Goldman Sachs Included in HFT Investigation

Goldman Sachs Included in HFT Investigation

Despite somehow coming out as a hero in Flash Boys, Goldman Sachs Group Inc (NYSE:GS) is nonetheless facing investigative inquiry related to its high frequency trading and hiring practices relative to US antibribery laws, the Wall Street Journal reports.

Goldman Sachs gets out of line of fire

Goldman Sachs Group Inc (NYSE:GS) was known to have a robust dark pool stock trading platform operating leading up to the book being published. Sources indicate Michael Lewis had interviewed subjects for the book in the spring and summer of 2013 as the story was unfolding. Goldman Sachs changed policy regarding its dark pool sometime in 2014 and embraced IEX for both the Lewis book and is still said to have a cooperative relationship with the firm. Goldman Sachs Group Inc (NYSE:GS)’s opposition to the traditional dark pool exchange model culminated in a Wall Street Journal opinion piece he wrote that raised eyebrows in terms of its frankness and direct attack of the exchange business model, reported in ValueWalk. One week after the WSJ piece, the Flash Boys book was launched. Soon after the planned launch date, a highly coordinated press effort on the day of the book’s launch occurred.  Lead by the US Justice Department, the FBI, Securities and Exchange Commission and the New York Attorney General, an investigation was quickly announced within a day of the book’s publishing.

Gates Capital Management Reduces Risk After Rare Down Year [Exclusive]

Gates Capital Management's ECF Value Funds have a fantastic track record. The funds (full-name Excess Cash Flow Value Funds), which invest in an event-driven equity and credit strategy, have produced a 12.6% annualised return over the past 26 years. The funds added 7.7% overall in the second half of 2022, outperforming the 3.4% return for Read More

Goldman Sachs Group Inc (NYSE:GS) is not being singled out in the probe, as the attorney general’s office has sent requests to many banks involved in operating dark pools. Those in the cross-hairs include three relatively small Chicago trading firms, one New York firm, dark pool exchanges and brokerage operations. In addition to Goldman Sachs, Barclays PLC is said to be investigated as well, according to the WSJ report.

Non-disclosed fees paid to influence trading venue decisions?

New York Attorney General Eric Schneiderman is seeking to determine if high speed trading firms had secret deals with trading venues. Dark pool trading venues typically don’t publish their exchange rules and on their financial reports brokerage firms typically hide the payments from dark pools under a non-descript revenue category.

Do dark pools provide special advantages not available to all?

Investigation is also taking place into the issue of providing special advantage to HFT firms that provide them special advantage not practically available to most traders / investors.  This includes investigation if the speed advantage HFT firms have is making markets unfair.  The legal question here comes into play with the computer. Can a computer be given an advantage in the market that would lead a human to receive punishment?

The revelation came to light in Goldman Sachs Group Inc (NYSE:GS)’s quarterly SEC filing, which was reviewed by the Wall Street Journal. The paper had previously reported on investigation into the bank’s Asian hiring practices.

Mark Melin is an alternative investment practitioner whose specialty is recognizing a trading program’s strategy and mapping it to a market environment and performance driver. He provides analysis of managed futures investment performance and commentary regarding related managed futures market environment. A portfolio and industry consultant, he was an adjunct instructor in managed futures at Northwestern University / Chicago and has written or edited three books, including High Performance Managed Futures (Wiley 2010) and The Chicago Board of Trade’s Handbook of Futures and Options (McGraw-Hill 2008). Mark was director of the managed futures division at Alaron Trading until they were acquired by Peregrine Financial Group in 2009, where he was a registered associated person (National Futures Association NFA ID#: 0348336). Mark has also worked as a Commodity Trading Advisor himself, trading a short volatility options portfolio across the yield curve, and was an independent consultant to various broker dealers and futures exchanges, including OneChicago, the single stock futures exchange, and the Chicago Board of Trade. He is also Editor, Opalesque Futures Intelligence and Editor, Opalesque Futures Strategies. - Contact: Mmelin(at)
Previous article Sunedison Inc (SUNE) Mixed Q1, But Attractive Valuation
Next article Akorn On The Prowl; Snaps Up VersaPharm For $440 Million

No posts to display