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I'm having a hard time believing this is actually a common case. The flow you've laid out almost certainly breaks SEC rules - Credit Suisse's (now closed) reta
by thedufer 8y ago
I'm having a hard time believing this is actually a common case. The flow you've laid out almost certainly breaks SEC rules - Credit Suisse's (now closed) retail execution unit was fined for this exact trade less than a month ago (https://www.sec.gov/news/press-release/2018-224 https://www.sec.gov/news/press-release/2018-224). If this is how internalizers make money, they should all be in existential crisis right now. As far as I can tell, they are not.
- anonu 8y agoThe SEC cracks down hard on ATSs. But it's rarely for what they do. It's for what they didn't do ... Which is be transparent and disclose. This is the case in the link and something I've observed with all these SEC actions brought against ATSs. The flow I explained in one way these guys make money. It's certainly exaggerated. At the one place I worked we ran a $0.5bn book of this stuff. You don't always get chances to get out. So risk management is key. Your book turns over every few days.
- thedufer 8y agoSure, most SEC complaints are for lack of transparency, because they don't have laws against a lot of the stuff they want to stop. But they don't go around prosecuting for lack of transparency of good things. If they fined someone for it, it's probably because they don't approve of the thing they did, which is a good sign they're going to fine others that do it. And it's not like a lot of internalizers are going around with prospectuses saying "we're gonna purposefully move markets to give your customers worse prices", so the SEC isn't going to have much trouble fining them if they decide to (assuming this is actually happening all the time).