Tag: Gary Gensler (Page 1 of 10)

“The Game is Rigged”, Says Ex-Citadel Data Scientist

Ex-Citadel employee Patrick McConlogue says the market is rigged.
Market News Daily: Ex-Citadel employee Patrick McConlogue says the market is rigged.

Patrick McConlogue, an ex-Citadel Data Scientist said during the ‘meme stock’ frenzy that the stock market is rigged, claiming he helped design it.

“The game is not fair and it never has been. Individual investors, even when operating in a swarm, are destined to lose. How do I know? I helped design the game.”

Not many investors know this, but Patrick actually breaks down how Citadel and other hedge funds were able to make billions back in only weeks from halts.

In this article, I’m going to share his words and knowledge in the industry directly with you.

Share this article to raise awareness of the market injustices ‘experts’ have claimed were never true.

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Ex-Citadel Employee Reveals Rigged Trading Game

Ex-Citadel employee Patrick McConlogue says the market is rigged.

Patrick McConlogue appeared on Fox Business during the ‘meme stock’ frenzy of 2021 when retail investors created one of the biggest scares in Wall Street history.

GameStop and AMC shareholders were able to create panic on Wall Street by heavily buying shares of the overleveraged shorted stocks.

As share prices soared, short sellers experienced massive losses.

GameStop was able to put Melvin Capital out of business, but Patrick McConlogue says other hedge funds were able to make back billions in losses during the halt.

The halts allowed hedge funds to enter AMC and GameStop knowing shares would plummet, allowing them to capitalize on the deflation of the price.

Patrick says the rules of the game also heavily favor hedge funds, something retail investors have urged SEC Chairman Gary Gensler for years to change.

“I respect many of my colleagues, the problem isn’t the people, it’s the rules of the game which heavily favor the funds.”

Below is ex-Citadel Data Scientist Patrick McConlogue’s story.

AMC Stock: The SEC Has Now Violated Threshold Rule

Patrick McConlogue Says the Stock Market is Rigged

Ex-Citadel employee Patrick McConlogue says the market is rigged.
Ex-Citadel employee Patrick McConlogue says the market is rigged.

“The game is not fair and it never has been. Individual investors, even when operating in a swarm, are destined to lose.

How do I know? I helped design the game.

A few years ago, I worked at the massive hedge fund Citadel. The multi-billion dollar fund was caught up in this week’s scandal for bailing out hedge fund Melvin Capital after everyday traders on Robinhood appeared close to liquidating the fund through mass buying of the GameStop stock $GME.

My role at Citadel was as an engineer in Long Term Quantitative Strategies. The entire department, filled with programmers and compliance officers, is dedicated to something called ‘alpha’ which determines the buying strategy of the fund.

I was responsible for innovative proprietary technology that capitalizes on public data faster than any other hedge fund. It’s a classic situation of machines against humans. I respect many of my colleagues, the problem isn’t the people, it’s the rules of the game which heavily favor the funds.

A group of traders on the r/WallStreetBets Reddit thread, now consisting of over 8.6M members, noticed that someone had overly “shorted” the GameStop $GME stock.

They decided it was the perfect time to buy. It was only around $18 per share and easily affordable for the common investor who kept buying, driving up the price of the stock.

As the buying frenzy continued the hedge funds who had taken the opposite position started to hemorrhage money.. BIG money.

The small investors celebrated their success online as news broke that the hedge fund Melvin Capital Management had lost so much on the $GME short position that they had to be bailed out by bigger hedge funds.

While the markets were closed Melvin Capital’s sinking battleship received an emergency infusion of $2.75 billion from Citadel and Point72.”

‘Meme Stock’ Halts

Ex-Citadel employee Patrick McConlogue says the market is rigged.

“On Thursday morning, Robinhood — the commission-free stock trading app used by small investors — suddenly shut down buys on $GME and a few other stocks that were under siege.

Only sell orders went through, reversing the trend, driving the stock prices back down and shoring up the hedge funds’ sinking ships. Remember, when the stock price goes down, the people who hold the “shorts” make money.

This started a chain reaction. Other retail trading platforms like E*Trade and TD AmeriTrade began freezing the stock for individual investors. But hedge funds own supercomputers.

They have direct access to stock markets. While small investors were frozen the hedge funds traded massive positions and quickly earned back the billions in losses from the past few days.

The rules of the game had been exposed, in broad daylight no less.

Robinhood users, when signing up for the popular trading app that offered “free trading” were likely unaware of their role in the hedge funds’ ability to reap huge profits.

The system is broken.”

Patrick McConlogue left Citadel for decentralized finance and co-founded a new technology called Overline that takes the philosophy of DeFi to the extreme.

Not only is Overline unable to freeze any of your assets but it can’t even turn off the exchange; it’s not possible.

You can read Patrick’s full write-up here.

Related: Ken Griffin Thanks Redditors for ‘Meme Stocks’

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Market News Today - Ex-Citadel data scientist says the market is rigged.
Market News Today – Ex-Citadel Data Scientist says the market is rigged.

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Dark Pool Trading Has Risen Under Gensler’s Watch

Market News Daily - Dark Pool Trading Has Risen Under Gensler's Watch.
Market News Daily – Dark Pool Trading Has Risen Under Gensler’s Watch.

Dark pool trading has risen substantially since Gary Gensler was appointed Chair of the Securities and Exchange Commission (SEC) in April of 2021 by President Joe Biden.

Gary Gensler announced exclusively on Bloomberg that 90-95% of retail orders don’t go through the lit exchange.

The SEC Commissioner says these orders are rerouted to dark pools rather than the NYSE.

What are dark pools?

Dark pools are privately organized platforms, also known to be an alternative trading system accessible to only institutions.

SEC Chairman and Commissioner Gary Gensler says payment for order flow is partly the reason why orders aren’t processed on the lit exchange.

He says retail orders go to wholesalers on an order-by-order competition.

Citadel’s Ken Griffin has praised PFOF stating it’s good for retail investors; however, in 2004 Citadel stated payment for order flow “creates conflicts of interest and should be banned, according to an SEC file.

PFOF allows market makers to process retails orders in the ‘dark markets’, or dark pools, per SEC Chairman Gary Gensler.

Dark pool trading has risen under Gensler’s watch.

Banning PFOF is one thing but what about retail demand that has been masked by dark pools?

The SEC actually has the power to ban dark pool trading.

Why dark pool trading has risen since Gary Gensler took office is something the retail community is trying to comprehend.

Dark Pools Have Been Robbing Retail Capital

When more than 50% of a stock’s trading volume goes to dark pools, the demand is cut by 50%, often times more depending on the trading day.

Half (or more) of retail’s money is not being reflected per the real demand of a security when trading has been rerouted to dark pools.

In other words, dark pools allow institutions to suppress shares from rising based on the true demand of a security.

Let’s take a look at AMC’s dark pool volume for July and August, 2023.

AMC Dark Pool Volume History – July and August 2023 – source.

Dark pool volume rose as high as 64% in July and 60% in August so far.

This means that for every dollar retail put into AMC Entertainment stock, only 36%-40% of that dollar counted towards demand in the lit exchange.

Clearly a huge advantage for institutions going short on a company, especially one like AMC Entertainment who has a high short interest of 28%.

But this is happening to stocks all over the markets.

And the problem has only grown since Gary Gensler took office in 2021.

SEC Scraps Vote for Hedge Fund Transparency Rule

The SEC recently scrapped to vote for a hedge fund transparency rule.

The Securities and Exchange Commission scrapped plans to vote on a rule that would have increased regulators’ visibility into financial risks at some hedge funds and private equity funds.

After scheduling the vote earlier this month, the five-member commission “decided to take a little more time” on the rule, an SEC spokeswoman said.

The rule, proposed early last year over Republican opposition, would have increased reporting requirements for filers of a confidential document called Form PF.

Among other proposed changes, it would have required large hedge funds to file reports within one business day of incidents such as extraordinary investment losses, defaults by major counterparties or spikes in margin requirements.

The rule sparked pushback from lobbyists for the hedge-fund and private-equity industries in Washington.

The Managed Funds Association, which represents hedge funds, urged the SEC last week to hold off on finalizing the rule until it was ready to adopt a separate Form PF proposal issued last August.

The Managed Funds Association, or MFA, is an association made up of a variety of hedge fund managers, including Citadel, Two Sigma, Point72, and Millennium Management.

Also Read: AMC Stock: The SEC Has Now Violated Threshold Rule

Market News Published Daily

Market News Today - Dark Pool Trading Has Risen Under Gensler's Watch.
Market News Today – Dark Pool Trading Has Risen Under Gensler’s Watch.

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A Former SEC Chief Now Predicts Peirce Will Replace Gensler

Market News Daily - A Former SEC Chief Now Predicts Peirce Will Replace Gensler.
Market News Daily – A Former SEC Chief Now Predicts Peirce Will Replace Gensler.

A former SEC Chief now predicts Hester Peirce will replace Gary Gensler in a drastic shift leading to the U.S. presidency.

“When any President is elected, the current SEC Chair typically resigns and the new SEC Chair position is rarely confirmed and filled until at least 3-4 months after Inauguration Day.

Hence, should a Republican get elected President, Chair Gensler would likely resign and the senior Republican appointed SEC Commissioner (in this case famed “crypto-mom” @HesterPeirce) would possibly become acting Chair,” said former SEC Office of Internet Enforcement chief John Reed Stark.

“If @HesterPeirce becomes acting Chair of the SEC, given her lengthy track record of dissent and opposition to most crypto-related SEC actions, the world should expect that most U.S. SEC crypto-related enforcement and most crypto-related SEC disruption would grind to a screeching halt,” he continued.

The United States’ securities regulator could completely u-turn its approach to crypto enforcement, depending on a key election in the United States in 2024, according to former SEC official John Reed Stark, says CoinTelegraph.

Hester Peirce has been highly scrutinized by retail investors, particularly those invested in stocks such as AMC and GameStop due to her take on market transparency.

She was one of the commissioners who voted against transparency rules that would increase hedge fund trade disclosure, something the ‘ape’ community has been raising awareness on for years now.

Her ties to a lobbyist group of anti-regulators has raised major concerns and questions about conflicts of interest in the regulatory system.

Is Hester Peirce Fit to Become SEC Chair?

Market News Daily - A Former SEC Chief Now Predicts Peirce Will Replace Gensler.
Market News Daily – A Former SEC Chief Now Predicts Peirce Will Replace Gensler.

Most would say yes, since not much to protect retail investors would actually be done — this is quite alarming to say about the position in general.

The Intercept wrote a piece on Hester Peirce in 2015 titled, “SEC Nominee To Oversee Wall Street Works At Think Tank Dedicated To Blocking Regulation.”

And according to the research, Hester Peirce received 98% of her salary from the Mercatus Center, a “think tank” that provides an academic façade to a radical anti-regulatory agenda.

But that’s not all, Mercatus Center focuses on the lobbying priorities of its corporate funders.

The Mercatus Center has been described by the Wall Street Journal “as a coordinating center for lobbyists trying to block a flurry of regulations.”

So, it comes as no surprise as to why the SEC commissioner has voted ‘no’ for market transparency rules.

Who Funds the Mercatus Center?

Will Hester Peirce replace Gary Gensler?

The Mercatus Center is one of the first think tanks formed by the right-wing billionaire Koch brothers to influence government policy. 

The Koch family has provided over $35 million to the Mercatus Center in recent years.

Other funding has come from ExxonMobil and Morgan Stanley.

Koch Industries also deals with derivatives such as stocks and bonds and is deeply involved in implementation efforts of the Dodd-Frank reform law.

A law that lacks much transparency needed to enforce a sustainable market.

This SEC commissioner has also opposed regulating private funds such as private family offices stating they are not a systemic risk to the financial system.

However, private family offices are known as ‘unregulated hedge funds‘ since they are not required to register with the SEC.

These private funds hold trillions in global assets with 40% being held in the United States alone.

Is Hester Peirce replacing Gary Gensler a good idea? Leave your thoughts in the comment section below.

Also Read: A New Bill is Being Introduced to Fire Gary Gensler

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Market News Today - A Former SEC Chief Now Predicts Peirce Will Replace Gensler.
Market News Today – A Former SEC Chief Now Predicts Peirce Will Replace Gensler.

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The Short Sale Ban is Really Up for Debate

Market News Daily - The Short Sale Ban is Really Up for Debate.
Market News Daily – The Short Sale Ban is Really Up for Debate.

An SEC official who spoke on condition of anonymity told FOX Business a short sale ban is “not something the commission is currently contemplating.”

However, bankers continue to push for a short sale ban on banking stocks despite the claims.

In September 2008, big banks were on the verge of collapse.

The SEC enacted a 21-day ban on shorting the shares of the remaining big banks.

However, investors continued to sell stocks due to the predicament the entire banking sector was in.

Big law firms at the time urged the SEC to ban short selling to protect against “coordinated short attacks.”

But FOX Business says SEC staffers are advising against implementing a short sell ban today.

They say the last time a ban was implemented following the 2008 financial crisis, it actually added more uncertainty to the financial markets, causing bank stocks to fall further.

“Upon evaluating the impact of the ban (in 2008), there was compelling evidence it was counterproductive and resulted in costs to big segments of the market,” said James Overdahl, Former Chief Economist of the SEC.

Proponents of short selling say it adds to the price discovery of stocks as the market digests both positive and negative information.

Supporters also say that most market manipulation occurs by traders pumping stocks with unfounded assertions of companies’ prospects, thus causing massive small investor losses after the stocks correct.

Bankers Urge the SEC to Temporarily Ban Short Selling

Market News Daily – The Short Sale Ban is Really Up for Debate.

Lindsey Johnson, CEO of the Consumer Banking Association, which represents mid-sized banks, said policymakers need to “take a serious look at the role short sellers are playing in the market and their impact on Americans’ confidence in our financial system.”

People close to the SEC say Gensler will have to propose the ban himself and push it through the full five-member commission on a party-line vote.

The two Republican commissioners, Hester Peirce and Mark Uyeda, will probably vote against any such measure, says FOX Business.

“As I’ve said in times of increased volatility and uncertainty, the SEC is particularly focused on identifying and prosecuting any form of misconduct that might threaten investors, capital formation, or the markets more broadly,” said Chairman Gary Gensler on May 4th.

The American Bankers Association on is urging federal regulators to investigate significant short sales of publicly traded banking equities that it said were “disconnected from the underlying financial realities.”

“We urge the SEC to consider all its existing tools and to take measures to reduce the avenues for abusive trading practices and restore investor confidence,” the banking group said.

“These measures include, at a minimum, a clear message and appropriate enforcement actions against market manipulation and other abusive short selling practices.”

U.S. federal and state officials are assessing the possibility of “market manipulation” behind big moves in banking share prices in recent days, a source familiar with the matter said on Thursday, as the White House vowed to monitor “short-selling pressures on healthy banks.”

This is a developing story – join the newsletter below for more market news and updates.

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Market News Today - The Short Sale Ban is Really Up for Debate.
Market News Today – The Short Sale Ban is Really Up for Debate.

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