Joseph Saluzzi ( and Sal L. Arnuk ( are co-heads of the equity trading desk at Themis Trading LLC (, an independent, no conflict agency brokerage firm specializing in trading listed and OTC equities for institutions. Prior to founding Themis, Sal and Joe worked for more than 10 years at Instinet Corporation, pioneers in the field of electronic trading, and at Morgan Stanley.


Yesterday morning we noticed that the SEC posted on its site a press release: Alternative Trading System Agrees to Settle Charges That It Failed to Disclose Trading by an Affiliate. The SEC issued Cease and Desist proceedings against Pipeline, one of the largest global crossing dark pools. Today we were going to just summarize and highlight the key SEC findings; however nothing we could say would be more damning than the actual facts in the SEC’s release. The affair is sordid and shocking, considering the expertise and industry standing of the firm and its key personnel. We’ll just say that the fines were surprisingly diminutive ($1 million to the firm, and $100,000 each to CEO Federspiel and Chairman and ex-Nasdaq head Berkeley), which has us scratching our heads.

What we will talk about this morning is the bigger picture: a broken market rife with conflicts of interest, and folks who have lost their way. We have spoken with quite a few buyside desks who, surprisingly, were not shocked; rather the sentiments expressed were best described as sadness and resignation. Did Pipeline “jump the shark” (the irony being that their brand was built protecting their customers from sharks)? The answer is no. Our entire industry has “jumped the shark”.


- For-profit stock exchanges selling customer trading information to “evolved day traders”,
- For-profit stock exchanges selling predictive software to “evolved day traders”,
- Internalizers paying for order flow so they themselves can model it and trade against it,
- Dark pools owned by exchanges,
- Dark pools operated by brokerage firms that employ “evolved day trader” tactics,
- Exchanges owned by “evolved day traders”,
- Dark pools owned by exchanges owned by brokers who employ “evolved day trader” tactics,
- Dark pools preying on institutions’ worst fears about the above, and falsely promising shark-free environments, only to…well you know. Read the SEC findings linked to above,
- Quotes per second jumping from 45,000 in 2004 to 6,000,000 today,
- Billions being spent on data centers globally to sell colocation speed advantages.
- Tunnels being dug through mountains to shave milliseconds for “evolved day traders”,
- Brokerage firms selling sponsored access to “evolved day traders”,
- Brokerage firms selling sponsored access to “evolved day traders”, and then claiming to be market structure specialists keeping you informed.
- A litany of data, latency, and strategy consultants geared towards helping “evolved day traders”, as well as more recently protecting you from “evolved day traders”.

This list is longer. You will read ours in due time. So no, Pipeline didn’t “jump the shark”, our whole industry did. Our industry “jumped the shark” because so much of the leadership has its origin in the original SOES firms and their accompanying mentality, and they have branched out and multiplied like cockroaches.

There is a crisis of leadership in our industry, folks. The markets will be broken until the focus returns to helping investors invest money, and not touching investor orders to siphon money.

By the way, long live The Fonz.

Jumped The Shark
Themis Trading, October 25, 2011

Category: Markets, Think Tank, Trading

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

3 Responses to “Jumped The Shark”

  1. Boo-urns says:

    Wait, unregulated markets lead to bad outcomes for consumers? This doesn’t seem consistent with the Efficient Markets Hypothesis, therefore it must be wrong.

  2. Francois says:

    100K for dudes making several millions every year while a 50$ non-paid fine by a guy who’s totally broke can land him in county jail for a long, long time.

    And…there are STILL some people wondering what Occupy Wall Street is about? Guess there are more dim-witted personal than previously known.

    Speaking of which, I heard the anchorwoman on NPR Morning Edition today repeatedly call the Occupy Wall Street protesters “anti-capitalists”. With vapid, slothful tripe of this kind, NPR shall wait a long time before I pledge any n’gwee to them again.


  3. Greg0658 says:

    I heard insomniac_tv_ABCnews call OWS “comrades” … busted out LOL .. those editor moderator insinuate’rs are a hoot