Wall Street is a simple business that revolves around people and information. In order for Wall Street to thrive, however, and for our markets and economy to prosper, there needs to be a premise of fair dealing on a level playing field.
In the thirty years I have been involved in the markets, I had never sensed until recently that a growing majority of market participants question this premise of fair dealing. Should we be surprised? Certainly not. In the face of high frequency trading, regulatory capture and too big to fail so many people in our nation question the very integrity of Wall Street itself.
I find this truly regrettable because our nation needs a healthy Wall Street with a healthy regulatory system in order to inspire real investor confidence. We are a long way from that reality.
Where are we? Well, in light of the most recent arrests in the ongoing insider trading scandal on Wall Street, let’s navigate and see how the U.S. Attorney in Manhattan characterizes the current state of the state on Wall Street.
In a recent FT article, Preet Bharara said the case, which resulted in criminal insider trading charges against four hedge fund employees and guilty pleas by three analysts, shows that insider trading is “rampant and routine, and that this criminal behavior was known, encouraged, and exploited by authority figures in several investment funds”.
Rampant and routine?? Is that right? Are you in a hurry to venture into these waters?
This reality truly should not come as a surprise given the preponderance of evidence showing that our regulators are captured by the industry and that the equity exchanges themselves promote glorified front running under the current construct of high frequency trading.
Larry is a Wall Street veteran, having worked at such banks as First Boston, Bear Stearns and Union Bank. He blogs at www.senseoncents.com