Section One, Part Four

MONEY FOR NOTHING - Farmers Markets While I would like to talk about the slow food movement, this is about the fast money movement. The markets being farmed are not lovingly cared for plots, but cynical manipulation via things called dark pools and high frequency trading. Money is being farmed, as assiduously as the best lettuce. In fact, " let us " is the true homily launched by the brokers and investment banks. To re-cap, dark pools are portfolios of securities to be bought and sold which represent an aggregation of customer orders across , usually, the larger brokers. They are never traded on the exchanges, but are matched in some back office, at prices which will almost inevitably see both buyer and seller pay an inordinate advantage to the broker. High frequency trading is using technology to effectively front-run normal market orders. We won't deign to give any credibility to the usual reasons which attempt to justify, or lionise, these practices, but anyone who says that there is an improvement in market efficiency is probably a liar. The only efficiency dividend here flows to the brokers, not the clients. Where does this fit the social contract? One of the un-recognised support packages exercised during the GFC was that given to the stock exchanges, and by extension, the brokers. In part, the form of this was through the suspension of short selling, particularly in an environment where many companies needed to re-capitalise ( brokers love stock issuance ), in part, it was because policies were designed to drive asset prices higher, presumably on the mistaken belief that asset prices/wealth effects are desireable targets for both monetary and fiscal policy. Bernanke's research notoriously made observations about asset prices.....an outrageous target for a central bank, which even under Greenspan, knew that they shouldn't create asset price bubbles ( then again, didn't both Paulson and Bernanke have some past association with Goldman Sachs? Or was that Geithner?) What is truly outrageous is that brokers rely on exchanges; try their best to manipulate policy to their advantage; and yet dark pools, and to some extent high frequency trading, are designed to circumvent those same exchanges. Regulators like ASIC look at these practices, and adopt a "warm lettuce" version of supervision-we have the absurdity in Australia where recent policy reviews have said that both dark pools and HFT don't need further restrictions placed upon them because, GET THIS, volumes in both seem to have declined recently. HANG ON...if you were a broker manipulating a market, wouldn't you maintain a low profile during a regulatory review. What a farce! The real farce is that the practices are remote enough that the general population does not have enough information to form a view about fairness, or justice, here. And the rule makers either don't understand the nuances of some of the practices, or are captive to a biased voice. During the GFC, it was ASIC who banned short-selling, but it was the ASX who were having its members, and friends, carted out via forced margin calls, etc. It was exchanges who let senior executives not have to provide details on how margined some holdings had become.....placing a lot of small investors in the invidious position of having insiders effectively destroying the share prices that they were supposed to be shepherding.( nothing was noble in the fall of Allco, or Babcock and Brown.) Farmers markets are reasonably small, intimate, sites. So too are exchanges. Only the first mentioned doesn't normally get government support to maintain its monopolistic ability to generously line the pockets of a small coterie. And they don't even have to justify themselves through a formal guarantee, it's all friend's here...money for nothing, the friends are free.