes had been stolen.

    Reuters later reported that bail for Aleynikov had been set at three-quarters of a million dollars. ?The bond also was to include $75,000 in cash, and Aleynikov was ordered to surrender his passport and not to access the computer data at issue in the case,? wrote Martha Graybow for Reuters.

    Program trading involves the buying and selling of large quantities of stocks based on automatic computer codes that determine which stocks to buy and sell, at which quantities, and at what price.

    On Saturday, RAW STORY reported that the NYSE had changed its reporting rules so that program trading would no longer have to be reported. That led some financial observers, such as Matt Taibbi and the Zero Hedge blog, to suggest the NYSE was trying to cover up Goldman Sachs? growing dominance of program trading.

    But the FBI?s arrest of Aleynikov may cast the NYSE?s decision in a new light. As Reuters reports:

      The case against Aleynikov may explain why the New York Stock Exchange moved quickly last week to stop reporting program stock trading for its most active firms.

      Goldman was often at the top of the chart ? far ahead of its competitors. It?s possible Goldman had asked the NYSE to stop reporting the number after it discovered that someone may have infiltrated the proprietary computer codes it uses.

    According to the FBI, Aleynikov uploaded proprietary computer codes responsible for running program trading to an unnamed German website. He also recently took a job with an unspecified ?financial institution? for three times the amount of money he had been earning at Goldman, leading some to speculate that this company may have wanted Goldman?s secrets.

    The financial watchdog blog Zero Hedge points out that there is a real possibility Goldman?s secret trading codes ? which are easily worth in the millions ? have been exposed, leaving the company potentially vulnerable to malicious competitors.

    And the blog also points to how efficiently and quickly law enforcement acted when it came to protecting the US?s largest, most influential investment bank:

      What is probably most notable, in less than a month since Sergey?s departure from [Goldman?], the FBI was summoned to task and the alleged saboteur was arrested and promptly gagged: if anyone is amazed by the unprecedented speed of this investigative process, you are not alone. If only the FBI were to tackle cases of national security and loss of life with the same speed and precision as they confront presumed high-frequency program trading industrial espionage cases? especially those that allegedly involve Goldman Sachs.