Courtesy of Pam Martens.
On July 17, 1996, the U.S. Justice Department charged the biggest names on Wall Street, names like Merrill Lynch, JPMorgan and predecessor firms to Citigroup, with pricing fixing on the electronic stock market known as Nasdaq.
The Justice Department felt the firms were so untrustworthy to make a fair electronic marketplace that as part of its settlement it required that some traders’ phone calls be tape recorded when making Nasdaq trades and it gave itself the right to randomly show up and listen in on the traders’ calls. The scandal made headlines for years and revealed that the price fixing had been going on under the unwatchful eye of regulators for more than a decade.
Now, more than six years after the greatest Wall Street crash since 1929, the public is still learning stomach-churning details about the lingering effects of de-regulating Wall Street.
Yesterday we learned that the very same Wall Street firms charged with price fixing in the 90s have somehow conned their regulators into allowing them to own their own dark pools – effectively unregulated stock exchanges – and make markets in the stock of their very own Wall Street bank.
The Financial Industry Regulatory Authority (FINRA) – a self-regulatory Wall Street body (which under a previous name was responsible for missing the Nasdaq price fixing for more than a decade) released trading data yesterday for the dark pools operating the week of May 12 – 16. This was the first time such data has been released. The data releases are set to continue.
There are three major concerns that are immediately raised by the trading statistics: that Wall Street banks are allowed to make a market in their own stock inside an unregulated dark pool; that the other largest banks are making large markets in each other’s stocks; and why the public is just seeing a sliver of sunshine – instead of what went on in the previous 51 weeks or prior years of trading in these dark pools? Since the Wall Street firms knew this public data release was coming, it’s possible that higher trading volumes were previously occurring in their own and each other’s stocks.
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