This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Stock Market Regulators Can't Find a Whale in a Pipeline

NEW YORK ( TheStreet) -- Who knows what complex trading strategies are currently distorting world markets?

Certainly not securities regulators.

In recent days, two front page stories in The Wall Street Journal have put the spotlight on trading operations that were unknown to the public but appear to have had an outsized impact on the markets.

On Friday , it was Bruno Iksil, a London-based JPMorgan Chase (JPM - Get Report) trader known to some market participants as "the London Whale."

According to Bloomberg, which followed up, on The Wall Street Journal,'s report, Iksil's bullish positions in credit default swaps indices have "broken" the indices, creating a disparity between the cost of credit for some companies and the way that cost was reflected in the indices.

Before most of us were able to wrap our heads around those events, The Wall Street Journal published an unrelated story Monday about a high frequency trading outfit called Pipeline Trading Systems that reached a settlement with the Securities and Exchange Commission after it was accused of misrepresenting the method it used to fill client orders.

The client wasn't you or me, but rather fund giant Fidelity Investments. Fidelity thought it was using Pipeline's technology to fill trades anonymously though a private off-exchange platform known as a "dark pool," when in fact a Pipeline affiliate called Milstream was trading ahead of Fidelity on separate venues to fill the order.

That activity that may have defeated the purpose of the dark pool. Fidelity used the dark pool to avoid having its orders move the market, but in fact its orders weren't being filled in the dark pool and so may have been completed after the market moved ahead of them.

Got that? It's amazing that regulators did. It appears one of the reasons they did was new bounties available to whistleblowers--a result of the 2010 Dodd Frank Act. The fact that Fidelity was the one getting ripped off may also have helped bring the matter to authorities' attention. You and I are unlikely to be so lucky.

Even so, according to Monday's article, Pipeline paid a mere $1 million fine and is still in business under the name Aritas. Milstream has disbanded, but one of its principals, Gordon Henderson, told the newspaper he hopes to set up a new business using many of the same Milsteam employees.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
JPM $60.96 2.37%
AAPL $126.37 2.53%
FB $83.20 -0.13%
GOOG $552.03 0.67%
TSLA $190.57 3.01%

Markets

DOW 17,976.31 +263.65 1.49%
S&P 500 2,086.24 +25.22 1.22%
NASDAQ 4,947.4410 +56.2220 1.15%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs