posted on Jan, 25 2014 @ 05:48 PM
Apparently Bank of America is under investigation for violating a form of insider trading rules called "Frontrunning".
Frontrunning (I think) is when a brokerage trading firm decides to somehow make money from their own trades based on orders placed by clients.
They simply do a "shadow" trade ahead of filling a trade order from a client.
They certainly would be able to influence a commodity price with a larger than normal block trade by a client.
After the client's trade, they simply sell their own positions and waalaa ---- profit in minutes (I think). Plus, they make a commission from the
And it seems trades involving U.S. government-owned mortgage giants Fannie Mae and Freddie Mac have been in play as well?
I would imagine any mistakes could cost millions.
But it seems BOA has reported many daily profits on their own "insider" style trading practices.
Apparently, this was deduced from profit/loss statements and filings.
hard to follow without understanding how the system works;
Every time a TBTF bank releases its 10-Q, we head straight for the section, usually well over 100 pages in, that discloses the bank's total
profitable trading days. ....
In summary, so far in 2013, Bank of America lost money on 9 trading days out of a total 188.
Statistically, this result is absolutely ridiculous when one considers that the bulk of bank trading revenues are still in the form of prop positions
disguised as "flow" trading to evade Volcker which means the only way a bank could make money with near uniform perfection is if it either i)
consistently has inside information that it trades on or ii) it consistently front-runs its clients.
Long detailed article;
Bank Of America Caught Frontrunning Clients
Can somebody explain this ??