Thousands of firms swap data with government agencies

Thousands of technology, finance and manufacturing companies are working closely with U.S. national security agencies, providing sensitive information and in return receiving benefits that include access to classified intelligence, four people familiar with the process said.

These programs, whose participants are known as trusted partners, extend far beyond what was revealed by Edward Snowden, a computer technician who did work for the National Security Agency. The role of private companies has come under intense scrutiny since his disclosure this month that the NSA is collecting millions of U.S. residents’ telephone records and the computer communications of foreigners from Google Inc (GOOG). and other Internet companies under court order.

Many of these same Internet and telecommunications companies voluntarily provide U.S. intelligence organizations with additional data, such as equipment specifications, that don’t involve private communications of their customers, the four people said.

Makers of hardware and software, banks, Internet security providers, satellite telecommunications companies and many other companies also participate in the government programs. In some cases, the information gathered may be used not just to defend the nation but to help infiltrate computers of its adversaries.

U.S. Agencies Said to Swap Data With Thousands of Firms - Bloomberg

Reuters Gives Elite Traders Early Advantage

A closely watched consumer confidence number that routinely moves markets upon release is accessed by an elite group of traders, for a fee, a full two seconds before its official release, according to a document obtained by CNBC.

A contract signed by Thomson Reuters, the news agency and data provider, and the University of Michigan, which produces the widely cited economic statistic, stipulates that the data will be posted on the web for the general public at 10 a.m. on the days it is released.

Five minutes before that, at 9:55 a.m., the data is distributed on a conference call for Thomson Reuters' paying clients, who are given certain headline numbers.

Thomson Reuters Gives Elite Traders Early Advantage

CBOE fined for failure to police naked shorting

The Chicago Board Options Exchange has agreed to pay a $6 million fine relating to what regulators call "various systematic breakdowns" in the policing of its own procedures. 

The Securities and Exchange Commission announced the charge Tuesday and accused CBOE of "a failure to enforce or even fully comprehend rules to prevent abusive short selling."

In addition to the $6 million fine, the SEC said CBOE will implement major remedial measures to settle the charges.  The fine is the first levied against an exchange for violations related to its own regulatory oversight. 

The SEC said its investigation found that CBOE failed to adequately regulate and control a conflict for one of its member firms, Chicago-based optionsXpress. The SEC later charged that firm in a so-called naked short-selling scheme, or illegally selling shares it did not own.  

The SEC claims CBOE didn't properly investigate the firm's compliance and interfered with the SEC's inquiry. 

"CBOE demonstrated an overall inability to enforce (its own procedures) with an ineffective surveillance program that failed to detect wrongdoing despite numerous red flags," the SEC said. 

CBOE fined $6 million in naked short selling scheme - chicagotribune.com

Banks hoard nearly $1 Trillion at Fed

FORTUNE -- U.S. banks now have $1 trillion at the Federal Reserve. It's far more than they have ever had before, and it could be a big problem.

And it's a new one. Before the financial crisis, the amount of cash banks kept idle at the Fed rarely topped $25 billion, which in terms of a multi-trillion dollar banking system is peanuts. But shortly after the start of the financial crisis, as a move to help the banks and save the economy (or perhaps the other way around), the Fed began paying interest on money banks deposited at the Fed.

Money flowed in. It has been rising ever since, but the rate of increase has picked up recently. In the first three months of this year, bank reserves at the Fed rose nearly $200 billion, or 25%, after barely budging in 2012. The amount passed the trillion dollar mark for the first time in April. Still, all that extra cash has done little to boost lending, which dropped in the first quarter.

http://finance.fortune.cnn.com/2013/06/12/federal-reserve-bank-deposits/?iid=Lead

MetaQuotes clashes with ZuluTrade, Myfxbook, Tradency and Tradeo – Shakeup in Copy-Trading World

MetaQuotes, the company behind the popular trading software MetaTrader 4, has warned brokers not to work with Zulutrade, Myfxbook, Tradency and Tradeo. These third party providers are accused by MetaQuotes of hacking the MT4 platform. 

http://www.forexcrunch.com/metaquotes-clashes-with-zulutrade-myfxbook-tradency-and-tradeo/

FX Traders manipulate fix rate

Traders at some of the world’s biggest banks manipulated benchmark foreign-exchange rates used to set the value of trillions of dollars of investments, according to five dealers with knowledge of the practice.

Employees have been front-running client orders and rigging WM/Reuters rates by pushing through trades before and during the 60-second windows when the benchmarks are set, said the current and former traders, who requested anonymity because the practice is controversial. Dealers colluded with counterparts to boost chances of moving the rates, said two of the people, who worked in the industry for a total of more than 20 years.

The behavior occurred daily in the spot foreign-exchange market and has been going on for at least a decade, affecting the value of funds and derivatives, the two traders said. The Financial Conduct Authority, Britain’s markets supervisor, is considering opening a probe into potential manipulation of the rates, according to a person briefed on the matter.

“The FX market is like the Wild West,” said James McGeehan, who spent 12 years at banks before co-founding Framingham, Massachusetts-based FX Transparency LLC, which advises companies on foreign-exchange trading, in 2009. “It’s buyer beware.”

The $4.7-trillion-a-day currency market, the biggest in the financial system, is one of the least regulated. The inherent conflict banks face between executing client orders and profiting from their own trades is exacerbated because most currency trading takes place away from exchanges. http://www.bloomberg.com/news/2013-06-11/traders-said-to-rig-currency-rates-to-profit-off-clients.html

Citi could lose 7 Billion due to Forex

Citigroup Inc. (C) could lose as much as $7 billion on currency swings if Charles Peabody is right, putting the analyst at odds with peers who say the stock will be the best performer among big U.S. banks in the year ahead.

Peabody, who leads research at Portales Partners LLC, is among only four analysts out of 34 tracked by Bloomberg who recommend investors sell Citigroup shares. He estimates the bank may lose $5 billion to $7 billion in regulatory capital this year if the dollar gains against the yen, euro and currencies in emerging markets, which provide about half the firm’s profit. That would be its worst translation loss in five years, exceeding the $3.5 billion deficit in 2011.

Former Chief Executive Officer Vikram Pandit expanded Citigroup’s overseas businesses to help it recover from 2008’s U.S. credit crisis. Peabody, who predicted the mortgage market’s plunge as early as January 2005, said the firm’s reliance on revenue from abroad is now driving his concern that a global economic slowdown will hurt the bank more than U.S. rivals. Citigroup Facing $7 Billion Hit on Dollar Gain, Peabody Says - Bloomberg

Treasury Yields Spike To New 14 Month Highs

30Y rates are up 4bps and 10Y rates up 5bps as a combination of MBS convexity hedging, Taper chatter, and growth hopiness flutter across the bond market. This has backed 10Y and 30Y rates up to their highest since April 2012 - getting close to some significant support/resistance from the last few years. Mortgage spreads have stabilized up here at their highest since July (around 83bps) but just as a delicate reminder, the last time bond yields spiked to this degree, equities began to wonder just what was going on? With so much of the investing public having bought bond-like-stocks at the behest of every talking head and asset-gatherer under-the-sun, we wonder at what point do the arguments about a great rotation from bonds to stocks (since gosh, 10Y bond prices are down 3% in the last month) turn to a rotation from bond-like-stocks to bond-like-bonds...

 [5]

Or more simply, the market's (or the Fed's) realization that 'normalizing' rates here will crush the economy as interest expense surges (think Japan...)

Charts: Bloomberg

http://www.zerohedge.com/print/475070

Whistleblower comes forward "Verax"

The individual responsible for one of the most significant leaks in US political history is Edward Snowden, a 29-year-old former technical assistant for the CIA and current employee of the defence contractor Booz Allen Hamilton. Snowden has been working at the National Security Agency for the last four years as an employee of various outside contractors, including Booz Allen and Dell.

The Guardian, after several days of interviews, is revealing his identity at his request. From the moment he decided to disclose numerous top-secret documents to the public, he was determined not to opt for the protection of anonymity. "I have no intention of hiding who I am because I know I have done nothing wrong," he said.

Snowden will go down in history as one of America's most consequential whistleblowers, alongside Daniel Ellsberg and Bradley Manning. He is responsible for handing over material from one of the world's most secretive organisations – the NSA.

In a note accompanying the first set of documents he provided, he wrote: "I understand that I will be made to suffer for my actions," but "I will be satisfied if the federation of secret law, unequal pardon and irresistible executive powers that rule the world that I love are revealed even for an instant."

Despite his determination to be publicly unveiled, he repeatedly insisted that he wants to avoid the media spotlight. "I don't want public attention because I don't want the story to be about me. I want it to be about what the US government is doing."

HE COMES FORWARD!
Code name 'Verax'...
VIDEO: 29-year-old source behind biggest intel leak in NSA history explains motives...
'I don't want to live in society that does these sort of things'...
'I believed in Obama's promises'...
'Presidents openly lie to secure the office'...
'Government has granted itself power it is not entitled to'...
Suggests he's defecting -- to China?
Former CIA Officer: 'Potential Chinese Espionage'...
REPORT: Intel officials overheard saying NSA leaker should be 'disappeared'...
Snowden Checked Out Of Hong Kong Hotel...

15 ms NFP leak

On Monday we brought to you proof of a 15 millisecond frontrunning of the Mfg ISM number by what turned out to be HFT clients of Reuters which admitted subsequently it had "inadvertently" leaked the number to select clients. However, that was child's play compared to the absolute market farce that happened today which we can visualize courtesy of Nanex, and which impacted gold, ES, and Treasury Futures altogether.

In sequential order: 62 milliseconds before the NFP number a massive dump of gold took place in what can merely be described as yet another of the infamous gold take downs we know so well which however take place just around the time of the London fixing. That it happened right before the NFP number is either an indication of an early NFP data leak reaching "some" HFT traders, or merely an attempt to set the "mood" for further selling by someone who decided that the NFP print would be negative for gold no matter what it was...

August 2013 Gold Futures trades and quote spread.

However, manipulated gold markets are nothing new, and frankly we would have been surprised if they did not happen.

What was more amusing was the action after the NFP release in both the eMini and the T-Bond futures, all of which had to be halted for a whopping 5 seconds until the algos, selling everything at first, got the memo out that good news today was in fact good news, and promptly ramped risk to the moon. Either that, or someone called in a code Red, made it so all selling was literally prohibited, and with the only path of no resistance up, resulted in today's epic melt up on what was initially a very bearish kneejerk response to the NFP print.

First: September 2013 T-Bond Futures trades and quote spread. The deluge of selling hits 482 milliseconds before the NFP release, leading to a 5 second circuit breaker and halting the OTR future contract of the world's largest bond market. Abe would be proud.

http://www.zerohedge.com/news/2013-06-07/here-todays-482-millisecond-nfp-leak-and-subsequent-gold-slam-and-trading-halts-trea