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Eventually Brad Katsuyama came to realize that the most sophisticated investors didn’t know what was going on in their own market. Not the big mutual funds, Fidelity and Vanguard. Not the big money-management firms like T. Rowe Price and Capital Group. Not even the most sophisticated hedge funds.

The deep problem with the system was a kind of moral inertia. So long as it served the narrow self-interests of everyone inside it, no one on the inside would ever seek to change it, no matter how corrupt or sinister it became

Technology had collided with Wall Street in a peculiar way. It had been used to increase efficiency. But it had also been used to introduce a peculiar sort of market inefficiency. Taking advantage of loopholes in some well-meaning regulation introduced in the mid-2000s, some large amount of what Wall Street had been doing with technology was simply so someone inside the financial markets would know something that the outside world did not. The same system that once gave us subprime-mortgage collateralized debt obligations no investor could possibly truly understand now gave us stock-market trades involving fractions of a penny that occurred at unsafe speeds using order types that no investor could possibly truly understand.

The trouble with the stock market — with all of the public and private exchanges — was that they were fantastically gameable, and had been gamed: first by clever guys in small shops, and then by prop traders who moved inside the big Wall Street banks. That was the problem, Puz thought. From the point of view of the most sophisticated traders, the stock market wasn’t a mechanism for channeling capital to productive enterprise but a puzzle to be solved.

As they worked through the order types, the Puzzle Masters created a taxonomy of predatory behavior in the stock market. Broadly speaking, it appeared as if there were three activities that led to a vast amount of grotesquely unfair trading. The first they called electronic front-running — seeing an investor trying to do something in one place and racing ahead of him to the next (what had happened to Katsuyama when he traded at RBC). The second they called rebate arbitrage — using the new complexity to game the seizing of whatever legal kickbacks, called rebates within the industry, the exchange offered without actually providing the liquidity that the rebate was presumably meant to entice. The third, and probably by far the most widespread, they called slow-market arbitrage. This occurred when a high-frequency trader was able to see the price of a stock change on one exchange and pick off orders sitting on other exchanges before those exchanges were able to react. This happened all day, every day, and very likely generated more billions of dollars a year than the other strategies combined.

IEX had made its point: That to function properly, a financial market didn’t need to be rigged in someone’s favor. It didn’t need payment for order flow and co-location and all sorts of unfair advantages possessed by a small handful of traders. All it needed was for investors to take responsibility for understanding it, and then to seize its controls. “The backbone of the market,” Katsuyama says, “is investors coming together to trade.”

If an investor as large as T. Rowe Price, which acted on behalf of millions of investors, had trouble obtaining the information it needed to determine if its brokers had acted in their interest, what chance did the little guy have?

The stock market really was rigged. Katsuyama often wondered how enterprising politicians and plaintiffs’ lawyers and state attorneys general would respond to that realization. (This March, the New York attorney general, Eric Schneiderman, announced a new investigation of the stock exchanges and the dark pools, and their relationships with high-frequency traders.

Such trading on information originating outside the company is generally not covered by insider trading regulation.

Insider trading is quite different from market manipulation, disclosure of false or misleading information to the market, or direct expropriation of the corporation’s wealth by insiders.

Regulation of insider trading began in the United States at the turn of the twentieth century, when judges in several states became willing to rescind corporate insiders’ transactions with uninformed shareholders.

One of the earliest (and unsuccessful) federal attempts to regulate insider trading occurred after the 1912–1913 congressional hearings before the Pujo Committee, which concluded that “the scandalous practices of officers and directors in speculating upon inside and advance information as to the action of their corporations may be curtailed if not stopped.”

The Securities Acts of 1933–1934, passed by the U.S. Congress in the aftermath of the stock market crash, though aimed primarily at prohibiting fraud and market manipulation, also targeted insider trading.

As of 2004, at least ninety-three countries, the vast majority of nations that possess organized securities markets, had laws regulating insider trading

Several factors explain the rapid emergence of such regulation, particularly during the last twenty years: namely, the growth of the securities industry worldwide, pressures to make national securities markets look more attractive in the eyes of outside investors, and the pressure the SEC exerted on foreign lawmakers and regulators to increase the effectiveness of domestic enforcement by identifying and punishing offenders and their associates operating outside the United States.

Famous examples of insider trading include transacting on the advance knowledge of a company’s discovery of a rich mineral ore (Securities and Exchange Commission v. Texas Gulf Sulphur Co.), on a forthcoming cut in dividends by the board of directors (Cady, Roberts & Co.), and on an unanticipated increase in corporate expenses (Diamond v. Oreamuno).

A controversial case is that of abstaining from trading on the basis of inside information (Fried 2003).

There is little disagreement that insider trading makes securities markets more efficient by moving the current market price closer to the future postdisclosure price. In other words, insiders’ transactions, even if they are anonymous, signal future price trends to others and make the current stock price reflect relevant information sooner.

Accurately priced stocks give valuable signals to investors and ensure more efficient allocation of capital.

The controversial question is whether insider trading is more or less effective than public disclosure.

Insider trading’s advantage is that it introduces individual profit motives, does not directly reveal sensitive intercorporate information, and mitigates the management’s aversion to disclosing negative information (

Probably the most controversial issue in the economic analysis of insider trading is whether it is an efficient way to pay managers for their entrepreneurial services to the corporation. Some researchers believe that insider trading gives managers a monetary incentive to innovate, search for, and produce valuable information, as well as to take risks that increase the firm’s value (Carlton and Fischel 1983; Manne 1966).

Another economic argument for insider trading is that it provides efficient compensation to holders of large blocks of stock

A common contention is that the presence of insider trading decreases public confidence in, and deters many potential investors from, equity markets, making them less liquid (Loss 1970).

Empirical research generally supports skepticism that regulation of insider trading has been effective in either the United States or internationally, as evidenced by the persistent trading profits of insiders, behavior of stock prices around corporate announcements, and relatively infrequent prosecution rates (Bhattacharya and Daouk 2002; Bris 2005).

Despite numerous and extensive debates, economists and legal scholars do not agree on a desirable government policy toward insider trading. On the one hand, absolute information parity is clearly infeasible, and information-based trading generally increases the pricing efficiency of financial markets. Information, after all, is a scarce economic good that is costly to produce or acquire, and its subsequent use and dissemination are difficult to control. On the other hand, insider trading, as opposed to other forms of informed trading, may produce unintended adverse consequences for the functioning of the corporate enterprise, the market-wide system of publicly mandated disclosure, or the market for information.

A bill to ban bump-stocks was submitted to the US Senate on Wednesday by California Democrat Dianne Feinstein.

He said there was growing bipartisan consensus and that his office had been "flooded" with calls from other lawmakers interested in the bill.

"I think we are on the verge of a breakthrough when it comes to sensible gun policy," he told reporters.

Bump-fire stocks, also called bump-stocks and slide-fire adapters, allow semi-automatic rifles to fire at a high rate, similar to a machine gun.But they can be obtained without the extensive background checks required of automatic weapons.

she added that she did not understand why anyone needed to own an assault rifle.

There is some support among survivors for banning bump-stocks but there is also a realisation that doing so does not amount to serious gun control.And all the while the killing continues. Fifty-nine people died here on Sunday.By Thursday afternoon at least 87 more people had been shot and killed across the US, according to the Gun Violence Archive. That's a Las Vegas massacre every three days.

Bump-stocks typically cost less than $200 (£150) and allow nearly 100 high-velocity bullets to be fired in just seven seconds, according to one company advert.

But neither automaker has convinced Wall Street that it has shed its boom-or-bust reputation tied to broader economic cycles, or is at the forefront of new technology being developed for self-driving vehicles and electric cars.

“It’s almost like Tesla is positioned in people’s minds as an energy storage company that happens to put most of its batteries on wheels,” said Andrew Stewart, chief investment officer at Exchange Capital Management, an investment firm in Ann Arbor, Mich.

While Tesla may enjoy the favor of investors, it still faces some daunting hurdles to reach its goals.

Avoid public transportation when possible, limit nonessential travel, work from home and skip social gatherings. Don’t go to crowded restaurants or busy gyms. You can go outside, as long as you avoid being in close contact with people.

If you develop a high fever, shortness of breath or another, more serious symptom, call your doctor. (Testing for coronavirus is still inconsistent — there are not enough kits, and it’s dangerous to go into a doctor’s office and risk infecting others.) Then, check the Centers for Disease Control and Prevention website and your local health department for advice about how and where to be tested.

Wash your hands, wash your hands, wash your hands. That splash-under-water flick won’t cut it anymore.

Also, clean “high-touch” surfaces, like phones, tablets and handles. Apple recommends using 70 percent isopropyl alcohol, wiping gently. “Don’t use bleach,” the company said.

To disinfect any surface, the C.D.C. recommends wearing disposable gloves and washing hands thoroughly immediately after removing the gloves. Most household disinfectants registered by the Environmental Protection Agency will work.

There’s a lot of information flying around, and knowing what is going on will go a long way toward protecting your family.

Right now, there’s no reason for parents to worry, the experts say; coronavirus cases in children have been very rare. The flu vaccine is a must, as vaccinating children is good protection for older people. And take the same precautions you would during a normal flu season: Encourage frequent hand-washing, move away from people who appear sick and get the flu shot.

Unless you are already infected, face masks won’t helpFace masks have become a symbol of coronavirus, but stockpiling them might do more harm than good. First, they don’t do much to protect you. Most surgical masks are too loose to prevent inhalation of the virus. (Masks can help prevent the spread of a virus if you are infected. The most effective are the so-called N95 masks, which block 95 percent of very small particles.)Second, health care workers and those caring for sick people are on the front lines. Last month, the surgeon general urged the public to stop stockpiling masks, warning that it might limit the amount of resources available to doctors, nurses and emergency professionals.

Stock up on a 30-day supply of groceries, household supplies and prescriptions, just in case.That doesn’t mean you’ll need to eat only beans and ramen. Here are tips to stock a pantry with shelf-stable and tasty foods

No. The first testing in humans of an experimental vaccine began in mid-March. Such rapid development of a potential vaccine is unprecedented, but even if it is proved safe and effective, it probably will not be available for 12 to18 months.

If you’re sick and you think you’ve been exposed to the new coronavirus, the C.D.C. recommends that you call your healthcare provider and explain your symptoms and fears. They will decide if you need to be tested. Keep in mind that there’s a chance — because of a lack of testing kits or because you’re asymptomatic, for instance — you won’t be able to get tested.

That’s not a good idea. Even if you’re retired, having a balanced portfolio of stocks and bonds so that your money keeps up with inflation, or even grows, makes sense. But retirees may want to think about having enough cash set aside for a year’s worth of living expenses and big payments needed over the next five years.

Irrational stockpiling can also lead to price gouging, says Steven Taylor, a professor and clinical psychologist at the University of British Columbia, and the author of The Psychology of Pandemics. “If the price of a roll of toilet paper is tripled, that’s seen as a scarcer commodity to acquire, which can lead to anxiety,” he says.

Panic buying, Taylor says, is fuelled by anxiety, and a willingness to go to lengths to quell those fears: like queueing for hours or buying way more than you need. We’ve seen this before throughout history. Back in 1962 during the Cuban missile crisis, when nuclear war seemed imminent, American families filled their basements with enough canned goods and bottled water to survive an atomic blast.

“But for many people, hand-washing seems to be too ordinary. This is a dramatic event, therefore a dramatic response is required, so that leads to people throwing money at things in hopes of protecting themselves.”

“Panic is a subjective, emotional state, and mostly what we can observe is the behaviour,” says Oppenheim. “Maybe someone reads articles or a couple of tweets about supply chain disruptions in China and mask shortages in Hong Kong, and then makes a very reasoned decision to stock up on masks just in case. All we can infer from the purchasing is the timing, so it could look panicky even if it's well thought through.”

The researchers used facial-recognition software to map out specific points on a person’s face, then applied machine-learning algorithms to the facial points to obtain empirical measures for three key face impressions—trustworthiness, dominance and attractiveness.  

They examined the association of these impressions with the accuracy of analysts’ quarterly forecasts, drawn from the Institutional Brokers Estimate System

Analyst accuracy was determined by comparing each analyst’s prediction error—the difference between their prediction and the actual earnings—with that of all analysts for that same company and quarter.

For an average stock valued at $100, Prof. Teoh says, analysts ranked as looking most trustworthy were 25 cents more accurate in earnings-per-share forecasts than the analysts who were ranked as looking least trustworthy

Similarly, most-dominant-looking analysts were 52 cents more accurate in their EPS forecast than least-dominant-looking analysts.

The relation between a dominant face and accuracy, meanwhile, was significant before and after the regulation was enacted, the analysts say. This suggests that dominant-looking male analysts are always able to obtain information,

While forecasts of female analysts regardless of facial characteristics were on average more accurate than those of their male counterparts, the forecasts of women who were seen as more-dominant-looking were significantly less accurate than their male counterparts.  

Says Prof. Todorov: “Women who look dominant are more likely to be viewed negatively because it goes against the cultural stereotype.

There was no guarantee that the economy’s downward spiral wouldn’t continue, as frightened businesses and consumers curbed spending and, in the process, increased unemployment. The CEA presents a series of charts comparing the 2008-2009 slump with the Great Depression. In every instance, the 2008-2009 downturn was as bad as — or worse than — the first year of the Great Depression: employment loss, drop in global trade and change in households’ net worth.

The starkest of these was the fall in households’ net worth (people’s assets, such as homes and stock, minus their debts, such as mortgages and credit-card balances). It dropped by $13 trillion, about a fifth, from its high point in 2007 to its trough in 2009. This decline, the CEA notes, “was far larger than the reduction [adjusted for inflation] . . . at the onset of the Great Depression.”

What separates then from now is that, after 18 months or so, spending turned up in 2009 while it continued declining in the 1930s. This difference reflected, at least in part, the aggressive policies adopted to blunt the downturn. The Fed cut short-term interest rates to zero and provided other avenues of cheap credit; the Troubled Asset Relief Program (TARP), enacted in the final months of the Bush administration, poured money into major banks to reassure the public of their solvency.

Still, Obama’s role was crucial. Against opposition, he decided to rescue General Motors and Chrysler. Throwing them onto the tender mercies of the market would have been a huge blow to the industrial Midwest and to national psychology. He also championed a sizable budget “stimulus.” Advertised originally as $787 billion, it was actually $2.6 trillion over four years when the initial program was combined with later proposals and so-called “automatic stabilizers” are included, the CEA says

More generally, Obama projected reason and calm when much of the nation was fearful and frazzled. Of course, he didn’t single-handedly restore confidence, but he made a big contribution

the recovery from the Great Recession is mostly complete. This seems plausible. Since the low point, employment is up 15.6 million jobs. Rising home and stock prices have boosted inflation-adjusted household net worth by 16 percent. Gross domestic product — the economy — is nearly 12 percent higher than before the financial crisis

his impact is underestimated. Suppose we had had a second Great Depression with, say, peak unemployment of 15 percent. Almost all our problems — from poverty to political polarization — would have worsened. Obama’s influence must be considered in this context. When historians do, they may be more impressed.

US equities all but shrugged off the emergency measures — the Dow Jones Industrial Average shed 2,700 points at the open, and the S&P 500 slipped 8%, hitting a circuit breaker that halted trading for 15 minutes. When it resumed, stocks continued to slump. 

In addition to facilitating more expansionary fiscal policy, "central banks will also have to ensure that credit can continue to flow to companies and households," he said. 

The S&P 500 closed Tuesday at the highest level in nearly three months. The Nasdaq has spiked 40% since March 23, fueled by the resilience of Big Tech, and is now within striking distance of all-time highs.

unprecedented stimulus from the Federal Reserve, and investors not wanting to miss out on monster returns once the economy recovers.

That means that while Main Street is still grappling with coronavirus, racial crisis and the impacts of both, Wall Street is doing just fine. Fed policy has allowed markets to decouple from economic reality.

Although the unrest was initially sparked by the killing of George Floyd, the continued broader economic discontent is an undercurrent.

that the American dream is not alive and well.

The divide between rich and poor was worsened by the Great Recession and its aftermath. The US government's response relied heavily on easy money from the Fed, rather than the kind of fiscal stimulus that can help lower-income Americans.

First, the coronavirus pandemic disproportionately hit poorer Americans, many of whom work in the hospitality and service sectors rocked by the pandemic. Nearly 40% of low-income workers lost their jobs in March alone, according to the Fed.

The Fed said it will support American households and businesses, but it acknowledged "our economy will face severe disruptions."

The social distancing policies imposed to fight the coronavirus crisis have brought the American economy to its knees. Malls are empty. Factories have been shut down. Casinos have gone dark. And countless flights have been suspended. The economic toll is massive.

Aided by extremely low interest rates, US businesses have borrowed heavily over the past decade to hire workers, build factories, research new products and pay for share buybacks. That debt now looks especially treacherous as the economy goes into a tailspin.

What investors think the public is thinking is therefore crucial.

Predicting the emotional reactions of the entire world population to coronavirus would be a bit easier if investors could turn to the market effects of previous pandemics for guidance. But history provides few indications of what might happen to the economy if the coronavirus and COVID-19, the disease it causes, continue to spread.

He shorted oil and, as a proxy for oil, the Canadian dollar. (That is, he bet against both.) Finally, he shorted U.S. equities.

Last October, he listened to an audiobook by the Hardcore History podcaster, Dan Carlin, called “The End Is Always Near.” “So I had pandemics and plagues in my head,” the Australian said. “In December, I started seeing the first articles about this wet-market thing going on in China, and then in early January there was a lot on Twitter about the shit in Wuhan.” He was in Switzerland on a ski holiday with his family, and he bought all the surgical masks and gloves he could find.

The Australian, who spoke on the condition that his name not be used, is a voluble redhead just shy of fifty.

The problem, he said, was that, perhaps more now than ever, Americans lack what he called “social cohesion,” and thus the collective will, to commit to such a path.

perhaps the government should reward each citizen who strictly observed the quarantine with fifty thousand dollars. “The virus would burn out after four weeks,” he said. The U.S. had all the food and water and fuel it would need to survive months, if not years, of total isolation from the world. “If you don’t trade with China, they’re screwed,” he said. “You’d win this war. Let the rest of the world burn.

I’d been eavesdropping for a week on the friend’s WhatsApp conversation with dozens of his acquaintances and colleagues (he called them the Fokkers, for an acronym involving his name), all of them men, most of them expensively educated financial professionals, some of them very rich, a few with connections in high places. The general disposition of the participants, with exceptions, was the opposite of the Australian’s

they expressed the belief, with a conviction that occasionally tipped into stridency or mockery, that the media, the modellers, and the markets were overreacting to the threat of the coronavirus

They mocked Jim Cramer, the host of the market program “Mad Money,” on CNBC, for predicting a great depression and wondering if anyone would ever board an airplane again. Anecdotes, hyperbole: the talking chuckleheads sowing and selling fear.

it’s hard for a coldhearted capitalist to know just how cold the heart must go. Public-health professionals make a cost-benefit calculation, too, with different weightings.

This brutal shock is attacking a body that was already vulnerable. In the event of a global depression, a postmortem might identify COVID-19 as the cause of death, but, as with so many of the virus’s victims, the economy had a preëxisting condition—debt, instead of pulmonary disease.

“It’s as if the virus is almost beside the point,” a trader I know told me. “This was all set up to happen.”

the “smart money,” like the giant asset-management firms Blackstone and the Carlyle Group, was now telling companies to draw down their bank lines, and borrow as much as they could, in case the lenders went out of business or found ways to say no. Sure enough, by March’s end, corporations had reportedly tapped a record two hundred and eight billion dollars from their revolving-credit lines

In a world where we talk, suddenly, of trillions, two hundred billion may not seem like a lot, but it is: in 2007, the subprime-mortgage lender Countrywide Financial, in drawing down “just” $11.5 billion, helped bring the system to its knees.

It is hard to navigate out of the debt trap. Creditors can forgive debtors, but that process, especially at this level, would be almost impossibly laborious and fraught. Meanwhile, defaults flood the market with collateral, be it buildings, stocks, or aircraft. The price of that collateral collapses—haircuts for baldheads—leading to more defaults.

In New York State, where nearly half a million new claims had been filed in two weeks, the unemployment-insurance trust began to teeter toward insolvency. Come summer, there would be no money left to pay unemployment benefits.

As April arrived, businesses, large and small, decided not to pay rent, either because they didn’t have the cash on hand or because, with a recession looming, they wanted to preserve what cash they had. Furloughed or fired employees, meanwhile, faced similar decisions

On March 20th, Goldman Sachs spooked the world, by predicting a twenty-four-per-cent decline in G.D.P. in the second quarter, a falloff in activity that seemed at once both unthinkable and inevitable. Subsequent predictions grew even more disma

President Joe Biden is expected to sign the $1.9 trillion coronavirus relief package Thursday afternoon. The plan will send direct payments of up to $1,400 to most Americans, and will also put nearly $20 billion into Covid-19 vaccinations and $350 billion into state, local and tribal relief.

The economic reopening, coupled with additional fiscal stimulus, accelerated the rotation into more cyclical sectors, such as energy. The S&P 500 energy sector has been the biggest winner this year, up 40% so far.

In Asia, Hong Kong’s Hang Seng Index rallied 1.7%, as did Shanghai’s composite index, with Chinese banks among the sharpest risers.

Fears about joblessness on this scale could jolt markets again. Investors have priced in a recession by now, but may still be processing the size of the hole the coronavirus has blown into the global economy, Jeffrey Kleintop, chief global investment strategist at Charles Schwab, told me.

The Dow Jones Industrial Average is now down 35% from its all-time high in mid-February, erasing all its gains since President Donald Trump's inauguration. Between January 20 and last Thursday, $27 trillion was wiped off global stocks, according to Bank of America.

"The market is running with the assumption that while this tumult will be the deepest recession in modern-day financial history, it will also be the shortest," Innes wrote.

We haven’t seen this combination of economic anxiety and high inflation before. Economists are weighing the risks of a U.S. recession, and companies in many industries are worried that their businesses are slowing.

Fast growing start-ups in particular need the faith of investors, customers and employees to keep the momentum going.

If within a few months, stock prices bounce back, investors start putting money into start-ups again and the market for initial public offerings unfreezes, the industry might be fine. But if investors stay skittish for many months or years, that could lead to a major shake-up.