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securities regulators will often settle for the proverbial low-hanging fruit — prosecuting easy cases that don’t make a big difference in the way Wall Street operates. But it does give the appearance they’re doing something.
And so it is with the SEC's proposal to stamp out flash trading, an unsavory practice that has permitted some high-frequency trading desks to get a millisecond sneak peak at market trade orders.
Banning flash trading certainly makes sense, because there’s no reason that trading firms with lightning-fast, computer-driven buy and sell programs should get an advantage over the rest of the market. (my comment inserted here flash trading is insider trading)
But the furor over flash trading has always been something of a sideshow because it affects a minuscule percentage of the tens of millions of high-frequency stock trades made each day.
No one gets fired. No mention of reprimands. A scathing report that accomplished an ...apology. Wow. Color me underwhelmed.
FYI, two major SEC figures were effectively fired: 1) Lori Richards, the long time head of the Office of Compliance, Inspections, and Examinations, and 2) Linda Thompsen, the former Director of the Division of Enforcement. According to the WSJ, both wanted to stay after the election, but the new chairwomen told them to leave. Also, lots of the people implicated in failed SEC inspections of Madoff are no longer with the SEC.
Also keep in mind that most of the honchos at the SEC responsible for this mess left after the election. It's a mostly new regime at the SEC, who can be contrite because it didn't happen under their watch. Hopefully they can make the necessary changes.
Aug. 26 (Bloomberg) -- Amaranth Advisors LLC, the hedge- fund that lost $6.6 billion in September 2006, won’t face enforcement action by the SEC.
The SEC completed a three-year investigation to determine if Amaranth, which at its peak ran about $9.5 billion, had misled investors in any way, including trading outside its mandate or failing to disclose pertinent information to them. The Washington-based agency notified the firm of its decision in an Aug. 19 letter.
“Needless to say, we are very pleased with this decision,” Nick Maounis, Amaranth founder, said in a letter to investors today.
Amaranth agreed to pay $7.5 million without admitting any wrongdoing earlier this month to settle allegations from the Commodity Futures Trading Commission and the Federal Energy Regulatory Commission that it tried to manipulate natural-gas futures. The FERC initially proposed a $291 million fine.
out with the old guard and in with the new guard.....
not to mention that a federal judge had to step in and reprimand the SEC recently:
A federal judge delivered a collective slap in the face to the SEC, Kenneth Lewis and Bank of America.
Judge Jed S. Rakoff criticized the bonuses that Merrill Lynch hurriedly paid out to its executives before being acquired by the Bank of America. The bank paid out $3.6 billion to its executives, despite losing $27 billion that year. BofA was later bailed out with taxpayer dollars.
"Do Wall Street people expect to be paid large bonuses in years when their company lost $27 billion?" asked the Judge.
The bank had settled just last week with the SEC over the compensation fiasco, paying $33 million. But Rakoff delayed the decision to approve the deal, citing lack of transparency and the 'small' size of penalty as reasons.
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