"Regulation, enforcement & litigation" Posts
SEC’s former whistleblowing chief sues the SEC for changes to the whistleblowing program

SEC’s former whistleblowing chief sues the SEC for changes to the whistleblowing program

Jordan A. Thomas, the former whistleblower program manager at the SEC, as well as a leading plaintiff attorney, is suing the SEC for changes to the program.
This article explains what the SEC whistleblowing program is, why it is so successful, and why you should consider it if you see fraud or crime.

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The CFTC goes after foreign bribery actors

The CFTC goes after foreign bribery actors

Corruption has a new enforcement agency. The CFTC announced in March 2019 that it would start enforcing the FCPA, and it effectively delivered with a $95m enforcement against Vitol, the Swiss energy firm, for bribes paid in Brazil, Ecuador and Mexico.
“The misuse of nonpublic information provided the CFTC with a hook in the Vitol case. In the CFTC’s order, the firm was accused of bribing officials at Brazil’s national oil company, Petróleo Brasileiro SA (https://lnkd.in/gU9BjjP), to get inside information that included weekly reports on production volume and anticipated imports.”
Basically, Vitol bribed Petrobras for confidential information in the company’s business auction. It then used this ‘golden number’ to manipulate the fuel-oil benchmarks from S&P to make the competitors’ bids less valuable.

As usual, Vitol “neither admitted to nor denied the CFTC’s market manipulation findings in its settlement”…

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A History of Daytrading: Regulators, Congress and Robinhood

A History of Daytrading: Regulators, Congress and Robinhood

More about Robinhood… Massachusetts’ Enforcement Division filed a complaint about
– its aggressive growth tactics,
– the firm’s outages and disruptions, which were well known and ignored while pushing growth,
– its gamification,
– and insufficient supervision for option trading.

Here is an excellent, albeit a bit lengthy, analysis of the history, regulatory and general situation of Robinhood & its Day Trading business by Bill Singer of Broke and Brokers (http://www.rrbdlaw.com/).

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Robinhood’s $65m SEC penalty and the ‘gamification’ of trading

Robinhood’s $65m SEC penalty and the ‘gamification’ of trading

Robinhood has just been fined $65m for overcharging its customers, despite trades being free of charge – the company sells its order flow, and the net result is that traders are overcharged $35m/y.

The firm also mislead its clients in its advertising.

But in the back of these already serious issues, is the question of ”gamification’ of trading, where inexperienced individuals actively day-trade on margin. They end-up facing professional investors, who are much better informed and equipped than them. A previous note (https://lnkd.in/gCjKwtM) showed that most if not all end-up losing money.

This five-year-old article below still remains a good analysis of what ‘gamification’ entails. It is probably fine for school teaching and corporate training, but feeding a “high-octane gambling need” is probably not ideal for financial markets.

Robinhood’s documented bubbles, coupled with many new accounts and likely overpriced markets, could turn pretty ugly pretty fast.

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Previous Posts

Hammock over the emptiness

4.25% repo on 10Y and other volatility warnings

This week saw some really unusual moves, 10Y repo, intraday volatility, stock rotations, A harbinger of more volatility to come?

Old calendar

T+1 ?

Should US stocks settle T+1? The current T+2 settlement date is considered antiquated, and the Robinhood affair (gee, them again???) has relaunched the debate. Here is a review of the DTCC’s proposal, as well as an idea for derivatives traders.

#FinancialMarkets, #DTCC, #Settlement, #Derivatives, #MarketStructure
Navesink International (www.NavesinkInternational.com)

classe dissipee

Adult supervision needed in the crypto trading rooms

The SEC and the NY AG are suing CoinSeed for lack of registrations and multiple other counts. That’s a cold shower for the crypto industry. Spoiler alert: adult supervision is needed.

Psychic crystal ball

Geode hedge fund, loses big on volatility bets during COVID

Geode handles $700 bn of Fidelity’s index tracking assets. Geode Diversified, the much smaller hedge fund business, took a 36% loss on COVID’s volatility rally. It is now getting the axe.

Navesink International March 2021 Newsletter

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Skeleton with a tie

Infinity Q, the new variance swap skeleton?

Infinity Q may be the new variance swap skeleton. The New York hedge fund has just been suspended by the SEC pending valuation of its variance swaps and its full liquidation.
The fund’s main investor is handling the fund, while the founder is on administrative leave.

Railway Tracks

Should index providers have oversight?

There are complex indices behind trillions of dollars in ETFs and passive funds. Their providers do investment research. They have discretion in inclusions. They suggest indices and strategies to asset managers. Their decisions move markets. When they fail to calculate correctly, investors lose millions.

Should those ‘data providers’ become ‘investment advisors’? The SEC is considering it. Two academics explain why and how this should be implemented.

Lion mirror cat

Roaring Kitty is a Wall Street lion

The first GameStop (GME) lawsuit is out. ‘Roaring Kitty’, the redittor who started the frenzy, the modern Robin Hood who went after the hedge funds villains, the David fighting the short-selling Goliath, is actually a Wall Street lion himself.

This post explains Keith Gill’s actions, his investment and his supervisory background, and the responsibility of his employer, as they are stated in the class action lawsuit. We ask questions and ponder the long-term consequences.

Grandma ate the wolves

The billionaire matriarch of the Schottenstein family was being taken advantage by her own two grandsons. So grandma ate the wolves.

She brought her two JP Morgan bankers to FINRA and obtained the largest award since 2018 – $19 millons. The post explains the case.

Old clamp

Are the Robinhood traders going after the VIX?

‘When you combine ignorance and leverage, you get some pretty interesting results.” Warren Buffett

Three good notes from the derivatives research teams of Morgan Stanley, Société Générale, and Nomura point to a potential squeeze in the VIX, as a result of the increasing retail activism. This technical post explains the contents of the research papers. Spoiler alert, yes, the VIX is prone to a squeeze.

The high price of free trade

Free doesn’t mean without cost. Payment For Order Flow brings benefits to the public, but there are drawbacks to this new execution approach.

This article explains what Payment For Order Flow is, the role of the market-makers, as well as the benefits and the drawbacks of the approach. It highlights the difficulty that SEC will meet in smoothing out those issues.

Paul Mora Interpol

Paul Mora receives the first Interpol warrant in the Cum/Ex tax trading strategy

The first Interpol warrant has been issued in the Cum/Ex tax trading case.

Paul Mora, looked for by Germany, Denmark, and Belgium, is currently in New Zealand. Mr. Mora said that “he would skip his tax fraud trial because of New Zealand’s low Covid-19 infection rate and argued that he wouldn’t get a fair hearing in Germany.”

Sure.

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