Levine on Wall Street: FBI is coming for high-frequency traders

The FBI is coming for high-frequency traders.

And has been for some time, I guess. Mostly for the usual--spoofing and stuff--but "Another form of activity under scrutiny involves using high-speed trading to place orders to conceal that the transactions are based on an illegal tip," and, come on, what? That makes literally zero sense. It's almost as though the FBI is not the agency with the most expertise to regulate modern market structure. If only there were an agency in charge of regulating market structure. But, nope.

Preet Bharara is coming for somebody.

He said in a speech that "you can expect that before too long a significant financial institution will be charged with a felony or be made to plead guilty to a felony, where the conduct warrants it." This struck me as pretty nonspecific, but the subsequent tweet seems somehow more ominous? I'm going to outsource this one to Ryan Hardy, who tweeted, "Vague twitter threats: an essential tool for prosecutors, and key deterrent against financial misdeeds."

Don't sell insurance without a license.

I kind of can't understand how MetLife (really AIG) was selling insurance in New York without a license? Like, it's an insurance company. Presumably it knows how to get insurance licenses. That seems like the sort of thing that someone would handle. But apparently not, and MetLife is paying Benjamin Lawsky $60 million over it.

Don't insider trade.

"During a drive to vacation in Reno, Nev., Chen overheard business calls by his wife, who previously advised Chen not to trade in Informatica securities under any circumstances." So guess what he did! All insider trading is dumb, but there is a spectrum of dumbness, and insider trading directly in the stock of your wife's company is just really catastrophically dumb, come on.

Enjoy your swaptions.

"Trading of options on indices comprised of credit default swaps has increased dramatically partly because -- unlike credit default swaps themselves -- the instruments are not required to be centrally cleared under new rules aimed at preventing a rerun of the financial crisis, according to traders." Are there penny- strike CDS index options? You can probably construct the rest of the regulatory arbitrage from there.

Dan Loeb will have his day in court against Sotheby's.

Loeb is trying to get rid of Sotheby's poison pill, and a Delaware judge agreed to hear the case before Sotheby's May 6 annual meeting. "Vice Chancellor Donald Parsons seemed sympathetic to the argument that the pill -- which caps Mr. Loeb’s investment at just under 10% while other, passive, shareholders can own twice that -- is unfair," though if "unfair" were the standard Delaware corporate law would be very different from what it is. "Third Point owns about 10 times as much stock as Sotheby’s directors and executives he is fighting, Mr. Parsons noted," suggesting that there's no need to let him buy more, though I guess you might think that owning 10 times as much stock as the directors is a reason to let Third Point have some say over Sotheby's management.

Things happen.

Go ahead, use a bitcoin ATM at a gun store. Maybe the libertarian police department will track down Mt. Gox's bitcoins. Banks are relatively happy about the new U.S. leverage rules. Shareholders are bad for banks. Bob Diamond is taking over a Botswanan bank. John Nunziata, call your mother. "If one wants to keep the cash flow and enjoy the house for the summer, you can rent and it's still a lot less than paying $45 million to buy."

If you have three trillion euros in your briefcase ...

... then you're going to jail, and also, you don't actually have three trillion euros in your briefcase. Ask yourself, if there was a briefcase in the world with three trillion euros in it, why would you have that briefcase? You wouldn't. Remember, everything is a hoax, but everything is especially a hoax today, April 1, 2014. Be careful out there.

  

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