Thursday, July 9, 2009

New Goldman Conspiracy: They're Seeing Every Trade Before They Happen

Posted on the Big Picture by Barry Ritholtz:

Here’s something to give the conspiracy buffs a total breakdown: Combine these stories from Bloomberg, Daily Kos, and Zero Hedge, and you can reach a rather unsavory conclusion:

Goldman Sachs’s $100 Million Trading Days Hit Record

FBI Arrest Opens Goldman-Sachs’ Pandora’s Box

Intraday Observations

“Incredibly Shrinking Liquidity” as Goldman Flushed Quant Trading

What is the inference of potentially illegality here?

“That Goldman Sachs may just possibly have used security access codes and built a system to acquire trading information PRIOR to transaction commit time points at NYSE.

The profitability of this split-second information advantage would have been and could have been extraordinary. Observed yielding profits at $100,000,000 a day. [summary to address complaints with respect to complexity.]

GS has special access inside the system from its status assisting the Working Group on Financial Markets (colloquially the Plunge Protection Team) created by Presidential Order two decades ago. GC also acts as Special Liquidity Provider for NYSE.

With 60% dominance of NYSE program trading, what’s good for Goldman defines what shows as overall market performance.”

There is likely to be more info about this trickling out over the coming days and weeks. Stay tuned . . .

See also Portfolio's Conspiracy Theory, Exposed for more on the alleged conspiracy...

With Goldman emerging from the financial crisis battered but still on top, the Street is seeing something more insidiously silly: a bona fide Goldman conspiracy. “A lot of people think that they must have gotten where they are because of some unfair advantage,” hedge fund manager Bill Fleckenstein says. Read "The Usual Suspects" for more background on the whispers on Wall Street...

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