Monday, May 10, 2010

The mechanical Scam

This may be bourgeoning paranoia, but Thursday was probably only a Test of the system made by a hacker, and probably a criminal hacker at that! It was a basic study of the machine shift between market exchanges, and if connected to some real money, will lead to a scam being introduced in about a month; after the furor dies down, and the traders return to normal practice. This Test had light volume in the Test, but the purchasers of huge volume should be arrested in the next major Run. This will be difficult, as the action will be across multiple exchanges. The SEC should immediately introduce a cross-exchange computer program to trace major Traders in sudden surges–simply name the top three Traders at any given point along with the total volume of their Trading. The real thing to be remembered is that the Screw-Up was man-made, and designed to test the machine system for performance characteristics.

This article may explain the difficulty in doing the Above. Any action by the SEC should impose heavy fines on Anyone who does not register their clients during any specific period of time; something equivalent to the total Trade value of the client, if they cannot be identified. This makes firms responsible for the probable Cost, if they do not identify their clients, and certify they are reputable firms which can be located in the real world. I would set a Rule stating that a firm or client must have been existent through 3 Tax Return years to purchase unfiltered access to the exchanges.

The real point behind my meandering outlines that immediate remedial action must be emplaned rapidly, else there will be major losses in the near future. The SEC should have the new regulation by the end of the Week, or be willing to endure a major loss to Investors very soon. We have a certain amount of time, as it will take the perpetrators a relative degree of time to set up their scam; it obviously requires a major positioning across markets. This will be to introduce instant Selling within a rapid period of Time, with major Purchasing within the same Period. The real thing is for Traders to stop machine trading as soon as possible, and not to Buy immediately until the Market has reestablished itself. lgl

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