More Front-Running: Where Are The Cops?

This is getting very, very old.

For release at noon EDT

The Federal Reserve on Thursday announced extensions of and modifications to a number of its liquidity programs. Conditions in financial markets have improved in recent months, but market functioning in many areas remains impaired and seems likely to be strained for some time. As a consequence, to promote financial stability and support the flow of credit to households and businesses, the Federal Reserve is extending a number of facilities through early 2010. At the same time, in light of the improvement in financial conditions and reduced usage of some facilities, the Federal Reserve is trimming the size and changing the terms of some facilities.

For release at noon eh?

You sure Ben?  You absolutely, positively sure?

I want to draw your attention to this:

That’s last night.

Over 12,000 contracts traded in two five-minute periods, over 10,000 right up on the time of that spike.

There was no news of any sort related to the US markets on the wire last night.  Zero.  None.  I and many others were wondering what the heck caused that.

This morning, the buying began in earnest at 8:30 Central, and then again at 10:00 Eastern – one hour in front of the "announcement", again on heavy volume.

Where is the SEC?

Where is the SEC’s demand for trading records on these contracts, particularly the ones last night on Globex?

That was a highly unusual trading pattern that strongly suggested that someone knew something and acted on it front of a news release.

Well, now we have the news release.  It sure wasn’t the (bad) unemployment or (neutral) GDP numbers.

So what’s left?

Yeah.

I’ll bet my last dollar those contracts can be traced to someone who got advance notice of this action, and that, by the way, is unlawful.  Or at least its supposed to be.

This is not the first time something like this has happened and I continue to highlight them in The Ticker as a log of apparent criminal market manipulation and insider trading, the rampant practice of which has turned our capital market system into a joke with the public and "Not Privileged" being the recipient of repeated screw jobs at the expense of those who are unlawfully tipped off in front of these sorts of "news releases."

The modern practice of this began with the August 2007 "discount window" cut in front of Options Expiration which was (by the trading patterns) clearly leaked to certain market participants in advance, and resulted in billions of dollars of losses for other traders and investors.  Bear Stearns’ infamous $5 and $10 strike PUTs being opened and bought hard days before the firm blew up (while the stock was trading at $60!), similar games with Lehman and other events continue to show that certain privileged parties repeatedly get "leaks" allowing them to trade in front of major news releases, and they do at the expense of everyone else in the market.

This blatant lawless behavior must be stopped.