Is Gary Gensler in bed with Ken Griffin? it's a good question. So how do we go about determining if this is opinion or fact?, or a little of both. It's very easy to see that the top people at the SEC, all came from the industry, Gary Gensler is former Goldman Sachs where he worked for 18 years. It's also easy to see that the people who went from Wall St. to the SEC, very often go right back to Wall St. when their term is over. We also know that Mr. Gensler, formally the head of the CFTC, recused himself in the MF Global case. That is to say, he refused to investigate on a massive investment scam because of his former ties to Wall St. Some might say, well, of course, he had to, it was a conflict of interest. With such a close knit community that is Wall St., where reputation is everything, how then would it be possible for any of them to not have a conflict of interest?
Flurry of rules
Over the course of 2021, the SEC, DTCC, NSCC have released a flurry of rules to "protect" the market. It now appears that Gary Gensler wants to go back and rewrite them, which fellow members of the SEC have called him out on. That his agenda in no way promotes the ideals and mission of the SEC. NSCC-010-2021? at best it is delayed again. CATS (Consolidated Audit Trail)? delayed again and it's been in the works since 2016. Short position reporting? that was in the original Dodd-Frank and hasn't been implemented. All of these would hurt Ken Griffin and Citadel, despite any ridiculous claims Ken Griffin might make. Yet here we have Gary Gensler wanting to get rid of them or rewrite them altogether before they even saw implementation.Credit to someone getting sued by Citadel (not us.)
The Last year
The last year has seen the rise of the Retail Investor. So much so that Congress had to hold hearings on it. Retail Investors aren't just at a disadvantage, they are actively hunted by the likes of Ken Griffin and Citadel. The SEC released the GME report on trading activities in the January 28th run-up, months late and without any weight. In essence they failed to address the primary concern of Retail Investors but took an in-ordinate amount of space to try and distance Citadel and Robinhood from any negative impact.
Now a broker-dealer can naked short a stock if it has reasonable grounds to believe it can locate it later on, say if the stock was on the easy to borrow list. Market Makers have certain exemptions. Therein lies part of the problem. The Market Maker can argue they are naked shorting to provide liquidity to the market and to delta hedge options. The broker-dealer can argue they are naked shorting because they believe they have reasonable grounds, such as the market maker, to be able to deliver the share. What it fails to take into account is the following: PFOF (Payment for Order Flow), Odd-Lots, Dark Pools and their own risk analysis and mitigation teams. Which is a long way to say, they know (the broker-dealers) they don't have reasonable grounds to do it and the market maker is abusing the exemption.
The SEC is fucking you over
The SEC is fucking you over - they know about this, they've been told numerous times, they've been shown it numerous times. They have the tools to prevent this, in fact, almost unilateral tools. In the 2008 financial crisis the SEC banned short selling of 700 financial institutions. Then shortly thereafter, any company during the crisis. They also have the ability to stop Dark Pools on a case by case basis. Now, the SEC loves to go on about their enforcement, you almost can't go a day without them telling you on twitter. The issue here is that while, yes, they are handing out fines, they are handed out to the small fish, the ones unable to obfuscate and hide the dirty deeds. The SEC would also like you to believe, that at the same time it is doing a great job at enforcement, it is severely underfunded. That is partially true, but like anything else the story is a little deeper than that. The SEC could simply fine companies 100% or 125% of the unlawful gains and use that to further investigate and enforcement. In fact doing so would turn it from simply the cost of doing business it is these days, into a deterrent it is meant to be.
DOJ is now investigating
The DOJ is now investigating. I think we could agree that is a good sign, unfortunately without more information on who, what, when and where of it, it might mean they are investigating charitable funds that donates hedges. Which leads us back to a question, how did it get to a DOJ investigation, if the purpose of the SEC is to protect investors, has the capability to at times almost unilaterally act, keep market order, why does it seem none of that happened? Our opinion is the simplest solution, is usually the right one, which is the SEC isn't capable of doing its job because it is so hopelessly conflicted by insiders that will go back onto Wall St. when they are done.
So much so, given all that is discussed here, the opinion we have is that yes, Gary Gensler is in bed with Ken Griffin.
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