There is also this from Matt Taibbi
http://trueslant.com/matttaibbi/2009/10/27/goldman-lobbies-senate-says-full-transparency-sucks/
Oct. 27 2009 - 11:58 am | 5,965 views | 4 recommendations | 39 comments
Goldman Lobbies Senate, Says Full Transparency Sucks
ALTERNATIVE TRADING PLATFORMS AND THEIR EFFECT ON LIQUIDITY
The equity markets provide perhaps the best example of a highly evolved complex ecosystem, where care must be taken to preserve the benefits that have evolved from competition and innovationâ¦
Crucially, liquidity is what helps to solve this mismatch problem. Market makers that see large volumes are best positioned to match differing size transactions. In traditional exchange trading, bids and offers are public, and this transparency helps buyers and sellers to achieve the best price.
For some market participants, however, the openness and transparency of the equity market actually mean they are unlikely to achieve the best price. The risk, particularly for large transactions such as those undertaken by pension funds or large mutual funds (where most small investors have most of their equity exposure), is that other market participants will use this transparency to undercut the intended transactions.
From a Goldman Sachs lobbying document (emphasis mine)
effective-reg-part-4.pdf (application/pdf Object).
This is from a lobbying document Goldman has been passing around the Senate on financial regulatory reform in general.
There is a lot of crazy stuff in this document, but the most notable is probably this passage, in which Goldman pooh-poohs the notion that complete transparency in markets creates accurate prices.
Instead, the bank argues that an over-the-counter market in which big traders like Goldman get to do deals in the shadows in âdark poolsâ without the retail investor having any knowledge of what the hell is going on is somehow better for everybody, that this somehow produces better prices. Of course the reality is that the two-tiered system creates one pool of fools whose every movement is visible to every animal on the Serengeti, and another pool of giant bloodthirsty carnivores who get to walk around invisible, picking off the dik-diks one by one.
Everyone I showed this to had the same reaction â âI canât believe they said this out loud.â
One friend of mine put it this way: say Goldman buys a big block of stock from a pension fund in a dark pool. Now they have shares they want to get out of and flatten out their risk. So where do they sell? Well, a big chunk of it might go to the retail schmuck who has no idea whatâs going on. Heâs buying 1000 shares of whatever at $28, not knowing that Goldman has another 50,000 shares to go. Next thing you know, the schmuckâs shares are at $27.
Goldman salutes this process, noting the magic of so-called ânon-displayed liquidity.â What the rest of us would describe as âhiding shit from the rabble,â Goldman calls âseparating liquidity from information about the transaction.â You almost have to admire the sheer balls of this sort of propaganda:
God bless this company. Theyâre never boring, thatâs for sure.
http://trueslant.com/matttaibbi/2009/10/27/goldman-lobbies-senate-says-full-transparency-sucks/
Oct. 27 2009 - 11:58 am | 5,965 views | 4 recommendations | 39 comments
Goldman Lobbies Senate, Says Full Transparency Sucks
ALTERNATIVE TRADING PLATFORMS AND THEIR EFFECT ON LIQUIDITY
The equity markets provide perhaps the best example of a highly evolved complex ecosystem, where care must be taken to preserve the benefits that have evolved from competition and innovationâ¦
Crucially, liquidity is what helps to solve this mismatch problem. Market makers that see large volumes are best positioned to match differing size transactions. In traditional exchange trading, bids and offers are public, and this transparency helps buyers and sellers to achieve the best price.
For some market participants, however, the openness and transparency of the equity market actually mean they are unlikely to achieve the best price. The risk, particularly for large transactions such as those undertaken by pension funds or large mutual funds (where most small investors have most of their equity exposure), is that other market participants will use this transparency to undercut the intended transactions.
From a Goldman Sachs lobbying document (emphasis mine)
effective-reg-part-4.pdf (application/pdf Object).
This is from a lobbying document Goldman has been passing around the Senate on financial regulatory reform in general.
There is a lot of crazy stuff in this document, but the most notable is probably this passage, in which Goldman pooh-poohs the notion that complete transparency in markets creates accurate prices.
Instead, the bank argues that an over-the-counter market in which big traders like Goldman get to do deals in the shadows in âdark poolsâ without the retail investor having any knowledge of what the hell is going on is somehow better for everybody, that this somehow produces better prices. Of course the reality is that the two-tiered system creates one pool of fools whose every movement is visible to every animal on the Serengeti, and another pool of giant bloodthirsty carnivores who get to walk around invisible, picking off the dik-diks one by one.
Everyone I showed this to had the same reaction â âI canât believe they said this out loud.â
One friend of mine put it this way: say Goldman buys a big block of stock from a pension fund in a dark pool. Now they have shares they want to get out of and flatten out their risk. So where do they sell? Well, a big chunk of it might go to the retail schmuck who has no idea whatâs going on. Heâs buying 1000 shares of whatever at $28, not knowing that Goldman has another 50,000 shares to go. Next thing you know, the schmuckâs shares are at $27.
Goldman salutes this process, noting the magic of so-called ânon-displayed liquidity.â What the rest of us would describe as âhiding shit from the rabble,â Goldman calls âseparating liquidity from information about the transaction.â You almost have to admire the sheer balls of this sort of propaganda:
God bless this company. Theyâre never boring, thatâs for sure.