Sep 17

The SEC’s Former Head HFT Expert Joins HFT Titan Citadel:

Last April, we commented on the most blatant (pre) revolving door we had ever seen at the SEC (and there have been many): the departure of the SEC’s head HFT investigator, Gregg Berman, who during his tenure at the agency (whose alleged purpose is to keep the “market” fair, efficient and unmanipulated) did everything in his power to draw attention away from HFTs. He did that, for example, by blaming Waddell and Reed for the May 2010 flash crash. This is what Berman, whose full title was the SEC’s “Associate Director of the Office of Analytics and Research in the Division of Trading and Markets” said in the final version of the agency’s Flash Crash report:

At 2:32 p.m., against this backdrop of unusually high volatility and thinning liquidity, a large fundamental trader (a mutual fund complex) [ZH: Waddell and Reed] initiated a sell program to sell a total of 75,000 E-Mini contracts (valued at approximately $4.1 billion) as a hedge to an existing equity position.”

Several years later, when the HFT lobby made a coordinated push to eliminate human spoofers (which algos were apparently helpless against without regulatory intervention), the SEC changed its story entirely and blamed the flash crash on one solitary trader, Navinder Sarao. By then the SEC had lost all credibility. It had also lost Gregg Berman, who six months after quitting the SEC ended up taking a nondescript job at EY, where he joined the Financial Services Organization (FSO) of Ernst & Young LLP as a Principal focusing on market risk and data analytics.

We, for one, were surprised: having expended so much energy to cater to the HFT lobby, we were confident Berman would end up collecting a 7-figure paycheck from one of the world’s most prominent high frequency frontrunning parasite firms. As a reminder, this is what we predicted when the creator of Midas, and Eric Hunsader’s archnemesis, quit the SEC:

Gregg will find a hospitable and well-paid position after spending 6 years defending the well-paying HFTs lobby. In all likelihood after taking a 2-4 month break from the industry, he will pull a Bart Chilton, and will join either HFT powerhouse Virtu, perennial accumulator of former government staffers, Goldman Sachs, or – most likely – the NY Fed’s shadow trading desk and the world’s most leveraged hedge fund, Citadel itself. Because for every quo there is a (s)quid.

In retrospect, Berman’s detour into E&Y ended up being just that: an attempt to mask his true career intentions by taking a less than 1 year “sabbatical” from his true calling: getting compensated from the very HFT industry whom he did everything in his power to reward generously during his tenure at the SEC.

Well, as it turns out, we were right after all, because lo and behold, as the WSJ first reported, Gregg Berman is now director of market-structure research at the world’s most levered hedge fund, HFT powerhouse and massive electronic market-making firm: Citadel, which also happens to be the entity through which the NY Fed intervenes in the market.

berman-citadel_0

And just like that all is well again in the corrupt world, in which the market “regulators” pretends to protect the little guy, when in reality all they only cater to the most criminal with the simple hope of landing a job there one day and getting paid in 1 year what they make in 10 at the SEC or any other government agency.

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