Something really ugly popped up on Daily Kos yesterday late in the afternoon.....
...GS, through access to the system as a result of their special gov't perks, was/is able to read the data on trades before it's committed, and place their own buys or sells accordingly in that brief moment, thus allowing them to essentially steal buttloads of money every day from the rest of the punters world.
Two things come out of this:
1. If true, this should be highly illegal, and would, in any sane country result in something like what happened to Arthur Andersen...
(2. ... is way off point....)
God help Goldman if this is true and the government goes after them. This would constitute massive unlawful activity. Indeed, the allegation is that Goldman alone was given this access!
God help our capital markets if this is true and is ignored by our government and regulatory agencies, or generates nothing more than a "handslap." Nobody in their right mind would ever trade on our markets again if this occurred and does not result in severe criminal and civil penalties.
There apparently is reason to believe that Sergey might have been involved in exactly this sort of coding implementation. Specifically, look at the patent claims cited on DailyKos; his expertise was in fact in this general area of knowledge in the telecommunications world......
This is precisely the sort of thing that a Unix machine, sitting on a network cable where it can "see" traffic potentially not intended for it, could have an interface put into what is called "promiscuous mode" and SILENTLY sniff that traffic!
ASSUMING THE TRAFFIC IS PASSING BY THE MACHINE ON THE WIRE THIS IS TRIVIALLY EASY FOR ANY NETWORK PROGRAMMER OF REASONABLE SKILL TO DO. IF THAT TRAFFIC IS EITHER UNENCRYPTED OR IT IS EASY TO BREAK THE ENCRYPTION.....
Folks, I have no way to know what the code in question does, but if there's anything to this - anything at all - there is a major, as in biggest scam of the century - scandal here - something much, much bigger than Madoff or Stanford.
What would this mean, if it was all to prove up?
It would mean that Goldman was able to "see" transaction order flow - bid, offer, and execute messages - before they were committed in the transaction stream. Such a "SNIFF" would be COMPLETELY UNDETECTABLE by the sender or recipient of the message.
The implication of this would be that they would be able to front-run any transaction where the data was visible to them, thereby effectively "stealing pennies" from each transaction they were able to front-run.
Again: I have absolutely nothing on the content of the allegedly-stolen code nor can I validate the claim made that Goldman had "special network access." Nothing. All I have to go on with regards to "market manipulation" (which such a program would be, writ large!) is the statement of the US Attorney that I cited in my earlier Ticker.
This may be nothing more than a crazy conspiracy theory put out by someone at Daily Kos. But consider the following:
The last few days the the market has traded "organically." I and many other market participants have noted that prior to the week before July 4th the market had been acting "very odd" - normal correlations between interest rate, foreign exchange the the stock markets had been on "tilt" for the previous couple of months, with the amount of "tiltage" increasing dramatically in the last three or four weeks. In fact, many of my usual indicators that I use for daytrading had become completely useless. Suddenly, just before the July 4the weekend, everything started correlating normally again. I have no explanation for this "light-switch" change but it aligned almost exactly with the day the NYSE had "computer problems" and extended trading by 15 minutes. Was there a configuration change made to their networking infrastructure, one asks?
Zerohedge's information, if you believe it, seems to point toward some sort of distortion. The cite above claims statistically "as likely as an asteroid hitting earth it is not true" proof of distortion in the market. I have not analyzed the data to independently validate that conclusion, but even if the odds of these "effects" in the market being random chance are only as good as getting hit by a tornado this afternoon......
Every market participant deserves answers on this point. Specifically to the NYSE and all other markets where colocation connections are made and allowed:
1.
Was it possible for message traffic to be "seen" by computers on your network and colocated into your infrastructure by other than the originator and recipient? That is, was it physically possible for anyone to "sniff" messages to and from other market participants.
2.
If it was possible, is it no longer possible, and if so, when was that change made?
I believe the SEC and FBI must direct a subpoena at all market exchanges for an under-oath answer to question #1. If the answer to that question is "yes" then every market participant who had or has equipment colocated on the NYSE infrastructure must be immediately served with a subpoena for a true and complete copy of all software operating on every machine connected to said infrastructure for immediate forensic investigation to ascertain if any participants were indeed "sniffing" traffic and front-running orders.
The charge made on the pages of Daily Kos is incredibly serious. If this happened it is a case of literal robbery of every market participant for the entire duration of the time that the code in question was executing on the network, with losses to market participants potentially running into the hundreds of billions of dollars.
Market participants deserve an answer to these questions.
Posted 7/9/2009 6:49 am
Computer nerds explain this shit to me like you were explaining it to an 8 year old boy.
Then, seems one Sergey Aleynikov got himself arrested. NYTimes says its about "secret sauce" Goldman Sachs quant math. We'll consider Mr. Aleynikov's STORM patent with distributed processing agents. Recalls Triple Hop's text indexing tools. Nothing to do with quant math.
The big ticket, the magic wand for a rogue quant shop is technology to grab off FIX PROTOCOL, OCX, or SWIFT messages that precede every transaction_commit at the Exchanges.
Posted 7/9/2009 6:54 am
Remember when Goldman Sachs was the only investment bank left standing last Fall? When Bear Sterns went down, Merrill Lynch had to be sold, and so on?
Posted 7/9/2009 6:55 am
Remember when a african with shady connections and no clear birth certificate bought the election with Jew Soros money, and then surrounded himself with APIAC/ex-Goldman Sachs employees?
Goldman Sachs bumped its computer trading business up to 60% of all NYSE quant trades.
1. Ain't that wonderful. $100,000,000 a day for Goldman is the schnizzle.
8% 45 votes
2. But now NYSE appears to have pulled the plug.
3% 18 votes
3. Goldman Sachs dropped to zero for NYSE quant trades.
3% 19 votes
5. OMG. WTF. And there's a Russky charged with something or other.
5% 26 votes
6. ALL OF THE ABOVE. AND the proles know next to nothing, SOP.
68% 388 votes
7. Thilla, thrilla, thrilla.....
13% 71 votes
Posted 7/9/2009 7:16 am
Geoge Soros made 2 billion in one day. Goldman Sachs limited their profits to 3 billion per month. My guess as to why they did this is because the were trying to keep from getting caught.
The market has been fucked lately and as a daytrader I have noticed it acting strange. Looks like 3 billion a month wasn't small enough to keep them off the radar.
Well, it's hard to tell how good the SEC is at this stuff. On the one hand, they had no problem catching one suspicious trade in Imclone from a cooking show hostess.
On the other hand, they claim to have had no way of telling that a 50 billion dollar fund trader who claimed to be an active trader wasn't actually making any trades.
And remember when said he wants to give oversight of the SEC, a governmental body, to the private corporation Federal Reserve, owned by 9 mega-wealthy Jew families including Rothschilds, Goldmans, Sachs, Loebs, Warburgs, plus "shut down the internet" Rockefeller, and chaired by Jew Bernanke?
Goldman Sachs is the [i[victimized financial instittution[/i], according to Jew Media. 
And Bernanke won't let Congress audit the Fed.
