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PARTNERS IN CRIME

PARIS EURONEXT & VIRTU FINANCIAL FINED $5 MILLION EACH !  

 

  Finally after countless complaints over numerous years a regulator ha finally punished an exchange for failing to provide fair and orderly markets . However the best punishment would of been to suspend both of them ! It now appears that exchanges have given certain members privileges and turned a blind eye while they manipulative and abuse the marketplace  in exchange for volume and liquidity .

 Virtu financial were using Algos that rapidly placed and cancelled orders which created a distorted order book which caused distortion to other honest traders .  The AMF regulator stated Virtu accounted for 62% of messages and orders on the Euronext Paris but just 2% of actual trades . Its algo worked so fast that 66% of its orders lasted less than one second and 25% lasted less than 10 milliseconds . Therefore Virtu had secured a dominant position on the Euronext Paris , Bats , Chi-x and Turqiose platforms and therefore provided unfair trading conditions to honest retail players . The exchange had granted Virtu an exemption from penalities applicable to exceeding the ratio of orders placed compared to trades executed which at the time was 100 % ; AMF also stated that this allowed Virtu to improve its algo and that Euronext had not operated with neutrality and impartiality in accordance with market integrity . During this period exhangs constantly denied any wrong doings or  providing privileges to certain members  ; this fine proves they were lying and asks the question how many other exchanges are ? Sadly this also asks where were the FSA were during this period !

  With  exchanges now charging extra for market data perhaps  our regulators can now enforce  "fair and orderly " markets and make exchanges uncouple themselves from abusive members to boost their share prices . The one question not answered is an apology to the honest traders who have lost monies during this period who knew they had their pockets picked ? 

 

 

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Comments: (4)

Tayloe Draughon
Tayloe Draughon - CloudQuant - Chicago 10 December, 2015, 16:40Be the first to give this comment the thumbs up 0 likes

The regulators have typically put the burden of supervision on the broker dealers (BDs) and Futures Commission Merchants (FCMs). Now the exchanges are being held accountable too. This is very interesting as exchange profits have been increasing. However the number of FCMs has been in decline.

Great post Neil.

Neil Crammond
Neil Crammond - DIVENTO FINANCIALS - London 10 December, 2015, 16:53Be the first to give this comment the thumbs up 0 likes

sadly the exchanges have denied allowing certain HFT  privileges and the regulators believed them !  This news shows how guilty Virtu and other algos have been ; pehaps we may see some exchanges threatened with jail

Tayloe Draughon
Tayloe Draughon - CloudQuant - Chicago 10 December, 2015, 17:07Be the first to give this comment the thumbs up 0 likes

Interesting thoughts. What do you think about the exchanges market directly to HFT firms for co-location services and higher speed market data access? Do you think that this creates an uneven playing field and an environment that leads to this type of behaviour? 

Neil Crammond
Neil Crammond - DIVENTO FINANCIALS - London 10 December, 2015, 17:111 like 1 like

the HFT promised liquidity and therefore the exchange closed their eyes to their activities ; on a depth of market screen these actions were blatant .