Defaulting banks - where will it stop?

[Jan Klimkowski]

Because TPTB and their puppet politcians are telling us that There Is No Alternative (TINA) to those cuddly sounding "austerity measures" (ie economic Shock Therapy):

Nightmare vision for Europe as EU chief warns 'democracy could disappear' in Greece, Spain and Portugal

By Jason Groves
Last updated at 8:24 AM on 15th June 2010

EU begin emergency billion-pound bailout of Spain
Countries in debt may fall to dictators, EC chief warns
'Apocalyptic' vision as some states run out of money

Democracy could ‘collapse’ in Greece, Spain and Portugal unless urgent action is taken to tackle the debt crisis, the head of the European Commission has warned.

In an extraordinary briefing to trade union chiefs last week, Commission President Jose Manuel Barroso set out an ‘apocalyptic’ vision in which crisis-hit countries in southern Europe could fall victim to military coups or popular uprisings as interest rates soar and public services collapse because their governments run out of money.

The stark warning came as it emerged that EU chiefs have begun work on an emergency bailout package for Spain which is likely to run into hundreds of billions of pounds.

A £650 billion bailout for Greece has already been agreed.

John Monks, former head of the TUC, said he had been ‘shocked’ by the severity of the warning from Mr Barroso, who is a former prime minister of Portugal.

Mr Monks, now head of the European TUC, said: ‘I had a discussion with Barroso last Friday about what can be done for Greece, Spain, Portugal and the rest and his message was blunt: “Look, if they do not carry out these austerity packages, these countries could virtually disappear in the way that we know them as democracies. They've got no choice, this is it.”

‘He's very, very worried. He shocked us with an apocalyptic vision of democracies in Europe collapsing because of the state of indebtedness.’
Greece, Spain and Portugal, which only became democracies in the 1970s, are all facing dire problems with their public finances. All three countries have a history of military coups.

Greece has been rocked by a series of national strikes and riots this year following the announcement of swingeing cuts to public spending designed to curb Britain’s deficit.

Spain and Portugal have also announced austerity measures in recent weeks amid growing signs that the international markets are increasingly worried they could default on their debts.

Dictatorships: An end to democracy in Europe could see a return of figures ruling dictatorships. General Franco was dictator of Spain until 1975; Georgios Papadopoulos led a military junta until 1973; and Antonio de Oliveira Salazar ruled as Portugese president until 1968

Other EU countries seeing public protests over austerity plans include Hungary, Italy and Romania, where public sector pay is to be slashed by 25 per cent.

Deputy Prime Minister Nick Clegg, who visited Madrid last week, said the situation in Spain should serve as a warning to Britain of the perils of failing to tackle the deficit quickly.

He said the collapse of confidence in Spain had seen interest rates soar, adding: ‘As the nation with the highest deficit in Europe in 2010, we simply cannot afford to let that happen to us too.’

Mr Barroso’s warning lays bare the concern at the highest level in Brussels that the economic crisis could lead to the collapse of not only the beleaguered euro, but the EU itself, along with a string of fragile democracies.


But it risks infuriating governments in southern Europe which are already struggling to contain public anger as they drive through tax rises and spending cuts in a bid to avoid disaster.

Mr Monks yesterday warned that the new austerity measures themselves could take the continent ‘back to the 1930s’.

In an interview with the Brussels-based magazine EU Observer he said: ‘This is extremely dangerous.

'This is 1931, we're heading back to the 1930s, with the Great Depression and we ended up with militarist dictatorship.
‘I'm not saying we're there yet, but it's potentially very serious, not just economically, but politically as well.’

Mr Monks said union barons across Europe were planning a co-ordinated ‘day of action’ against the cuts on 29 September, involving national strikes and protests.

David Cameron will travel to Brussels on Thursday for his first summit of EU leaders since the election.

Leaders are expected to thrash out a rescue package for Spain’s teetering economy. Spain is expected to ask for an initial guarantee of at least £100 billion, although this figure could rise sharply if the crisis deepens.

News of the behind-the-scenes scramble in Brussels spells bad news for the British economy as many of our major banks have loaned Spain vast sums of money in recent years.

Germany’s authoritative Frankfurter Allgemeine Newspaper reported that Spain is poised to ask for multi-billion pound credits.

Mr Barroso and Jean-Claude Trichet of the European Central Bank are united on the need for a rescue plan.

The looming bankruptcy of Spain, one of the foremost economies in Europe, poses far more of a threat to European unity and the euro project than Greece.

Greece contributes 2.5 percent of GDP to Europe, Spain nearly 12 percent.
Yesterday’s report quoted German government sources saying: ‘We will lead discussions this week in Brussels concerning the crisis. It has intensified to the point that the states do not want to wait until the EU summit on Thursday in Brussels.”’

At the end of last month the credit rating agency Fitch downgraded Spain, triggering sharp falls on stock markets.

On Friday the administration in Madrid continued to insist no rescue package was necessary. But Greece said the same thing before it came close to disaster.

Yesterday the European Commission and the statistics authority Eurostat met to consider Spain‘s plight as many EU countries consider the austerity package proposed by the Madrid administration insufficient to deal with the country‘s problems


Read more: http://www.dailymail.co.uk/news/worldnew...z0qxRi9QsZ

[Jan Klimkowski]

The economic shock therapists of the IMF are busy bullying Romania.

Romania's highest court voted IMF-imposed "austerity measures" illegal.

UPDATE 1-Romania court rejects austerity measures - agency

Fri Jun 25, 2010 5:07am EDT* Some measures on pensions against constitution - Agerpres

* Savings required for resumption of IMF aid

* Leu currency and blue chip stocks fall

(Adds analyst and market reaction, details on politics)

BUCHAREST, June 25 (Reuters) - Romania's top court rejected some parts of a key austerity package related to pensions on Friday, endangering an IMF-led aid deal, local news agency Agerpres reported, citing judicial sources.

Disbursement of about 2 billion euros in aid from the International Monetary Fund and the European Union depended on the court's approval of a government move to cut state wages by a quarter and reduce pensions by 15 percent.

The 20-billion-euro IMF-led aid package is vital for the recession-hit economy, and the court ruling hit the country's currency and stocks. The court said an official announcement would follow shortly.

"This decision is a defeat for the government as it wasn't able to make a constitutional law," said Mircea Marian, political commentator at daily Evenimentul Zilei. "The letter of intent will not reach the IMF board by June 28 for sure."

"The government will not be able to take a decision until the court explains the rationale behind its decision, which could take at least 10 days..."

Romania's leu fell after the decision was reported and was down 0.6 percent on the day at 4.261 per euro by 0846 GMT EURRON=. The blue-chip stocks index also fell and was down 3.4 percent on the day .BETI.

The reported court ruling raises further questions over the government's ability to push through reforms, after it narrowly survived a no-confidence vote earlier this month, showing its majority remained fragile. [ID:nLDE65E06I] (Reporting by Luiza Ilie, Sam Cage and Ioana Patran)

http://www.reuters.com/article/idUSLDE65N18H20100625

So, to serve its IMF master, Romania's government hiked VAT instead:

UPDATE 1-Romania to hike VAT to 24 pct, IMF to meet June 30

Sat Jun 26, 2010 7:47am EDT* Romania to hike VAT to 24 pct from July 1

* PM Boc says IMF to discuss aid on June 30

* Plans to move forward with cuts in state wages


(Adds quotes, details)

BUCHAREST, June 26 (Reuters) - Romania's centrist coalition government will hike value added tax by 5 percentage points to 24 percent as of July 1, which should unlock a 20 billion euros IMF-led aid package, Prime Minister Emil Boc said on Saturday.

The VAT hike comes one day after Romania's top court ruled against key planned pension cuts, prompting the International Monetary Fund to postpone a June 28 meeting to discuss the country's aid package.

While the higher tax should help Romania meet its IMF-agreed fiscal deficit of 6.8 percent of GDP, analysts said inflation will jump significantly and recession might deepen.

"The government has decided to hike the VAT by 5 percentage points," Boc told reporters after an emergency cabinet meeting.

"Under these conditions, our agreement with the IMF goes on and our objective is ... to get a positive result when the (IMF) Board meets on Wednesday."

The disbursement of about 2 billion euros ($2.68 billion) in IMF and European Union funds depended on the Constitutional Court's approval of a government move to cut state wages by a quarter and reduce pensions by 15 percent.

The Friday court ruling against planned pension cuts sent the leu currency EURRON= falling as much as 1.1 percent to a seven-month low against the euro and hit share prices, while yields on its sovereign Eurobonds jumped.

In addition to the VAT hike, Boc said the government will also press on with its plans to cut public sector wages by 25 percent. While the court did not object to the wage cuts, they were included in the same bill as the pension cuts, which will now be sent back to parliament for further discussion.

Finance Minister Sebastian Vladescu said the VAT hike will will bring up to 4 billion lei ($1.16 billion) in additional revenue to the budget by the end 0f 2010.

"I cannot hide that I am deeply disappointed that today we are hiking the VAT," Vladescu told reporters.

"We are taking this measure because it is important to ensure our financing ability. But we believe this (the hike) is not what is best for the Romanian economy."

Analysts said investors were more wary than ever over the government's ability to enforce steps needed to keep its IMF deal going.

"Markets will not calm down until the IMF clearly announces what it plans to do related to Romania," said Nicolaie Alexandru-Chidesciuc, ING Bank chief economist in Bucharest.

(Reporting by Luiza Ilie; Editing by Ron Askew)

http://www.reuters.com/article/economicN...7E20100626

[Peter Lemkin]

http://www.kpfa.org/archive/id/62073

"The Collapse of Europe As the Second Phase In Two World Depressions" with Webster Tarpley. Comparison of the three waves of the depression of the 1930s with the progression of the current depression: the October 1929 New York Stock Market crash; the summer 1931 banking panic and collapse of Europe, including the destruction of the world monetary system which depended on the British pound; and the subsequent banking panic and closure of the banks in the United States.\:bandit:

[Jan Klimkowski]

Food-stamp tally nears 40 million, sets record

Nearly 40 million Americans received food stamps -- the latest in an ever-higher string of record enrollment that dates from December 2008 and the U.S. recession, according to a government update.

Food stamps are the primary federal anti-hunger program, helping poor people buy food. Enrollment is highest during times of economic distress. The jobless rate was 9.9 percent, the government said on Friday.

The Agriculture Department said 39.68 million people, or 1 in 8 Americans, were enrolled for food stamps during February, an increase of 260,000 from January. USDA updated its figures on Wednesday.

"This is the highest share of the U.S. population on SNAP/food stamps," said the anti-hunger group Food Research and Action Center, using the new name for food stamps, Supplemental Nutrition Assistance Program (SNAP). "Research suggests that one in three eligible people are not receiving ... benefits."

Enrollment has set a record each month since reaching 31.78 million in December 2008. USDA estimates enrollment will average 40.5 million people this fiscal year, which ends Sept 30, at a cost of up to $59 billion. For fiscal 2011, average enrollment is forecast for 43.3 million people.

(Reporting by Charles Abbott; Editing by John Picinich)

http://www.reuters.com/article/idUSTRE6465E220100507

[Peter Lemkin]

..and without going into details, but knowing from the 'inside' and 'ground-'zero'' (as one who had once received food stamps for some years in the USSA and then was refused them because [as homeless] I couldn't prove for bureaucratic purposes that I lived in that county (sic!~) [the social worker for food stamps, said 'sorry, but Bush is President now..."] and at times starved and/or had to beg...and then left the fucking country....that the 40 milliion is about half of those who have applied and would want and need....it stilll works [on the lowest level to feel gerbils] if you 1] have a home in your name 2] have children 3] have not had to move recently 4] are female head of household and 5] don't need food assistance....:deal:

[Jan Klimkowski]

SEC Chief Information Officer Finds God, Quits Regulator To Become Deacon

Today's wtf moment of the day is brought to you by the SEC and god. In a stunning development, we uncover that the SEC actually has had a Chief Information Officer for the past two years (yes, we loled). In an even more stunning development, the SEC has disclosed that this CIO is leaving the organization, and has decided to join the metaphorical Goldman Sachs by doing god's work on earth... but not at 200 West, and is instead joining the church as a deacon. "The Securities and Exchange Commission today announced that Charles Boucher has decided to leave the agency after serving as its Chief Information Officer (CIO) since 2008. His plans include not-for-profit work and completion of studies in preparation for ordination as a Deacon in his church next spring." This is merely confirmation that Mr. Boucher must have been rather compromised when Chief Information Officering: he should know, as most other far dumber SEC henchman have figured out, that Goldmanliness is Godliness. Had he gone to Goldman, he would have already been promoted to Pope, in exchange for a few indulgences on behalf of the Abacus and Timberwolf sins, and have DMA access to High Frequency Communications directly to the One.

http://www.zerohedge.com/article/sec-chi...ome-deacon

No one can serve two masters, for either he will hate the one and love the other; or else he will be devoted to one and despise the other. You can not serve both God and Mammon.

—Matthew 6:19-21,24

Matthew was wrong.

WASP capitalism has always allowed its chosen to serve God through Mammon.

[Magda Hassan]

The EU Banking System Is In Big Trouble

By Mike Whitney

URL of this article: www.globalresearch.ca/index.php?context=va&aid=20088

Global Research, July 10, 2010
Information Clearing House - 2010-07-09

The EU banking system is in big trouble. Many of the Union's largest banks are sitting on hundreds of billions of euros in dodgy sovereign bonds and non performing real estate loans. But writing down their losses will deplete their capital and force them to restructure their debt. So the banks are concealing their losses through accounting sleight-of-hand and by borrowing money from the European Central Bank. This has helped to hide the rot at the heart of the system.

Presently, 170 banks are having difficulty accessing the wholesale markets where they get their funding,. Financial institutions are wary of lending to each other because they're not sure who is solvent or not. It's a question of trust.

ECB chief Jean-Claude Trichet has tried to keep the problems under wraps, but markets aren't easily fooled. Stress gauges, like euribor, have been rising for the last two months. Investors smell a rat. They know the banks are playing hide-n-seek with downgraded assets and they know that Trichet is helping them out.

A week ago, stocks rallied on news that EU banks would repay most of the 442bn euro one-year emergency loan from the ECB. The news was mainly a publicity stunt designed to hide what was really going on. Yes, the banks borrowed significantly less that analysts had predicted (another 132bn euro), but just two days later, 78 banks borrowed another 111bn euro. The additional loans makes it look like Trichet cooked up the whole thing to trick investors.

EU banks were engaged in the same high-risk activities as their counterparts in the US. They were playing fast and loose on speculative trades that were ramped up with maximum leverage. Bankers raked in hundreds of billions in salaries and bonuses before the bubble burst. Now the securities and bonds they purchased have plunged in value, so they've turned to the ECB for a bailout. Sound familiar?

Trichet is a banking industry rep, much like Geithner and Bernanke. His job is to maintain the political and economic power of the banks and to dump the losses onto the public. Presently, the ECB provides "limitless" loans to underwater banks so they can maintain the appearance of solvency. Trichet has lowered rates to 1 percent, provided a safe haven for overnight deposits, and begun an aggressive bond purchasing program (Quantitative Easing) which keeps prices of sovereign bonds artificially high. Valuations on bank assets are supported by a central authority and do not reflect true market pricing.

The wholesale-funding market (repo) has not shut down. Banks can still exchange their sovereign bonds and real estate securities for short-term loans. It merely requires that they take a haircut on the value of their collateral, which would then have to be recorded as a loss leaving them capital impaired. This is how markets work, but the banks are not required to play by the rules.

From Bloomberg News: "European lenders had $2.29 trillion at risk in Greece, Italy, Portugal and Spain at the end of 2009, including loans to governments, according to the Bank for International Settlements...German banks’ writedowns on loans and securities will probably reach $314 billion by the end of 2010, with state-owned lenders and savings banks facing the bulk of the losses, the International Monetary Fund said in a report in April."

See? The ECB is not buying Greek bonds because of a "sovereign debt crisis". They are buying them so the banks won't lose money. The "sovereign debt crisis" meme is all public relations hype. If it becomes too expensive to fund government operations, Greece can leave the EU and return to the drachma which would give it greater flexibility to settle its debts. That would increase demand for Greek exports and improve tourism. This is the best solution for Greece. So, where's the crisis?

If Greece, Portugal and Spain, leave the EU and restructure their debt, banks in Germany and France will default and bondholders will lose their shirts. In other words, the investors, who took a risk, will lose money---which is how the system is supposed to work.

Bloomberg again: "The region’s banks have written down a proportionately lower percentage of their assets than their U.S. counterparts. U.S. banks will have written down 7 percent of their assets by the end of 2010 and euro-area banks 3 percent, according to the IMF. European banks still haven’t shown analysts they have completed their writedowns." (Bloomberg)

So, the banks are underwater, but nothing has been done to fix the problem. Where are the regulators?

On Tuesday, euribor hit a 10-month high. The pressure is building despite Trichet's emergency programs. ECB bank lending is nearly 800bn euro while overnight deposits are roughly 240bn euro. Trichet is willing to drag the EU through 10 or 15 years of subpar growth and high unemployment (like Japan) to keep a handful of bankers and bondholders from accepting their losses. If things get bad enough, Trichet might invoke the "nuclear option", that is, allow a major bank to implode "Lehman-style" so he can extort hundreds of billions of euros from the EU member states. It's been done before; just ask Bernanke or Paulson.

The "Stress Test" Fraud

The bank stress tests in the US were organized by the Treasury as a "confidence-building" measure. They allowed the banks to use their own internal-models to determine the value of complex securities. The same rule will apply to EU banks. The Daily Telegraph reports that some of the banks will actually test themselves. As least that removes any doubt about the results.

From Bloomberg News -- "European stress tests on 91 of the region’s biggest banks drew criticism from analysts who said regulators are underestimating probable losses on Greek and Spanish government bonds. The tests are designed to assess how banks will be able to absorb losses on loans and government bonds, the Committee of European Banking Supervisors said yesterday. Regulators have told lenders the tests may assume a loss of about 17 percent on Greek government debt, 3 percent on Spanish bonds and none on German debt, said two people briefed on the talks who declined to be identified because the details are private.

Credit markets are pricing in losses of about 60 percent on Greek bonds should the government default, more than three times the level said to be assumed by CEBS. Derivatives known as recovery swaps are trading at rates that imply investors would get back about 40 percent in a Greek default or restructuring." (Bloomberg)

The tests are a joke. The banks will continue to use accounting-rule changes and other gimmickry to obfuscate their losses. Trichet will use the tests to step up his bond purchasing program (QE) which will transfer the banks losses onto the member states. Many of the banks are insolvent and need restructuring. But they are in no real danger, because they still have a stranglehold on the process.

[Jan Klimkowski]

Britain's comatose financial regulator, the Financial Services Authority, has been trying to make headlines about how it will ban "self-certified" mortgages, aka "liar loans".

The banks are screaming "Foul!".

Meanwhile, here is the preposterous truth:

A spokeswoman for the FSA said on Monday that,
(snip)
nearly half of all mortgages taken out between 2007 and the first quarter of 2010 were advanced without consumers having to verify their income.

http://www.telegraph.co.uk/finance/perso...y-FSA.html

Nothing to see here....

[Jan Klimkowski]

Chinese Banking Stress Test Assumptions Imply Chinese Real Estate May Be Overvalued By As Much As 60%

Now this is what a real stress test should look like. Bloomberg quotes a banking insider that "China’s banking regulator told lenders last month to conduct a new round of stress tests to gauge the impact of residential property prices falling as much as 60 percent in the hardest-hit markets." And just in case it is unclear what the reality of the situation is, because as Europe demonstrated all too well, nobody would test for something which is not already priced in, China is effectively telegraphing to the world that it is bracing itself for a more than 50% plunge in select real estate values.

"Banks were instructed to include worst-case scenarios of prices dropping 50 percent to 60 percent in cities where they have risen excessively, the person said, declining to be identified because the regulator’s requirement hasn’t been publicly announced. Previous stress tests carried out in the past year assumed home-price declines of as much as 30 percent." The doubling in stress is somewhat to be expected considering the tens of trillions in renminbi pumped into the banking system via whole loans and other CDO products, most of which have gone into building up empty cities, vacant apartment complexes, and unused infrastructure projects. As we noted previously when discussing the recent Fitch report on shadow funding of the real estate bubble, the nearly 50 million in vacant units, the ugly truth about the Chinese bubble is slowly starting to leak out.

From Bloomberg:

The tougher assumption may underscore concern that last year’s record $1.4 trillion of new loans fueled a property bubble that could lead to a surge in delinquent debts. Regulators have tightened real-estate lending and cracked down on speculation since mid-April, after residential real estate prices soared 68 percent in the first quarter from a year earlier, according to estimates from Knight Frank LLP, the London-based property adviser.

A deep slump in China’s property market may further slow the nation’s economy, which grew at a less-than-forecast 10.3 percent pace in the second quarter. China is still the fastest growing major world economy. Concern that Chinese growth may slow due to a real-estate slump erased an early rally in U.S. stocks.

Non-Performing Loans

The China Banking Regulatory Commission said in a July 20 statement that banks should “continue to deepen” stress tests on lending to property and related industries, citing a speech by Chairman Liu Mingkang during a meeting attended by regulatory officials and bank heads. The release didn’t give details. Officials at CBRC didn’t return calls seeking comment.

Results from previous stress tests show that the ratio of non-performing real estate loans among Chinese banks would rise by 2.2 percentage points if home prices drop 30 percent and interest rates rise by 108 basis points, the person said. Pretax profits would fall 20 percent under that scenario. A basis point is 0.01 percentage point.

Measures to cool property-price gains included raising minimum mortgage rates and down-payment ratios for second-home purchases, and a suspension of lending for third homes.

Needless to say the "recoupling" that will occur once investors finally peek behind the books of largely insolvent Chinese books, will blow up the economies of Australia and New Zealand, which are nothing than a second derivative on China, and will do miracles to the European export-led Golden Age.

http://www.zerohedge.com/article/chinese...ed-much-60

[Jan Klimkowski]

Karl Denninger asking the right question:

Was The Flash-Crash A "Forced Error"?

A provocative question, to put it mildly.

It looks like it might have been. In fact, Nanex appears to have solid information that implies quite strongly that the "Flash Crash" may have been engineered.

Specifically:

As small lags in time from quotes sent through CQS happen every day, the NBBO system cannot be relied upon and is meaningless until the time stamping mechanism has been fixed. This situation also makes the potential for latency arbitrage even more suspect as participants receiving premium NYSE products (as opposed to CQS) can detect these delays where-as others cannot. In the age of HFT's, where quotes can be sent at rates exceeding 5,000 quotes per second for one issue and can effect the BBO, delays of even 200 milliseconds (or less) become a lifetime.

CQS (Consolidated Quotation System) is the method in which 99.9% of all US market participants receive their data and is also responsible for calculating the NBBO for all listed stocks. There are however premium products direct from the exchange which are not disseminated through CQS. One such product is OpenBook from NYSE. In comparing time stamps of quotes from CQS to OpenBook, it is clear this time delay exceeded 20 seconds in many cases.

Note that underlined section.

Now read this:

Conclusion: Put simply, if CQS (Consolidated Quotation System) does not determine that quotes from a given exchange are stale, the possibility of it choosing those quotes as the BBO is inevitable. It is obvious from these charts (and from those presented in out original Flash Crash Analysis) that the NYSE quotes are stale. Furthermore, since the quotes are time stamped when exiting CQS, other market participants could not detect the NYSE quotes (and therefor the current BBO) were stale.

Got it?

The only people who would know there was an exploitable problem are those who receive "premium" quote services - which is 0.1% of the market participants. That explicitly doesn't include you, me, or any other retail trader.

Further, those who "knew" there was an exploitable problem with the data could not have acted on it unless they knew it was possible - that is, it happened too fast for the computer to be reprogrammed at the time.

Therefore, those very same someone's had to know in advance that this could happen, otherwise the selling and buying that happened during the event, which was essentially all machine-driven since we humans were a full twenty to thirty seconds behind real-time, couldn't have occurred.

So we now appear to have established two things:

There was/is an exploitable problem in the quote feeds

and


Some market participants knew it existed and how to exploit it before the flash-crash happened, and in fact programmed their computers to exploit it if and when it happened.

There's an open question as to whether intentionally exploiting such a data dislocation is a violation of existing law. I can make a colorable argument either way, given the requirements of securities law and the fact that issuing bids and offers with an intent not to execute but rather the manipulate the price (irrespective of how you do it) is a black-letter violation of those laws.

But with one final piece of the puzzle - which Nanex hasn't yet found and identified to the best of my knowledge - we will then have what appears to be evidence of serious felonies. That question is this:

Did one or more market participants cause the quote dislocation?

That is, did one or more participants not just take advantage of an arbitrage situation but rather did one or more participants not only subscribe to such a service but also cause the dislocation itself?

Nanex has raised the possibility of "Quote Stuffing" being part and parcel of the HFT game these days - that is, attempting to intentionally flood the quote system such as to cause other market participants to be unable to keep up with your quote flow (with said quotes not intended to execute, but rather to play "screw your buddy.") Such an act, if in fact it is happening, appears to be a clear-cut violation of securities law in that it is by definition intended to manipulate price through the indirect method of overrunning other participants' ability to respond.

If in fact this has occurred in the past and is occurring today it would then seem to be rather obvious that we have a smoking gun - and one that demands investigation, identification of the parties involved in public, and the laying of charges.

So where is the SEC and Department of Justice in looking into this?

And incidentally, why is it legal in the first place to sell a "premium" quote service which has as it's only selling feature, and therefore the only reason to pay for it, the promulgation of market data before anyone else has it, when the market is supposed to disseminate information to all participants at the same time?

NANEX material used with permission.

http://market-ticker.org/archives/2592-W...Error.html