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How the FCC saw through the Comcast/Time-Warner deal

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Very interesting article in the New Yorker by Tim Wu. Key grafs:

Time Warner and Comcast are the nation’s No. 1 and 2 cable companies, and if two of the largest companies in any industry wanted to merge, the government would inevitably take a close look. You can be sure that if Walmart and Costco wanted to combine forces, or Ford and G.M., they’d face an uphill battle. But Comcast was confident that its merger with Time Warner would be easily approved, based on the argument that the two companies have a fundamentally different relationship than similarly large companies in other industries. Because the two serve different regions of the United States, Comcast insisted, they are not actually direct competitors. Sure, they might be near-monopolies in many parts of the country, but the deal was simply about linking up regional monopolies, not increasing them.

But that theory fell apart when the Justice Department began to look in a different way at what Comcast does, and to seriously consider the company’s role not just in selling cable and broadband, but in delivering content over the Internet more generally. Spurred on, perhaps, by white papers submitted by Netflix, Dish, Public Knowledge, and various antitrust professors, the Justice Department decided, conceptually, to turn things around, and in economic jargon, to look at the other side of the “two-sided market.” That meant noticing that Comcast sells both Internet access to customers and customer access to the Internet. Stated differently, anyone who wants to reach one of Comcast’s customers—like Netflix delivering a film or Spotify delivering a song—has to go through it, and it alone. Looking at the deal this way forced the Justice Department to think about Comcast as something much more than just a regional cable company.

In this case, the competition that really mattered was not between Comcast and Time Warner, but between Comcast and the various companies—like Amazon, Dish (as of late), and Netflix—that rely on broadband to provide cheaper versions of TV over the Internet. From this angle, it is clear that Comcast has already been doing what it can to slow the emergence of Internet TV as a serious competitor to its own television offerings. It began to charge new access fees to companies like Netflix. It even worked to cripple Hulu, of which it was a joint-owner. And, as Harold Feld points out, it has done what it can to limit the threat from services like HBO Go to its own Xfinity service.

The future was clear to see in Comcast’s prior conduct—it was already using what power it had to weaken its competitors. It was therefore not hard to predict that adding all of Time Warner’s customers and wires to its reach would give Comcast that much more power over its online rivals. With that, Comcast’s repeated claims that its proposed merger had no bearing on competition fell apart.

Written by LeisureGuy

24 April 2015 at 3:35 pm

Posted in Business, Government

How to Design a Roller Coaster That’ll Make You Beg For Mercy

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I was an adult before I took my first roller-coaster ride. It was just up the coast from here: the roller coaster at the Santa Cruz Boardwalk. I was living in Iowa City, but would fly to San Jose fairly often for business trips to Palo Alto, and my friend Mr. Beetner, an explorer of new cities, drove me to Santa Cruz for a day.

I screamed my head off and could not wait to ride it again. This article by Jeff Wise in Bloomberg explains what makes a great roller-coaster ride:

Just looking at it makes me sick. I’m standing at the base of the world’s tallest roller coaster lift hill, staring at a track that rises to a 325-foot-high apex in the clear, blue Carolina sky. Soon, I’ll be dragged up there and dropped almost straight down. My stomach isn’t happy about it.

Why would anyone pay to have the crap scared out of them? To find out, I’m meeting with Rob Decker, the senior vice president for planning and design at the amusement-park conglomerate Cedar Fair. In late 2012 the company started planning a new tent-pole attraction for its Carowinds Park on the outskirts of Charlotte. Working with Switzerland-based amusement-ride builders Bolliger & Mabillard, Cedar Fair devised a 325-foot “ultimate thrill machine,” as Decker puts it, that in the course of a three-minute ride achieves a top speed of 95 mph. The result, Fury 325, debuted on March 28, the opening day of the park’s 2015 season.

The company won’t share attendance and revenue figures, but if it keeps Fury 325’s seats filled, more than a million customers will ride the coaster in 2015. “It’s a big ride for them,” says amusement park consultant Jerry Aldritch. “It lets them market a new product to bring more people to the park and generate more revenue. It’s not just about clicks of the turnstile, it’s about the merchandise and the food and all the other revenue generators.”

The key to the ride’s success isn’t so much what it does to riders physically, but how it works them over psychologically, wringing them out with alternating applications of terror, surprise, and exhilaration. Decker gave me a section-by-section explanation of how the coaster generates its effects, then accompanied me for a ride shortly before the coaster opened. (As it turns out, understanding the ride’s psychodynamics doesn’t reduce the urge to scream one’s brains out.)

The Approach

The monster exerts its pull from across state lines. Driving south on I-77 from Charlotte toward Carowinds, which straddles the state line in Fort Mill, S.C., I see the lift hill rising over the horizon from 5 miles out. Already, the ride is messing with my brain. “It looks magnificent and terrifying,” Decker says. “Your visit [is] validated before you even open the car door.” Fury 325 stretches to the parking lot and dives underneath the park’s entrance bridge, so I hear the screams the minute I arrive. As I walk toward the gates, a queasy stomach and sweaty palms signal that my fight or flight circuitry is prepping me for danger.

Anticipation . . .

Continue reading.

Written by LeisureGuy

24 April 2015 at 3:26 pm

Posted in Business

It takes a village to make a village good

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Or: good downtowns don’t just happen by accident, and generally quite a bit of the town is involved. James Fallows passes along a reader’s story of how Asheville NC came to have a great downtown:

Here’s how we got to today’s post: through the past few weeks, I’ve done a variety of items on the attempts of long-challenged Fresno to rebuild its historic downtown.

  • Then a reader from Seattle explained how his town had pulled off a comparable feat. He  pointed out that visitors assumed Seattle just “naturally” looked the way it does now, but in fact the downtown revival was the fruit of at least 30 years of deliberate planning and effort.
  • Then another reader said that planning and effort had only a loose connection to the finished result. Tampa, he said, had tried as hard and as long as Seattle but had little to show for it. Meanwhile elegant little Asheville, North Carolina had apparently drifted its way into a celebrated downtown.
  • Then a reader in Tampa said, Wait a minute! It’s actually nice here too! We’ve even got a Riverwalk. You can read his case in this post.

Now the expected further shoe has dropped, with readers from Asheville writing in to say: We drifted our way into success? Hah! Some “drift!”

Here is a sample, from J. Patrick Whalen, who has lived in Asheville since the mid-1970s. I’m quoting him at length because the issues he mentions connect the stories we’ve heard in every corner of the country. I’m also including some of the photos Mr. Whalen sent, of Asheville before-and-after its recent renaissance.

I saw, with some consternation, the description of Asheville’s revitalization process in the “More on Nice Downtowns” column Tuesday, 4/21.

I’m afraid the reader who wrote in is not very well acquainted with the long hard battle Asheville went through to bring downtown back from the mostly boarded-up deserted place it was in the 60’s, 70’s, and 80’s to the vital downtown we have now. I will take a shot at summarizing the key elements of that battle, but please rest assured the story is more complicated and there were more participants than I can do justice to in this short note

1) Asheville had a large number of beautiful old buildings built in Art Deco style and otherwise during the 1920’s boom period.

2) When the depression hit, Asheville was devastated. The City itself nearly went bankrupt; an economic pall settled over the area for over 50 years; and there was no reason to do anything other than let buildings stand vacant or underutilized because nothing much was happening.

3) When the interstate came through downtown and the Asheville Mall was built in the 60’s and early 70’s, downtown was effectively dead.4) What followed was basically a 30 year period during which businesses closed and downtown was left boarded up with empty sidewalks. Combined with the long-term economic challenges the mountain area had faced, a profound pessimism settled over the community so that every new idea floated to bring the city back was met with an oft-repeated refrain: “That will never work here – don’t even try.”

5) Some of that pessimism was reinforced when large-scale solutions attempted by city leaders failed. A proposal was floated demolish a large part of the historic downtown and replace it with an enclosed mall. That idea was voted down but in the process local citizens became much more invested in saving and bringing back downtown. Citizen resistance was led by John Lantzius, who was already busy, with his sister, Dawn, renovating buildings, in one of the blocks slated for demolition, and providing low-cost spaces for local businesses. Other large-scale projects were actually completed by out-of-town developers during this period but the projects failed financially.  The large-scale failures were part of the story of the 80’s.

6) However, another part of the 80’s story was that the local citizen reaction to the downtown mall proposal combined with the fact that those failed large-scale projects which were completed also served as sort of  “first buds of spring” to give people a little hope, encouraged some of the remaining local entrepreneurs to hold on and some new ones to take a chance on downtown. . .

Continue reading. Before and after photos at the link.

Written by LeisureGuy

24 April 2015 at 1:05 pm

As Comcast Deal Collapses, the FCC Chairman Emerges as an Open Internet Hero

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I have to admit that I was quite skeptical of Tom Wheeler for a long time—partly because of his background and partly because I distrust Obama’s appointments (cf. John Brennan). But this one has turned out well. Sam Gustin writes at Motherboard:

Earlier this week, Comcast CEO Brian Roberts reached out to Federal Communications Commission Chairman Tom Wheeler in a last-ditch effort to lobby for the cable giant’s $45 billion merger with Time Warner Cable. Roberts argued that the deal would benefit consumers and advance the public interest, adding that the company was “eager” to complete the transaction.

Comcast’s argument failed. The cable giant has announced that it’s abandoning the merger with Time Warner Cable, now that regulators have made clear that the deal would face nearly insurmountable obstacles.

“Today, we move on,” Comcast’s Roberts said in a statement.

The deal’s death blow came when the FCC decided to send the merger to anadministrative law judge, which could have resulted in a year-long, trial-like public spectacle. Such hearings are so burdensome for companies that over the last 30 years, no big telecom merger has ever been completed once it was designated for this process, according to policy experts.

“This is the FCC’s nuclear option,” said a person close to the Comcast merger review. “It’s the way to kill a deal.”

By the time Comcast met with federal regulators on Wednesday in a final effort to salvage the merger, FCC officials had become convinced that the deal would not benefit consumers and needed to be blocked. At that point, there was little Comcast could do other than walk away.

“Today, an online video market is emerging that offers new business models and greater consumer choice,” Wheeler said in a statement. “The proposed merger would have posed an unacceptable risk to competition and innovation especially given the growing importance of high-speed broadband to online video and innovative new services.”

The FCC’s strong opposition to the merger is just the latest surprising example of how the agency has sided with public interest advocates against corporate giants under Wheeler’s leadership. From the FCC’s tough new net neutrality rules to the agency’s support for community broadband networks and now its resistance to the Comcast deal, Wheeler has emerged as an unlikely public interest champion.

“I’ve been working in the public interest community for 40 years and I can’t recall a similar period where the FCC moved so aggressively to promote broad public interest objectives and stand up to large corporate interests,” said Andrew Jay Schwartzman, senior counselor at the Georgetown University Law Center’s Institute for Public Representation in Washington. . .

Continue reading.

Written by LeisureGuy

24 April 2015 at 11:36 am

There are landslides, and then there is earthflow

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Watch this earthflow in western Russia that occurred on 1 April 2015—and I don’t believe it’s an April Fool’s joke:

Apparently it’s a mine-waste failure. The US has had several bad failures regarding mine waste, but nothing on this scale, so far as I know. Yet.

Written by LeisureGuy

24 April 2015 at 10:30 am

Posted in Environment, Business

The Whistleblower’s Tale: How An Accountant Took on Halliburton

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The corruption and dishonesty of modern corporations is striking, but I suppose corporations of yesteryear were equally awful. Jesse Eisinger reports at ProPublica:

The email that ruined Tony Menendez’s life arrived on a warm and sunny February afternoon in 2006. Menendez is, by nature, precise and logical, but his first instinct was somewhat irrational. He got up to close the door to his office, as if that might somehow keep the message from speeding across cyberspace. Then he sat down at his desk to puzzle out what had just happened.

The email was sent by Mark McCollum, Halliburton’s chief accounting officer, and a top-ranking executive at Halliburton, where Menendez worked. It was addressed to much of the accounting department. “The SEC has opened an inquiry into the allegations of Mr. Menendez,” it read. Everyone was to retain their documents until further notice.

Panic gripped Menendez. How could McCollum have learned he had been talking to the SEC? The substance of the email was true. After months of raising concerns inside the company, Menendez had filed a complaint with regulators and Halliburton’s audit committee that accused the giant oil services company of violating accounting rules. But those complaints were supposed to be kept strictly confidential. Did the agency violate that trust? Did a board member? Somebody had talked.

Ten minutes passed, maybe fifteen. Menendez finally could move. He got up, opened his office door carefully and looked out. The floor normally bustled at that hour in the mid-afternoon. It had cleared out. He turned around quickly, grabbed his computer and rushed out of the heavily secured Halliburton complex north of Sugarland, Texas.

Menendez drove around for hours. He doesn’t remember much about where he went or for how long. At some point, he called his wife.

“Ondy,” he cried out to her, frantic. “They outed me!”

As shocked as Menendez was, his wife had seen something like this coming. Tony was a perennial optimist, even naïve. He always thought the company would do the right thing and fix its accounting problem. More jaded, his wife was prepared for the worst. She’d even urged Tony to start secretly taping his bosses.

“Is anyone following you?” she asked. “Make sure.”

Menendez looked around, seeing only a blur of cars pass at the beginnings of evening rush hour. He didn’t think anyone was tailing him. Then again, how would he know? He needed a lawyer – right now. Only months into the best job he’d ever had, he was in the most trouble of his professional career.

Menendez quickly googled “whistleblower” and “lawyer” on his phone and came up with Philip Hilder, the attorney who had represented the Enron whistleblower, Sherron Watkins. He placed the call and got through. Hilder heard Menendez out and then told him to listen carefully. Hilder instructed Menendez not to tell anyone, not even his wife. Too late for that, and he wouldn’t have kept it from Ondy anyway. They were partners.

“Ok. Then don’t talk on the phone anymore. Don’t talk in your office. Don’t talk in your house,” Hilder continued.

“How quickly can you come in to see me?”

I met Tony and Ondy Menendez this past winter, in a suburb less than an hour outside Detroit. Now 44, Menendez speaks earnestly and insistently, with the carefully chosen words one would expect from an accountant. His cheeks carry a tinge of pink and, at the slightest smile, his eyes are consumed by crow’s feet. He hid a bulky frame with a corduroy jacket over a black V-neck sweater.

They told me about their long and agonizing fight against a powerful corporation. It’s a story of what it takes to be a whistleblower in America – and what it takes out of you.

Many whistleblowers come undone after they launch their fights. They have trouble keeping their jobs, their marriages, their sobriety. Even friends who are sympathetic often see them as pains in the ass. They are forever marked by a scarlet “W.” And while whistleblowers naturally start off more skeptical than the average, the experience pushes some into often justifiable paranoia. If you want to know why whistleblowers can seem a little crazy, it’s because anybody who is not a little bit crazy would back away from the ordeal of confronting a corporate behemoth or grinding government bureaucracy.

There’s nothing crazy about Menendez, however, beyond an optimism that persists even when the facts don’t warrant it. Throughout the whole struggle, he just knew that somehow, sometime, the world would come around to seeing he was right about Halliburton.

Menendez grew up in Houston, the son of a jovial construction worker with an eighth-grade education. His father had once . . .

Continue reading. It’s a long article and tells an interesting story: well worth reading in its entirety.

Wouldn’t it be amazing to encounter a corporation that was honest, forthright, and transparent—and actually supported its employees?

Written by LeisureGuy

23 April 2015 at 10:44 am

Posted in Business, Daily life, Law

One guy trading at home caused the flash crash? Really?

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Here’s the Bloomberg View report by Matt Levine:

Hey look, they caught the guy who caused the flash crash of 2010! His name is Navinder Singh Sarao, and he lives in London and in 2009 he asked someone to help him build a spoofing robot:

On or about June 12, 2009, SARAO sent an email to a representative of his FCM in which he explained that he “need[ed] to get in touch with a [] technician [at the company that provided his trading software (“Trading Software Company #1″)] that will be able to programme for me extra features on [the software],” namely, “a cancel if close function, so that an order is canceled if the market gets close.”

Sarao was trading E-mini S&P 500 futures contracts, but he wanted a more convenient way to not trade them, so he e-mailed his FCM (futures commission merchant, i.e. broker) for help automating that. The idea is that he would put in a big order to sell a whole bunch of futures at a price a few ticks higher than the best offer. So probably he wouldn’t sell any futures, since he wasn’t offering the best price. But he had to keep constantly updating his orders to keep them a few ticks higher than the best offer, to make sure that he didn’t accidentally sell any futures as the market moved. And that’s a bit of a pain, so he programmed an algorithm to do it for him. Though he also seems to have done similar things manually, to support the algorithm’s efforts, or to stave off boredom while the algorithm did its thing.

The point of this — according to the federal prosecutors, the Federal Bureau of Investigation and the Commodity Futures Trading Commission, who are not happy with Sarao — is that by placing all these fake sell orders, Sarao would artificially drive down the price of the E-mini futures. It’s classic spoofing: He’d place a lot of big orders to sell, everyone else would say, “Ooh look at all those big sell orders, I’d better sell too,” they’d sell, the market would go down, he’d buy, he’d turn off his algorithm, everyone else would say, “Oh hey never mind, things are great again, there are no more big sell orders,” they’d buy, the price would go back up, and Sarao would sell the futures he’d bought at a lower price a moment ago. We’ve talked about spoofing before, and I’ve always been a little troubled that it works, but what can I say, it works.

On May 6, 2010, according to the authorities, it worked a little too well: Sarao did such a good job of driving down the price of the E-mini future that he caused a flash crash in which “investors saw nearly $1 trillion of value erased from U.S. stocks in just minutes.” I’ll put some more details downstairs but honestly they are boring details. Sarao traded a ton of E-mini futures during the flash crash — “62,077 E-mini S&P contracts with a notional value of $3.5 billion” — and made “approximately $879,018 in net profits” that day, or a profit of about 2.5 basis points on the notional amount, which I guess isn’t bad for one day’s work. He did this by, basically, putting in orders to sell thousands of contracts away from the best offer. Those orders were never executed, or intended to be executed, but they tricked people into thinking that there was a lot more selling interest than there actually was. That combined with a collapse in buying interest — at one point Sarao’s fake sell orders alone “were almost equal to the entire buyside of the Order Book” — to create a collapse in prices. He profited from those collapsing prices by selling high and buying back lower. It’s a pretty straightforward spoofing story.

So straightforward that one of the biggest puzzles here is why it took so long — and the help of a whistleblower — for regulators to figure it out. They came tantalizingly close:

As reflected in correspondence with both SARAO and an FCM he used, the CME observed that, between September 2008 and October 2009, SARAO had engaged in pre-opening activity — specifically, entering orders and then canceling them — that “appeared to have a significant impact on the Indicative Opening Price.” The CME contacted SARAO about this activity in March 2009 and notified him, via correspondence dated May 6, 2010, that “all orders entered on Globex during the pre-opening are expected to be entered in good faith for the purpose of executing bona fide transactions.” The CME provided a copy of the latter correspondence to SARAO’s FCM, which suggested to SARAO in an email that he call the FCM’s compliance department if he had any questions. In a responsive email dated May 25, 2010, SARAO wrote to his FCM that he had “just called” the CME “and told em to kiss my ass.”

Emphasis added because come on: The futures exchange wrote to Sarao on the day of the flash crash, telling him to stop spoofing, and he called them back “and told em to kiss my ass.” And then regulators pondered that reply for five years before deciding that they’d prefer tohave him arrested in London and extradited to face criminal spoofing charges. One conclusion here might be that rudeness to regulators really works.

Even odder, Sarao didn’t just retire to a supervillain lair after the flash crash. The CFTC lists “at least” 12 days on which he allegedly manipulated the futures market; eight of them came after the flash crash, and he allegedly continued to manipulate the futures market more or less up to the moment he was arrested. The CFTC claims that Sarao basically started his spoofing career by causing the flash crash, and then went ahead and kept spoofing for another five years without much interruption. I guess he got more subtle at it? Not very subtle though; he was a consistently large trader, “placing, repeatedly modifying, and ultimately canceling multiple 200-, 250-, 300-, 400-, 500-, 550-, 600-, and 900-lot sell orders,” versus an average order size of seven contracts. He also seems to have had some patterns (like putting in orders for exactly 188 or 289 contracts that never executed) that you’d think would make him easier for regulators or exchanges to spot. If regulators think that Sarao’s behavior on May 6, 2010, caused the flash crash, and if they think he continued that behavior for much of the subsequent five years, and if that behavior was screamingly obvious, maybe they should have stopped him a little earlier?

Also, I mean, if his behavior on May 6, 2010, caused the flash crash, and if he continued it for much of the subsequent five years, why didn’t he cause, you know, a dozen flash crashes?

So I mean … maybe he didn’t cause the flash crash? There’s a jointCFTC and Securities and Exchange Commission report that came out a few months after the flash crash that blames it on an effort by Waddell & Reed to sell some E-mini futures with an inept algorithm; lots of people have long had their doubts about that theory, and now the CFTC itself seems to have abandoned it in favor of the new one-guy-in-London theory. You could maintain a skeptical attitude about the one-guy-in-London theory too though. The CFTC says that Sarao’s “Layering Algorithm” was turned on between 11:17 a.m. and 1:40 p.m. Central time, and that “the Layering Algorithm caused the price in the E-mini S&P contract to be temporarily artificially depressed while the Layering Algorithm was active. Once the Layering Algorithm was turned off and the orders were canceled, the market price typically rebounded.” But the CFTC also describes the flash crash this way:

Between 1:41 and 1:44 p.m. CT, the E-mini S&P market price suffered a sharp decline of 3%. Then, at 1:45 p.m. CT, in a matter of 15 seconds, the E-mini S&P market price declined another 1.7%. The price crash in the E-mini S&P market quickly spread to major U.S. equities indices which suffered precipitous declines in value of approximately 5 to 6%, with some individual equities suffering much larger declines.

Get that? The flash crash happened when Sarao’s algorithm had been turned off, and the price should have been rebounding: . . .

Continue reading.

And in Wall Street on Parade, Pam Martens is similarly skeptical:

The U.S. Justice Department is relying on Americans’ gullibility with its arrest of a 36-year old in the U.K., charging him as a key culprit in the Flash Crash of the stock market on May 6, 2010. London newspapers report the young man trades from his bedroom in his parents’ middle class row house.

The arrest came on the same day that news broke that Loretta Lynch was speeding toward a confirmation vote in the U.S. Senate as the next U.S. Attorney General, meaning that current U.S. Attorney General Eric Holder is making his last hurrah after failing to prosecute any bigwigs on Wall Street throughout his tenure, notwithstanding their insidious role in the greatest financial collapse since the Great Depression.

The first problem with the Justice Department’s complaint against the bedroom spoofer is that the complaint has gone missing. What was released to the public consists of a one-pager stating that there is a complaint, followed by an affidavit from an FBI agent and a one-page Exhibit A which shows trading prices on an S&P 500 futures contract from 11:00 to 11:12 – far removed from when the Flash Crash occurred in the afternoon.

The press release issued by the Justice Department tells us that “Navinder Singh Sarao, 36, of Hounslow, United Kingdom, was arrested today in the United Kingdom, and the United States is requesting his extradition.  Sarao was charged in a federal criminal complaint in the Northern District of Illinois on Feb. 11, 2015, with one count of wire fraud, 10 counts of commodities fraud, 10 counts of commodities manipulation, and one count of ‘spoofing,’ a practice of bidding or offering with the intent to cancel the bid or offer before execution.”

However, the actual complaint that would provide specifics of these counts is missing from what was released by the U.S. Justice Department.

Another problem in this case is that the FBI agent, Gregory Laberta, appears to be getting the bulk of his theories and trading analysis from “representatives of an economic consulting group retained in connection with this investigation who have reviewed relevant trading and order book data.” Both the names of the representatives and the name of the consulting group are withheld.

The crux of the allegations is that Sarao put downward pressure on market prices via the E-Mini Standard and Poor’s 500 futures contract. The FBI agent’s affidavit states: “Between 12:33 p.m. and 1:45 p.m., SARAO placed 135 sell orders consisting of either 188 or 289 lots, for a total of 32,046 contracts.”

Just as the original finger pointing at the mutual fund company Waddell and Reed made no sense, neither do these allegations. As we reported in 2010:

“The so-called Flash Crash report was the product of the Commodity Futures Trading Commission (CFTC) and Securities and Exchange Commission (SEC) and consists of 104 pages of data that is unintelligible to most Americans, including the media that are so confidently reporting on it.  It names no names, including the firm it is fingering as the key culprit in setting off the crash.  Earlier media reports say the firm is the mutual fund manager, Waddell and Reed, and Waddell has conceded that it made a large trade that day to hedge its positions in its mutual funds which total $70 billion according to its web site.

“As the official report goes, Waddell set off a computerized algorithm to sell 75,000 contracts of the E-mini futures contract that is based on the Standard and Poor’s 500 stock index and trades at the Chicago Mercantile Exchange.  At roughly $55,000 per contract, the total amount Waddell was seeking to sell to hedge its mutual fund stock positions was $4.125 billion.

“But here’s where the official theory comes apart: fourteen days after the Flash Crash, Terrence Duffy, the Executive Chairman of the CME Group which owns the Chicago Mercantile Exchange testified before the U.S. Senate’s Subcommittee on Securities, Insurance, and Investment of the Committee on Banking, Housing and Urban affairs that “Total volume in the June E-mini S&P futures on May 6th was 5.7 million contracts, with approximately 1.6 million or 28 per cent transacted during the period from 1 p.m. to 2 p.m. Central Time.”  In other words, the government investigators are suggesting that a trade that represented 1 per cent of the day’s volume in a futures contract in Chicago and less than 5 per cent of contracts traded in the pivotal 1 to 2 p.m. time frame in Chicago (2 to 3 p.m. in New York) caused stocks in the cash market to plunge to a penny.”

If no charges were brought against Waddell and Reed for their 75,000 contracts, why are charges being brought against the bedroom trader for his 32,046 contracts?

The official reports in 2010 focused heavy suspicions on two trading firms that went unnamed, other than Waddell and Reed. We filed a Freedom of Information Act request for the names of those firms and our request was denied. There’s your smoking gun.

From the 2010 report: . . .

Continue reading.

So this poor schlemiel is going to be fr0g-marched off to jail to protect two big Wall Street firms—that seems about par for the course for Eric Holder, past and future Wall Street lawyer.

Written by LeisureGuy

22 April 2015 at 8:10 pm


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