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Consolidated Audit Trail System

Complete message thread from old site

Martin Koopman
5 August 2010 3:55pm

Hello,

I thought it appropriate to post this message on this forum which is the most visited and bring to your attention the Consolidated Audit Trail System in the US.

The SEC is requesting industry input into the proposed Consolidated Audit Trail System. The Consolidated Audit Trail System is intended to enable regulators to track information related to trading orders received and executed across the securities markets.

Details of the Consolidated Audit Trail System including how to make an online submission are at: http://www.sec.gov/news/press/2010/2010-86.htm

I wanted to encourage member firms and individuals of the FIX community to make a submission. My personal submission, which you can read at the above link, recommends that FIX is used as the data format for the Consolidated Audit Trail System.

Thank you.

Martin Koopman

Courtney Doyle McGuinn
6 August 2010 6:58pm

Thanks Martin,

I also wanted to share with everyone the following response I submitted on behalf of FPL: http://www.sec.gov/comments/s7-11-10/s71110-32.pdf. The main message we want to get across is that the format of the reporting data should be based on the FIX Protocol. This is consistent with FPL's goal to continually educate and engage the regulatory bodies across the globe. I'd also encourage others to respond to this proposal - please note that the submission deadline is Monday.

Regards,
Courtney

> Hello,
>
> I thought it appropriate to post this message on this forum which is the most visited and bring to your attention the Consolidated Audit Trail System in the US.
>
> The SEC is requesting industry input into the proposed Consolidated Audit Trail System. The Consolidated Audit Trail System is intended to enable regulators to track information related to trading orders received and executed across the securities markets.
>
> Details of the Consolidated Audit Trail System including how to make an online submission are at: http://www.sec.gov/news/press/2010/2010-86.htm
>
> I wanted to encourage member firms and individuals of the FIX community to make a submission. My personal submission, which you can read at the above link, recommends that FIX is used as the data format for the Consolidated Audit Trail System.
>
> Thank you.
>
> Martin Koopman

FIX Trading Community
7 August 2010 3:15pm

[ original email was from John Harris - john.harris@bondmart.com ]
I must respectfully disagree with my friends Courtney and Martin that FPL should support or encourage this initiative in any respect whatsoever. Such support or encouragement is tantamount - unwittingly in Courtney's and Martin's cases - to proposals from slaves to their masters for economically obtaining additional and more vicious guard dogs, the better to prevent escape. Allow me to share here excerpts from a brief essay I wrote for TabbForum on a related SEC proposal - that concerning the Large Trader Reporting System - because the same principles apply. You will find the complete essay at http://www.tabbforum.com/opinions/large-trader-reporting-system-is-insulting-unconstitutional. (Free registration is required for access.)

Pertinent excerpts:

"If implemented as proposed, this system would allow the Commission to obtain personally-identifiable data on the orders and trade data of firms deemed "large" by the Commission, on the basis of arbitrary thresholds it determines, without warrant or compensation for the search and taking of the data...

"As proposed, this system violates the fourth and fifth amendments of the U.S. Constitution.

"For persons or firms deemed large traders by the Commission, the rule conditions participation in national securities markets on a priori surrender of their fourth amendment rights to be secure against unreasonable searches and seizures. Order and trade data is highly-sensitive property of its owners. Absent a valid search warrant based on probable cause and supported by oath or affirmation as required by law, the Commission has no more authority under the law to obtain and search such property than any other agency of government would have to search a person's home or other property without a warrant.

"The Commission has posited no exigent circumstances that would justify a warrantless search or seizure of this valuable, proprietary data. Surely if such exigent circumstances existed, the Commission would say so. In any event, such circumstances could not possibly implicate simultaneously the hundreds or thousands of persons or firms whose rights would be summarily abrogated by the Commission's proposal, each of whom is entitled to a presumption of innocence under the law. This rule allows criminal fishing expeditions by government agents, in clear violation of the constitution.

"If put into effect, the proposed rule amounts to a taking of private property for public use without just compensation, in contravention of the fifth amendment. If the Commission requires additional market data in order to fulfill its mission, then it must purchase that data from willing sellers on the open market. This rule would deny persons or firms access to national securities markets unless they agree to a taking by government agents. The proposal is tantamount to a government agent telling the owner of beachfront property, 'We want to use your land for a naval shipyard, without actually purchasing or leasing it from you. You will not be able to use any facility owned or regulated by the government unless and until you comply with our demand.'

"This proposal is unconstitutional and an affront to free people and markets. If the Commission possesses evidence of violations of the securities laws of the United States, it has all the authority and resources it needs to investigate such purported violations and to prosecute as necessary. In America, we do not allow government agents to search our persons, property, papers, or effects so that they can better educate themselves on how we live, work, and interact with others. Absent a specific and credible allegation of unlawful activity, the Commission has no authority or legal basis to view or parse the data it seeks through this proposed rule.

"If the Commission is granted the power it seeks, its employees will be able to reverse-engineer valuable, proprietary trading algorithms, which they can then employ for their own profit. Arguably, by virtue of this proposal, these employees will come to possess an information advantage superior to that of any other trader on earth. Perversely, once armed with this information, they could then shape their own order flow and trading activities to avoid the prying eyes and sticky fingers of other Commission employees."

(End of excerpts)

My friends, if you do not wake up to and firmly oppose the dangers of government surveillance of private citizens and activities, your children and mine are in for an ugly future. Markets are "public" only in the sense that they are open to everyone. Such openness does not invite or justify proposals such as these from supposed, government servants.

Best,
John

> Thanks Martin,
>
> I also wanted to share with everyone the following response I submitted on behalf of FPL: http://www.sec.gov/comments/s7-11-10/s71110-32.pdf. The main message we want to get across is that the format of the reporting data should be based on the FIX Protocol. This is consistent with FPL's goal to continually educate and engage the regulatory bodies across the globe. I'd also encourage others to respond to this proposal - please note that the submission deadline is Monday.
>
> Regards,
> Courtney
>
>
> > Hello,
> >
> > I thought it appropriate to post this message on this forum which is the most visited and bring to your attention the Consolidated Audit Trail System in the US.
> >
> > The SEC is requesting industry input into the proposed Consolidated Audit Trail System. The Consolidated Audit Trail System is intended to enable regulators to track information related to trading orders received and executed across the securities markets.
> >
> > Details of the Consolidated Audit Trail System including how to make an online submission are at: http://www.sec.gov/news/press/2010/2010-86.htm
> >
> > I wanted to encourage member firms and individuals of the FIX community to make a submission. My personal submission, which you can read at the above link, recommends that FIX is used as the data format for the Consolidated Audit Trail System.
> >
> > Thank you.
> >
> > Martin Koopman

John Cameron
8 August 2010 12:52am

There are two battles to be fought here and I think it is important not to mix them up.

The first battle relates to the extent of regulation of our industry. I sympathize with many of John Harris' fears, eloquently expressed below.
The danger is that we move to a grossly over-regulated environment as a poorly considered (and largely politically motivated) knee jerk reaction to the recent financial crisis.

However, I do believe that some regulation is appropriate and the second battle relates to the format of the data gathered for the purposes of that regulation. It does not make sense for the format of that data to be anything other than FIX. Anything else will constitute a major unnecessary cost to the industry. Therefore I strongly support FPL's and Martin's submissions.

These are two important battles which BOTH need to be fought. If the industry does not engage effectively in these battles, then it deserves whatever ends up being imposed on it.

John

> I must respectfully disagree with my friends Courtney and Martin that FPL should support or encourage this initiative in any respect whatsoever. Such support or encouragement is tantamount - unwittingly in Courtney's and Martin's cases - to proposals from slaves to their masters for economically obtaining additional and more vicious guard dogs, the better to prevent escape. Allow me to share here excerpts from a brief essay I wrote for TabbForum on a related SEC proposal - that concerning the Large Trader Reporting System - because the same principles apply. You will find the complete essay at http://www.tabbforum.com/opinions/large-trader-reporting-system-is-insulting-unconstitutional. (Free registration is required for access.)
>
> Pertinent excerpts:
>
> "If implemented as proposed, this system would allow the Commission to obtain personally-identifiable data on the orders and trade data of firms deemed "large" by the Commission, on the basis of arbitrary thresholds it determines, without warrant or compensation for the search and taking of the data...
>
> "As proposed, this system violates the fourth and fifth amendments of the U.S. Constitution.
>
> "For persons or firms deemed large traders by the Commission, the rule conditions participation in national securities markets on a priori surrender of their fourth amendment rights to be secure against unreasonable searches and seizures. Order and trade data is highly-sensitive property of its owners. Absent a valid search warrant based on probable cause and supported by oath or affirmation as required by law, the Commission has no more authority under the law to obtain and search such property than any other agency of government would have to search a person's home or other property without a warrant.
>
> "The Commission has posited no exigent circumstances that would justify a warrantless search or seizure of this valuable, proprietary data. Surely if such exigent circumstances existed, the Commission would say so. In any event, such circumstances could not possibly implicate simultaneously the hundreds or thousands of persons or firms whose rights would be summarily abrogated by the Commission's proposal, each of whom is entitled to a presumption of innocence under the law. This rule allows criminal fishing expeditions by government agents, in clear violation of the constitution.
>
> "If put into effect, the proposed rule amounts to a taking of private property for public use without just compensation, in contravention of the fifth amendment. If the Commission requires additional market data in order to fulfill its mission, then it must purchase that data from willing sellers on the open market. This rule would deny persons or firms access to national securities markets unless they agree to a taking by government agents. The proposal is tantamount to a government agent telling the owner of beachfront property, 'We want to use your land for a naval shipyard, without actually purchasing or leasing it from you. You will not be able to use any facility owned or regulated by the government unless and until you comply with our demand.'
>
> "This proposal is unconstitutional and an affront to free people and markets. If the Commission possesses evidence of violations of the securities laws of the United States, it has all the authority and resources it needs to investigate such purported violations and to prosecute as necessary. In America, we do not allow government agents to search our persons, property, papers, or effects so that they can better educate themselves on how we live, work, and interact with others. Absent a specific and credible allegation of unlawful activity, the Commission has no authority or legal basis to view or parse the data it seeks through this proposed rule.
>
> "If the Commission is granted the power it seeks, its employees will be able to reverse-engineer valuable, proprietary trading algorithms, which they can then employ for their own profit. Arguably, by virtue of this proposal, these employees will come to possess an information advantage superior to that of any other trader on earth. Perversely, once armed with this information, they could then shape their own order flow and trading activities to avoid the prying eyes and sticky fingers of other Commission employees."
>
> (End of excerpts)
>
> My friends, if you do not wake up to and firmly oppose the dangers of government surveillance of private citizens and activities, your children and mine are in for an ugly future. Markets are "public" only in the sense that they are open to everyone. Such openness does not invite or justify proposals such as these from supposed, government servants.
>
> Best,
> John
>
>
>
>
>
> > Thanks Martin,
> >
> > I also wanted to share with everyone the following response I submitted on behalf of FPL: http://www.sec.gov/comments/s7-11-10/s71110-32.pdf. The main message we want to get across is that the format of the reporting data should be based on the FIX Protocol. This is consistent with FPL's goal to continually educate and engage the regulatory bodies across the globe. I'd also encourage others to respond to this proposal - please note that the submission deadline is Monday.
> >
> > Regards,
> > Courtney
> >
> >
> > > Hello,
> > >
> > > I thought it appropriate to post this message on this forum which is the most visited and bring to your attention the Consolidated Audit Trail System in the US.
> > >
> > > The SEC is requesting industry input into the proposed Consolidated Audit Trail System. The Consolidated Audit Trail System is intended to enable regulators to track information related to trading orders received and executed across the securities markets.
> > >
> > > Details of the Consolidated Audit Trail System including how to make an online submission are at: http://www.sec.gov/news/press/2010/2010-86.htm
> > >
> > > I wanted to encourage member firms and individuals of the FIX community to make a submission. My personal submission, which you can read at the above link, recommends that FIX is used as the data format for the Consolidated Audit Trail System.
> > >
> > > Thank you.
> > >
> > > Martin Koopman

Mahesh Kumaraguru
8 August 2010 2:44pm

Hi John Cameron,

I find your seperation of legal and technical aspects of the SEC's proposed "Consolidated Audit Trail System" beautiful (like FIXProtocol's seperation of Session and Application layers :-)

I fully agree with Martin, Courtney and you that FIXProtocol is ideally suited to be the most widely used data format for electronic stock trading applications.

Hi John Harris,

Given the seperation of "Consolidated Audit Trail System" into seperate legal and technical aspects, would you support the use of FIXProtocol as data format for CATS?

Regards,
K. Mahesh

>
> There are two battles to be fought here and I think it is important not to mix them up.
>
> The first battle relates to the extent of regulation of our industry. I sympathize with many of John Harris' fears, eloquently expressed below.
> The danger is that we move to a grossly over-regulated environment as a poorly considered (and largely politically motivated) knee jerk reaction to the recent financial crisis.
>
> However, I do believe that some regulation is appropriate and the second battle relates to the format of the data gathered for the purposes of that regulation. It does not make sense for the format of that data to be anything other than FIX. Anything else will constitute a major unnecessary cost to the industry. Therefore I strongly support FPL's and Martin's submissions.
>
> These are two important battles which BOTH need to be fought. If the industry does not engage effectively in these battles, then it deserves whatever ends up being imposed on it.
>
> John
>
> > I must respectfully disagree with my friends Courtney and Martin that FPL should support or encourage this initiative in any respect whatsoever. Such support or encouragement is tantamount - unwittingly in Courtney's and Martin's cases - to proposals from slaves to their masters for economically obtaining additional and more vicious guard dogs, the better to prevent escape. Allow me to share here excerpts from a brief essay I wrote for TabbForum on a related SEC proposal - that concerning the Large Trader Reporting System - because the same principles apply. You will find the complete essay at http://www.tabbforum.com/opinions/large-trader-reporting-system-is-insulting-unconstitutional. (Free registration is required for access.)
> >
> > Pertinent excerpts:
> >
> > "If implemented as proposed, this system would allow the Commission to obtain personally-identifiable data on the orders and trade data of firms deemed "large" by the Commission, on the basis of arbitrary thresholds it determines, without warrant or compensation for the search and taking of the data...
> >
> > "As proposed, this system violates the fourth and fifth amendments of the U.S. Constitution.
> >
> > "For persons or firms deemed large traders by the Commission, the rule conditions participation in national securities markets on a priori surrender of their fourth amendment rights to be secure against unreasonable searches and seizures. Order and trade data is highly-sensitive property of its owners. Absent a valid search warrant based on probable cause and supported by oath or affirmation as required by law, the Commission has no more authority under the law to obtain and search such property than any other agency of government would have to search a person's home or other property without a warrant.
> >
> > "The Commission has posited no exigent circumstances that would justify a warrantless search or seizure of this valuable, proprietary data. Surely if such exigent circumstances existed, the Commission would say so. In any event, such circumstances could not possibly implicate simultaneously the hundreds or thousands of persons or firms whose rights would be summarily abrogated by the Commission's proposal, each of whom is entitled to a presumption of innocence under the law. This rule allows criminal fishing expeditions by government agents, in clear violation of the constitution.
> >
> > "If put into effect, the proposed rule amounts to a taking of private property for public use without just compensation, in contravention of the fifth amendment. If the Commission requires additional market data in order to fulfill its mission, then it must purchase that data from willing sellers on the open market. This rule would deny persons or firms access to national securities markets unless they agree to a taking by government agents. The proposal is tantamount to a government agent telling the owner of beachfront property, 'We want to use your land for a naval shipyard, without actually purchasing or leasing it from you. You will not be able to use any facility owned or regulated by the government unless and until you comply with our demand.'
> >
> > "This proposal is unconstitutional and an affront to free people and markets. If the Commission possesses evidence of violations of the securities laws of the United States, it has all the authority and resources it needs to investigate such purported violations and to prosecute as necessary. In America, we do not allow government agents to search our persons, property, papers, or effects so that they can better educate themselves on how we live, work, and interact with others. Absent a specific and credible allegation of unlawful activity, the Commission has no authority or legal basis to view or parse the data it seeks through this proposed rule.
> >
> > "If the Commission is granted the power it seeks, its employees will be able to reverse-engineer valuable, proprietary trading algorithms, which they can then employ for their own profit. Arguably, by virtue of this proposal, these employees will come to possess an information advantage superior to that of any other trader on earth. Perversely, once armed with this information, they could then shape their own order flow and trading activities to avoid the prying eyes and sticky fingers of other Commission employees."
> >
> > (End of excerpts)
> >
> > My friends, if you do not wake up to and firmly oppose the dangers of government surveillance of private citizens and activities, your children and mine are in for an ugly future. Markets are "public" only in the sense that they are open to everyone. Such openness does not invite or justify proposals such as these from supposed, government servants.
> >
> > Best,
> > John
> >
> >
> >
> >
> >
> > > Thanks Martin,
> > >
> > > I also wanted to share with everyone the following response I submitted on behalf of FPL: http://www.sec.gov/comments/s7-11-10/s71110-32.pdf. The main message we want to get across is that the format of the reporting data should be based on the FIX Protocol. This is consistent with FPL's goal to continually educate and engage the regulatory bodies across the globe. I'd also encourage others to respond to this proposal - please note that the submission deadline is Monday.
> > >
> > > Regards,
> > > Courtney
> > >
> > >
> > > > Hello,
> > > >
> > > > I thought it appropriate to post this message on this forum which is the most visited and bring to your attention the Consolidated Audit Trail System in the US.
> > > >
> > > > The SEC is requesting industry input into the proposed Consolidated Audit Trail System. The Consolidated Audit Trail System is intended to enable regulators to track information related to trading orders received and executed across the securities markets.
> > > >
> > > > Details of the Consolidated Audit Trail System including how to make an online submission are at: http://www.sec.gov/news/press/2010/2010-86.htm
> > > >
> > > > I wanted to encourage member firms and individuals of the FIX community to make a submission. My personal submission, which you can read at the above link, recommends that FIX is used as the data format for the Consolidated Audit Trail System.
> > > >
> > > > Thank you.
> > > >
> > > > Martin Koopman

FIX Trading Community
8 August 2010 3:34pm

[ original email was from John Harris - john.harris@bondmart.com ]
Kay,

To answer your question, allow me to quote from the first of 203 pages of the proposed rule:

"[T]he Commission preliminarily believes that existing audit trails are limited in their scope and effectiveness in varying ways"

'Preliminarily believes?' What the hell does that mean? These ineffectual sycophants and power-mongers promulgate 203 pages of self-gratifying, economic speculation (acknowledging at least tangentially that this proposal will put firms out of business) on the basis of preliminary belief ascribed anthropomorphically to a government commission and we're supposed to jump through hoops for this like good, little doggies?

And who designed the 'existing audit trails' that are so limited in scope and effectiveness? Right - the same gang that couldn't shoot straight.

For FPL members or volunteers to support this tyrannical exercise in any way, shape, or form is self-destructive. It comes from the same, repugnant mindset that preaches "If rape is inevitable, enjoy it."

No. This is wrong. Oppose it.

> Hi John Cameron,
>
> I find your seperation of legal and technical aspects of the SEC's proposed "Consolidated Audit Trail System" beautiful (like FIXProtocol's seperation of Session and Application layers :-)
>
> I fully agree with Martin, Courtney and you that FIXProtocol is ideally suited to be the most widely used data format for electronic stock trading applications.
>
> Hi John Harris,
>
> Given the seperation of "Consolidated Audit Trail System" into seperate legal and technical aspects, would you support the use of FIXProtocol as data format for CATS?
>
> Regards,
> K. Mahesh
>
> >
> > There are two battles to be fought here and I think it is important not to mix them up.
> >
> > The first battle relates to the extent of regulation of our industry. I sympathize with many of John Harris' fears, eloquently expressed below.
> > The danger is that we move to a grossly over-regulated environment as a poorly considered (and largely politically motivated) knee jerk reaction to the recent financial crisis.
> >
> > However, I do believe that some regulation is appropriate and the second battle relates to the format of the data gathered for the purposes of that regulation. It does not make sense for the format of that data to be anything other than FIX. Anything else will constitute a major unnecessary cost to the industry. Therefore I strongly support FPL's and Martin's submissions.
> >
> > These are two important battles which BOTH need to be fought. If the industry does not engage effectively in these battles, then it deserves whatever ends up being imposed on it.
> >
> > John
> >
> > > I must respectfully disagree with my friends Courtney and Martin that FPL should support or encourage this initiative in any respect whatsoever. Such support or encouragement is tantamount - unwittingly in Courtney's and Martin's cases - to proposals from slaves to their masters for economically obtaining additional and more vicious guard dogs, the better to prevent escape. Allow me to share here excerpts from a brief essay I wrote for TabbForum on a related SEC proposal - that concerning the Large Trader Reporting System - because the same principles apply. You will find the complete essay at http://www.tabbforum.com/opinions/large-trader-reporting-system-is-insulting-unconstitutional. (Free registration is required for access.)
> > >
> > > Pertinent excerpts:
> > >
> > > "If implemented as proposed, this system would allow the Commission to obtain personally-identifiable data on the orders and trade data of firms deemed "large" by the Commission, on the basis of arbitrary thresholds it determines, without warrant or compensation for the search and taking of the data...
> > >
> > > "As proposed, this system violates the fourth and fifth amendments of the U.S. Constitution.
> > >
> > > "For persons or firms deemed large traders by the Commission, the rule conditions participation in national securities markets on a priori surrender of their fourth amendment rights to be secure against unreasonable searches and seizures. Order and trade data is highly-sensitive property of its owners. Absent a valid search warrant based on probable cause and supported by oath or affirmation as required by law, the Commission has no more authority under the law to obtain and search such property than any other agency of government would have to search a person's home or other property without a warrant.
> > >
> > > "The Commission has posited no exigent circumstances that would justify a warrantless search or seizure of this valuable, proprietary data. Surely if such exigent circumstances existed, the Commission would say so. In any event, such circumstances could not possibly implicate simultaneously the hundreds or thousands of persons or firms whose rights would be summarily abrogated by the Commission's proposal, each of whom is entitled to a presumption of innocence under the law. This rule allows criminal fishing expeditions by government agents, in clear violation of the constitution.
> > >
> > > "If put into effect, the proposed rule amounts to a taking of private property for public use without just compensation, in contravention of the fifth amendment. If the Commission requires additional market data in order to fulfill its mission, then it must purchase that data from willing sellers on the open market. This rule would deny persons or firms access to national securities markets unless they agree to a taking by government agents. The proposal is tantamount to a government agent telling the owner of beachfront property, 'We want to use your land for a naval shipyard, without actually purchasing or leasing it from you. You will not be able to use any facility owned or regulated by the government unless and until you comply with our demand.'
> > >
> > > "This proposal is unconstitutional and an affront to free people and markets. If the Commission possesses evidence of violations of the securities laws of the United States, it has all the authority and resources it needs to investigate such purported violations and to prosecute as necessary. In America, we do not allow government agents to search our persons, property, papers, or effects so that they can better educate themselves on how we live, work, and interact with others. Absent a specific and credible allegation of unlawful activity, the Commission has no authority or legal basis to view or parse the data it seeks through this proposed rule.
> > >
> > > "If the Commission is granted the power it seeks, its employees will be able to reverse-engineer valuable, proprietary trading algorithms, which they can then employ for their own profit. Arguably, by virtue of this proposal, these employees will come to possess an information advantage superior to that of any other trader on earth. Perversely, once armed with this information, they could then shape their own order flow and trading activities to avoid the prying eyes and sticky fingers of other Commission employees."
> > >
> > > (End of excerpts)
> > >
> > > My friends, if you do not wake up to and firmly oppose the dangers of government surveillance of private citizens and activities, your children and mine are in for an ugly future. Markets are "public" only in the sense that they are open to everyone. Such openness does not invite or justify proposals such as these from supposed, government servants.
> > >
> > > Best,
> > > John
> > >
> > >
> > >
> > >
> > >
> > > > Thanks Martin,
> > > >
> > > > I also wanted to share with everyone the following response I submitted on behalf of FPL: http://www.sec.gov/comments/s7-11-10/s71110-32.pdf. The main message we want to get across is that the format of the reporting data should be based on the FIX Protocol. This is consistent with FPL's goal to continually educate and engage the regulatory bodies across the globe. I'd also encourage others to respond to this proposal - please note that the submission deadline is Monday.
> > > >
> > > > Regards,
> > > > Courtney
> > > >
> > > >
> > > > > Hello,
> > > > >
> > > > > I thought it appropriate to post this message on this forum which is the most visited and bring to your attention the Consolidated Audit Trail System in the US.
> > > > >
> > > > > The SEC is requesting industry input into the proposed Consolidated Audit Trail System. The Consolidated Audit Trail System is intended to enable regulators to track information related to trading orders received and executed across the securities markets.
> > > > >
> > > > > Details of the Consolidated Audit Trail System including how to make an online submission are at: http://www.sec.gov/news/press/2010/2010-86.htm
> > > > >
> > > > > I wanted to encourage member firms and individuals of the FIX community to make a submission. My personal submission, which you can read at the above link, recommends that FIX is used as the data format for the Consolidated Audit Trail System.
> > > > >
> > > > > Thank you.
> > > > >
> > > > > Martin Koopman

Jan Jonsson
8 August 2010 6:47pm

Hi
This must be one in a life time opportunity for establish FIX as the one and only market data protocol. I read one “prof of concept”, showing that fix could be implemented 25% faster than ITCH for example.
About the other question discussed, the one about the level of information that should be public, I think that ALL LIT orders (with out counter parties) and ALL trades must be an acceptable level, all the rest is questionable. However, that is not of FIX protocols concern.

It is maybe time to move the concerns for latency, towards concern of fairness?
And one single protocol for market data will maybe not benefits individual companies, but it will on average make us all better off. It will be more efficient use of resources than today.

/ Jan

Mahesh Kumaraguru
8 August 2010 8:41pm

[Start quote from http://www.sec.gov/about/whatwedo.shtml]

When the stock market crashed in October 1929, public confidence in the markets plummeted. Investors large and small, as well as the banks who had loaned to them, lost great sums of money in the ensuing Great Depression. There was a consensus that for the economy to recover, the public's faith in the capital markets needed to be restored. Congress held hearings to identify the problems and search for solutions.

Based on the findings in these hearings, Congress — during the peak year of the Depression — passed the Securities Act of 1933. This law, together with the Securities Exchange Act of 1934, which created the SEC, was designed to restore investor confidence in our capital markets by providing investors and the markets with more reliable information and clear rules of honest dealing.

[End quote from SEC.gov]

After the great recession which started in Dec-2007 (as per http://en.wikipedia.org/wiki/Late-2000s_recession), this "Consolidated Audit Trail System" is what I think is the SEC's first major "software project". So lets help out because :-

As a software engineer, can I say that the SEC is using iterative development model? They developed "Existing audit trails that were limited in their scope and effectiveness" and I would consider "Consolidated Audit Trail System" as the next iteration to improve the overall effectiveness of financial transactions survillence systems for legal compliance checking. The existing ineffective audit trails were developed years back. We could take the timeline when different audit trails were developed and compare the trading volumes to see a corelation of how the presently ineffective audit trails catered to the trading volumes of "those good old days". Next if we compare with the trading volumes of today, we know why the legacy audit trails failed in todays volumes and what is needed in CATS.

After CATS goes through this iteration, its effectiveness would be measured and then there could be future iterations. If later it is felt there is too much data being generated by CATS, then that redundant / useless data could be trimmed off. Like FIX has been going thru so many versions "fix"ing errors / deficiencies, similarly SEC is "fix"ing errors / deficiencies in its laws / procedures and I think FIXProtocol could help them. A new version of FIXProtocol is welcomed by the FIX community, similarly I would expect this new CATS system could be welcomed by people.

I partly agree this gang "couldn't shoot straight", so let us tech savvy FIXProtocol guys who are "experts at shooting "messages in milliseconds" contribute to the technical aspect of this proposal. In a different discussion (http://fixprotocol.org/discuss/read/cf21817f) Jim Northey stated "maybe the SEC should lay off a few dozen lawyers and hire some tech savvy people that understand complex system behavior." I partly agree with Jim in that SEC should hire tech savvy people but should not lay off the lawyers, else a group of programmers would end up sitting in SEC office debating the advantages of how GOF design patterns helps software development or what would be the next great programming language or any of the other hundreds of irrelevant very geeky topics. Let the lawyers perform the role of business anaysts by explaining the legal aspects of securities trading to the software engineers and software engineers write a national monitoring system NMS which could permit SEC to monitor "all trading". For example as a FIX developer, I can write code to pull the trade data and parse thru a FIX log, but I would not know how to find which securities trading law is being broken in a given set of order and execution messages, that explation an lawyer who understands federal laws about financial fraud has to provide me before I can write a .java to find all orders which "match this fraud pattern".

In http://www.thetrumpet.com/index.php?download=cache/TW20100807.pdf&tw_download I was surprised to read "a large trading error that inadvertently causes dislocation in our markets" compared to "another natural disaster".

Bottomline:- If CATS is able to prevent another Madoff / Lehman / etc. then the effort to develop this new system is worth it because it could save the financial future of many.

Mahesh Kumaraguru
9 August 2010 3:15pm

Hi Jan Jonsson,

I fully agree regarding "establish FIX as the one and only market data protocol" but this would only be from the perspective of reporting into SEC's "Consolidated Audit Trail System". There is a bigger reason for why a single protocol for all compliance audit is better because if all stock trading activity were reported in a single format, it would make it easier for SEC to analyze trading activity in realtime. I believe SEC needs to develop a realtime legal compliance audit system (receives all trade data in real time and analyzes trading patterns) which can electronically detect fraudulent activity as it occurs, not years after the fraud took place, ie. CATS should be able to detect and stop a fraud like Madoff / Lehman before the full fraud actually occurs and innocent middle class people loose their life time savings.

It is time to move the concerns for latency, towards concern of fairness. If I were working as software developer for Maddoff, I would be happy with CATS because SEC has the capacity to know this trade is for the big fraudster called "Bernie Maddoff". Maddoff is my source of money, but I do NOT want to write code for fraud. As a Java programmer, I do not have much knowledge of securities trading laws and what trading patterns would violate federal laws, I write code based on requirements given to me by business analysts. Maybe its time I start learning about legal aspects of stock trading instead of bothering only about milliseconds / process footprints.

Regards,
K. Mahesh

> Hi
> This must be one in a life time opportunity for establish FIX as the one and only market data protocol. I read one “prof of concept”, showing that fix could be implemented 25% faster than ITCH for example.
> About the other question discussed, the one about the level of information that should be public, I think that ALL LIT orders (with out counter parties) and ALL trades must be an acceptable level, all the rest is questionable. However, that is not of FIX protocols concern.
>
> It is maybe time to move the concerns for latency, towards concern of fairness?
> And one single protocol for market data will maybe not benefits individual companies, but it will on average make us all better off. It will be more efficient use of resources than today.
>
> / Jan

Mahesh Kumaraguru
9 August 2010 8:48pm

Just now submitted to SEC regarding File No. S7-11-10 Consolidated Audit Trail System Release No. 34-62174, in short,

I proposed that two new Fields

OrderSourceUserID
OrderSourceSystemID

be added to the Consolidated Audit Trail System records which would aid SEC regulatory authorities to see details of both people involved in a new order creation - the client for whom the order was placed and the portfolio manager who placed the order and help detect order sources which violate laws / are involved in market manipulation ie. I would like to find ways to stop rouge trader(s).

FIX Trading Community
9 August 2010 10:16pm

[ original email was from John Harris - john.harris@bondmart.com ]
While some of us accept eagerly the bit, yoke, or saddle and even strain for a cube of sugar or pat on the head from master, others may wish to use the opportunity presented by the SEC's submission of its Big Brother/Total Information Awareness ("Consolidated Audit Trail") program for financial transactions for more human pursuits, such as thinking deeply about what it means to be a human being, what our obligations are to one another as human beings, and the proper role of government in peaceful society. The dangers of this proposal demand nothing less.

For those who prefer living as sovereign human beings rather than as farm animals, let me suggest that "rogue trading" is not a crime. It may be a tort, but definitely is not a crime. Neither is "market manipulation" a crime. Like rogue trading or even "insider trading," market manipulation may be a tort, but most assuredly is not a crime.

Before you rush to your dog-eared copies of the Exchange Act to prove me wrong, know this: the validity of a law is determined not by legislatures or courts but by common sense. Just because the corrupt, venal, incompetent power-mongers in Congress promulgate a law and the the corrupt, venal, incompetent power-monger in the White House signs it does not make the law valid. If you doubt that for even a moment, type "fugitive slave act" into a Google search box and learn something. It was never a crime to provide safe haven or assist the escape of a slave, no matter what words to the contrary were or are set forth in the United States Code.

The only real crimes are assault, theft, fraud, and trespass. Nothing else is a crime and there is no such thing as a victimless crime.

All government regulation rests on the principle of prior restraint. Under the principle of prior restraint, the freedom of law-abiding, sovereign human beings is forcibly constrained by other human beings operating as "government" under the theory that if left to their own devices, such sovereign beings will use their freedom to commit crimes. Is anyone reading these words truly so dull-witted that he fails to see that prior restraint is itself a crime (encompassing assault, theft, and trespass)? Shall we bind the arms and legs of peaceful human beings to prevent assault before the fact? Shall we mute them to prevent fraud before the fact?

I submit to those of you capable of thinking and walking the earth upright as human beings that the SEC's Big Brother/Total Information Awareness proposal is the vilest, most evil, repugnant excrement the agency has ever produced. Not only is the proposal manifestly incapable of achieving its stated aims or method of operation, it insults your heritage, dignity, birthright, and progeny.

I do not and will not submit to this totalitarian proposal. At no moment since my conception did or have I become the property of or beholden to the SEC. It has no right to surveil my financial transactions or any other of my activities, in real time or not, without a warrant issued by a court of law upon a showing of probable cause that I have committed a crime and am subject to its jurisdiction. I have committed no such crime and will not be treated as criminal before the fact.

SEC: I say "no." And to hell with you for demanding otherwise. I hope all FPL members and volunteers will see this Big Brother/Total Information Awareness program for the affront and usurpation that it represents and join with me in nullifying it.

> Just now submitted to SEC regarding File No. S7-11-10 Consolidated Audit Trail System Release No. 34-62174, in short,
>
> I proposed that two new Fields
>
> OrderSourceUserID
> OrderSourceSystemID
>
> be added to the Consolidated Audit Trail System records which would aid SEC regulatory authorities to see details of both people involved in a new order creation - the client for whom the order was placed and the portfolio manager who placed the order and help detect order sources which violate laws / are involved in market manipulation ie. I would like to find ways to stop rouge trader(s).

Mahesh Kumaraguru
10 August 2010 8:33pm

Hi John Harris,

I am not a lawyer so my knowledge of law is limited to what you called common sense. To be frank, I am not so much bothered about the legal / ethical aspects of this Consolidated Audit Tape System, I am only looking at how it can be technically implemented. Since your post discusses things for which I may not be competent enough to comment on, I would leave it for people more competent than me to answer your questions like the proper role of government in peaceful society, whether insider trading is a crime or not (http://www.investopedia.com/articles/03/100803.asp), what are the only real crimes, principle of prior restraint, etc.

Your post reminds me of the gun control law arguments I saw on TV news somtime back. Why do governments need police and courts? Or better still why do we need governments? Let everybody have their own protection. That was how humanity started many thousand years back. There were no governments, no police / courts, individuals decided what is right and wrong(this still happens in rulal areas of 3rd world countries. In villages of Tamilnadu its called "Katta panchayat" http://archives.chennaionline.com/society/CrimeandSociety/10kpanchayat.asp). Then groups of individuals started deciding whats good for the group and started demarcating "their" territory and defined whats acceptable to the group. Then these territories became kingdoms. Then came democracy and communism. Then came Leauge of nations and now the whole world is kind of under United nations.

I agree with that you free human beings have a right to keep their financial transactions secret. But in the context of a portfolio manager with 50 billion AUM in pension funds, college savings funds etc. of many hundreds of thousands of middle class people, this money does not belong to the portfolio manager and hence all transactions on these funds are public information because if this asset management company goes bankrupt, then the financial future of all these people could be jeopardized.

I am more interested in the software architecture of the CATS system, how to make it handle the vast amounts of data generated from all markets, how to detect activity which violates a SEC law, can Complex Event processing be used, what can the developers of CATS system learn from the developers of systems which monitor heartbeats of coronary patients, earthquake monitors etc.

Regards,
K. Mahesh

> While some of us accept eagerly the bit, yoke, or saddle and even strain for a cube of sugar or pat on the head from master, others may wish to use the opportunity presented by the SEC's submission of its Big Brother/Total Information Awareness ("Consolidated Audit Trail") program for financial transactions for more human pursuits, such as thinking deeply about what it means to be a human being, what our obligations are to one another as human beings, and the proper role of government in peaceful society. The dangers of this proposal demand nothing less.
>
> For those who prefer living as sovereign human beings rather than as farm animals, let me suggest that "rogue trading" is not a crime. It may be a tort, but definitely is not a crime. Neither is "market manipulation" a crime. Like rogue trading or even "insider trading," market manipulation may be a tort, but most assuredly is not a crime.
>
> Before you rush to your dog-eared copies of the Exchange Act to prove me wrong, know this: the validity of a law is determined not by legislatures or courts but by common sense. Just because the corrupt, venal, incompetent power-mongers in Congress promulgate a law and the the corrupt, venal, incompetent power-monger in the White House signs it does not make the law valid. If you doubt that for even a moment, type "fugitive slave act" into a Google search box and learn something. It was never a crime to provide safe haven or assist the escape of a slave, no matter what words to the contrary were or are set forth in the United States Code.
>
> The only real crimes are assault, theft, fraud, and trespass. Nothing else is a crime and there is no such thing as a victimless crime.
>
> All government regulation rests on the principle of prior restraint. Under the principle of prior restraint, the freedom of law-abiding, sovereign human beings is forcibly constrained by other human beings operating as "government" under the theory that if left to their own devices, such sovereign beings will use their freedom to commit crimes. Is anyone reading these words truly so dull-witted that he fails to see that prior restraint is itself a crime (encompassing assault, theft, and trespass)? Shall we bind the arms and legs of peaceful human beings to prevent assault before the fact? Shall we mute them to prevent fraud before the fact?
>
> I submit to those of you capable of thinking and walking the earth upright as human beings that the SEC's Big Brother/Total Information Awareness proposal is the vilest, most evil, repugnant excrement the agency has ever produced. Not only is the proposal manifestly incapable of achieving its stated aims or method of operation, it insults your heritage, dignity, birthright, and progeny.
>
> I do not and will not submit to this totalitarian proposal. At no moment since my conception did or have I become the property of or beholden to the SEC. It has no right to surveil my financial transactions or any other of my activities, in real time or not, without a warrant issued by a court of law upon a showing of probable cause that I have committed a crime and am subject to its jurisdiction. I have committed no such crime and will not be treated as criminal before the fact.
>
> SEC: I say "no." And to hell with you for demanding otherwise. I hope all FPL members and volunteers will see this Big Brother/Total Information Awareness program for the affront and usurpation that it represents and join with me in nullifying it.
>
>
>
> > Just now submitted to SEC regarding File No. S7-11-10 Consolidated Audit Trail System Release No. 34-62174, in short,
> >
> > I proposed that two new Fields
> >
> > OrderSourceUserID
> > OrderSourceSystemID
> >
> > be added to the Consolidated Audit Trail System records which would aid SEC regulatory authorities to see details of both people involved in a new order creation - the client for whom the order was placed and the portfolio manager who placed the order and help detect order sources which violate laws / are involved in market manipulation ie. I would like to find ways to stop rouge trader(s).

Mahesh Kumaraguru
10 August 2010 8:34pm

Posted in the SEC website at

http://sec.gov/comments/s7-11-10/s71110-36.htm

> Just now submitted to SEC regarding File No. S7-11-10 Consolidated Audit Trail System Release No. 34-62174, in short,
>
> I proposed that two new Fields
>
> OrderSourceUserID
> OrderSourceSystemID
>
> be added to the Consolidated Audit Trail System records which would aid SEC regulatory authorities to see details of both people involved in a new order creation - the client for whom the order was placed and the portfolio manager who placed the order and help detect order sources which violate laws / are involved in market manipulation ie. I would like to find ways to stop rouge trader(s).

FIX Trading Community
10 August 2010 9:52pm

[ original email was from John Harris - john.harris@bondmart.com ]
K. Mahesh,

I understand that the government's Big Brother/Total Information Awareness ("Consolidated Audit Trail") program for financial transactions presents technical problems that interest you. But as an adult, you must know that every action you undertake has a legal/ethical aspect to it. Yes, in your mind, you can choose to disregard the legal/ethical aspects of any particular problem and contemplate solely the technical aspects, but once you act on the matter, that separation becomes untenable.

Throughout history, engineers have attempted to evade moral responsibility for their work. These engineers have attempted to do what you are now attempting: to separate technical from moral considerations. As I suggested in a post that I deleted at the request of the Program Office, engineers seemingly capable of slipping effortlessly into moral blinders have "improved" methods of crucifixion and other tortures, weapons of mass destruction, and tools of genocide. I do not doubt that in many of these cases, they found the technical challenges interesting or solved problems that were used elsewhere for good purposes. But they were nonetheless wrong to employ their skills for murder or mayhem. And no, I am not equating the work of German mechanical and chemical engineers to improve the lethality of Hitler's gas chambers to your proposal of new fields in furtherance of a Big Brother edition of the FIX Protocol. The difference in degree is huge, but the principle is the same. Primum non nocere.

As a software developer you must hold logic in high regard. Do you not see the logical disconnect between your statement "free human beings have a right to keep their financial transaction secret" and your efforts in support of this program? This program forces human beings - all Americans - to surrender their financial privacy. As such, it violates the very right you acknowledge. Therefore, you are aiding the abrogation of rights of your family, friends, colleagues, and neighbors, as well as your own rights and those of millions of people you do not know. How does that compute?

Undoubtedly some of our readers question by now why an essentially political discussion is raging in this forum. They may even be tiring of it. But this is potentially the most important topic ever raised in these boards and directly implicates the future of FIX as we know it. If implemented, this despicable proposal will diminish the vitality and importance of markets from which many of us - including vendors of FIX-related software and services - earn our livings. To the extent those advocating government adoption of FIX for this program succeed, they will have ceded control of the protocol to a vast, remote, politico-bureaucratic process and beast. Are any so naive as to believe that if the government comes to depend on FIX for one of its cherished surveillance programs, it will leave the future of the protocol to the control of private actors?

No, what is really remarkable about this debate is the deafening silence from the audience. So afraid are member firms of offending the bureaucrats at the SEC that they dare not speak out publicly or truthfully against a government proposal astounding for the sweeping magnitude of its Orwellian, anti-competitive character. And thus the employees of these member firms who normally have no reticence in this forum keep their mouths shut, for fear of their jobs.

Have courage my friends. Your jobs are already in danger. This proposal only heightens the risk. Speak out, while you can.

> Hi John Harris,
>
> I am not a lawyer so my knowledge of law is limited to what you called common sense. To be frank, I am not so much bothered about the legal / ethical aspects of this Consolidated Audit Tape System, I am only looking at how it can be technically implemented. Since your post discusses things for which I may not be competent enough to comment on, I would leave it for people more competent than me to answer your questions like the proper role of government in peaceful society, whether insider trading is a crime or not (http://www.investopedia.com/articles/03/100803.asp), what are the only real crimes, principle of prior restraint, etc.
>
> Your post reminds me of the gun control law arguments I saw on TV news somtime back. Why do governments need police and courts? Or better still why do we need governments? Let everybody have their own protection. That was how humanity started many thousand years back. There were no governments, no police / courts, individuals decided what is right and wrong(this still happens in rulal areas of 3rd world countries. In villages of Tamilnadu its called "Katta panchayat" http://archives.chennaionline.com/society/CrimeandSociety/10kpanchayat.asp). Then groups of individuals started deciding whats good for the group and started demarcating "their" territory and defined whats acceptable to the group. Then these territories became kingdoms. Then came democracy and communism. Then came Leauge of nations and now the whole world is kind of under United nations.
>
> I agree with that you free human beings have a right to keep their financial transactions secret. But in the context of a portfolio manager with 50 billion AUM in pension funds, college savings funds etc. of many hundreds of thousands of middle class people, this money does not belong to the portfolio manager and hence all transactions on these funds are public information because if this asset management company goes bankrupt, then the financial future of all these people could be jeopardized.
>
> I am more interested in the software architecture of the CATS system, how to make it handle the vast amounts of data generated from all markets, how to detect activity which violates a SEC law, can Complex Event processing be used, what can the developers of CATS system learn from the developers of systems which monitor heartbeats of coronary patients, earthquake monitors etc.
>
> Regards,
> K. Mahesh
>
> > While some of us accept eagerly the bit, yoke, or saddle and even strain for a cube of sugar or pat on the head from master, others may wish to use the opportunity presented by the SEC's submission of its Big Brother/Total Information Awareness ("Consolidated Audit Trail") program for financial transactions for more human pursuits, such as thinking deeply about what it means to be a human being, what our obligations are to one another as human beings, and the proper role of government in peaceful society. The dangers of this proposal demand nothing less.
> >
> > For those who prefer living as sovereign human beings rather than as farm animals, let me suggest that "rogue trading" is not a crime. It may be a tort, but definitely is not a crime. Neither is "market manipulation" a crime. Like rogue trading or even "insider trading," market manipulation may be a tort, but most assuredly is not a crime.
> >
> > Before you rush to your dog-eared copies of the Exchange Act to prove me wrong, know this: the validity of a law is determined not by legislatures or courts but by common sense. Just because the corrupt, venal, incompetent power-mongers in Congress promulgate a law and the the corrupt, venal, incompetent power-monger in the White House signs it does not make the law valid. If you doubt that for even a moment, type "fugitive slave act" into a Google search box and learn something. It was never a crime to provide safe haven or assist the escape of a slave, no matter what words to the contrary were or are set forth in the United States Code.
> >
> > The only real crimes are assault, theft, fraud, and trespass. Nothing else is a crime and there is no such thing as a victimless crime.
> >
> > All government regulation rests on the principle of prior restraint. Under the principle of prior restraint, the freedom of law-abiding, sovereign human beings is forcibly constrained by other human beings operating as "government" under the theory that if left to their own devices, such sovereign beings will use their freedom to commit crimes. Is anyone reading these words truly so dull-witted that he fails to see that prior restraint is itself a crime (encompassing assault, theft, and trespass)? Shall we bind the arms and legs of peaceful human beings to prevent assault before the fact? Shall we mute them to prevent fraud before the fact?
> >
> > I submit to those of you capable of thinking and walking the earth upright as human beings that the SEC's Big Brother/Total Information Awareness proposal is the vilest, most evil, repugnant excrement the agency has ever produced. Not only is the proposal manifestly incapable of achieving its stated aims or method of operation, it insults your heritage, dignity, birthright, and progeny.
> >
> > I do not and will not submit to this totalitarian proposal. At no moment since my conception did or have I become the property of or beholden to the SEC. It has no right to surveil my financial transactions or any other of my activities, in real time or not, without a warrant issued by a court of law upon a showing of probable cause that I have committed a crime and am subject to its jurisdiction. I have committed no such crime and will not be treated as criminal before the fact.
> >
> > SEC: I say "no." And to hell with you for demanding otherwise. I hope all FPL members and volunteers will see this Big Brother/Total Information Awareness program for the affront and usurpation that it represents and join with me in nullifying it.
> >
> >
> >
> > > Just now submitted to SEC regarding File No. S7-11-10 Consolidated Audit Trail System Release No. 34-62174, in short,
> > >
> > > I proposed that two new Fields
> > >
> > > OrderSourceUserID
> > > OrderSourceSystemID
> > >
> > > be added to the Consolidated Audit Trail System records which would aid SEC regulatory authorities to see details of both people involved in a new order creation - the client for whom the order was placed and the portfolio manager who placed the order and help detect order sources which violate laws / are involved in market manipulation ie. I would like to find ways to stop rouge trader(s).

Mahesh Kumaraguru
11 August 2010 5:35am

Hi John Harris,

Sorry to be discussing politics in a technical forum. I agree that as an adult, every action of mine has a legal/ethical/moral aspect to it. But I have my limitations. I am interested only in the technical aspect and not in the ethical / legal aspect because of multiple reasons:-

1. I am not competent enough to comment on the ethical / legal aspects of this SEC proposal. I have expertise in technology and not much of trading laws because my FIXProtocol projects did not require knowledge of security trading laws but required knowledge of FIXProtocol. I should accept that you are the first person to have made me start to learn security trading laws and the moral/ethical aspects of them. Thank you.

2. Whether we support it or oppose it, if "Big Brother" decides this system is needed, SEC will go ahead and develop it no matter what the public says. Take the example of Healthcare bill. I had received numerous printed material from opponents of the healthcare bill explaining why they think its a bad law (the opponents were distributing printed material at bus stops / public places), yet the government passed the bill in spite of opposition.

Why I am keen on looking at the technical aspects is because if SEC builds the CATS system without any input from the technology community, the chances of CATS being successful in preventing another Maddoff / Lehman / great recession is lower, instead if we provide feedback, the chances of CATS being successful is higher. I believe SEC should ask FIX to form a working group which could have members like me from FIXProtocol side providing the technical inputs and lawyers from SEC providing the legal inputs.

Its true that engineers and scientists created nuclear fuel, nuclear medicine etc being used for good peaceful purposes and nuclear weapons which threatens to wipe out all life from the face of earth. But it was one of those nuclear weapons which was used to end world war II. So it is confusing to me should I see the engineers and scientists who created nuclear weapons as good people who helped humanity by providing a tool to stop world war II or are they bad people who have endangered all life on earth? What about the warriors who actually dropped the bomb - they are good people because the war was stopped by their actions or they are bad people because so many innocent people died in those bombs? Most objects created by mankind on earth have good and bad applications, I just hope mankind uses the tools for the common good. So a tool created by mankind in itself is neither good nor bad, it depends on the people using it whether they put it to good or bad use. Another example:- I once saw a guy walk into a pharmacy, buy a bottle of NyQuil cough syrup and he drank the full bottle in one gulp. Now should the FDA / government ban sale of cough syrups which are sleep inducing because some idiots are abusing it? The sleep inducing chemical is present in the medicine to help people with excessive cough problems fall asleep. So there are limits to which a government can prevent abuse of tools meant for good use. There are two sides to a coin.

There might be faults with governments policies and laws, but overall governments are trying to help people. When huricane Katrina happened, the government could have said "you people chose to live at a place in NewOrleans below sea level which is a known flood risk zone, so its your mistake. So either save yourself or ask the God we all trust to save you", instead government sent all forms of help available to save people and properties. I am not following NewOrleans news, but I believe government should be doing something to the flood risk zone to prevent another catastrophe.

I agree with you that it has become just the two of us discussing, I wish more people who agree/disagree could participate, but people could have their own reasons to not participate and there could be people who neither agree nor disagree, so they could be reading these posts and trying to make up their minds on which side to join.

Regards,
K. Mahesh

FIX Trading Community
11 August 2010 8:42am

[ original email was from John Greenan - john.greenan@alignment-systems.com ]
John,

I've followed this debate with interest from afar. You make a vast number of statements but I'd like to pick up on just one. "what is really remarkable about this debate is the deafening silence from the audience".

I've discussed this thread with a number of folks within some big global firms. The issue is that any public statement by an employee of one of the mega banks on this sort of subject will have to be cleared by compliance. Do you think that an employee of (for example) Goldman Sachs will want to go to compliance to ask for permission to publicly criticise the SEC on a public forum?

The fact is that many people have views on this subject but are often constrained. I am sure you will find people more forthcoming in a private meeting.

Regards,

John

This post was created while reading http://amzn.to/dB8XB5 and listening to http://www.youtube.com/watch?v=B7dBBCHYcZs

Mahesh Kumaraguru
11 August 2010 11:48am

Hi John Greenan,

You are right. Not everybody is lucky to have an employer who permits the use of company provided email-id which is used to register at http://FIXProtocol.org/ to be used for posting anything which could be seen as critizing the "Big brother". We cannot go around privately meeting all people who have something to say. Then they could have fears like what if Mahesh is a spy and I maybe carrying some recording equipment. They maynot share any true opinions on phone because they could be scared of phone tapping. First of all I see no point in critizing governments because people elected the government officials and if these officials do not meet expectations of voters, they would get voted out in the next election and the new government which is formed would go around rectifying failed policies. Thats the advantage of democracy. Government is not a set of saints who have renounced worldly pleasures, they are also human beings like you and me, so there could be a few bad apples.

If this Consolidated Audit Trail System infringes on freedom like John Harris pointed out in one of his posts above, let people state it. Because after all the debate I have had with John Harris, I am still not sure this SEC proposal is bad.

These people can share their opinions using a personal email id and leave company name blank when registering. That way, they do not have to ask compliance. Avoid posting anything abusive and let SEC also know that this is they feel.

Regards,
K. Mahesh

> John,
>
> I've followed this debate with interest from afar. You make a vast number of statements but I'd like to pick up on just one. "what is really remarkable about this debate is the deafening silence from the audience".
>
> I've discussed this thread with a number of folks within some big global firms. The issue is that any public statement by an employee of one of the mega banks on this sort of subject will have to be cleared by compliance. Do you think that an employee of (for example) Goldman Sachs will want to go to compliance to ask for permission to publicly criticise the SEC on a public forum?
>
> The fact is that many people have views on this subject but are often constrained. I am sure you will find people more forthcoming in a private meeting.
>
> Regards,
>
> John
>
> This post was created while reading http://amzn.to/dB8XB5 and listening to http://www.youtube.com/watch?v=B7dBBCHYcZs
>
>
>
>
>
>

Hanno Klein
11 August 2010 12:24pm

I guess FPL has been luckier than the SWIFT colleagues over in Europe that were forced by the US via the European Parliament to agree to provide information on bank data transfers flowing through their network. FPL does not have its own network and hence does not have such information. SWIFT moved its servers from the US to Europe and still could not avoid the current outcome.

The US has created a similar issue related to travellers visiting the US. Airlines have been forced by the US to provides a significant amount of information about the passengers if they want to continue to have landing rights in the US.

Concerns should be even greater with companies collecting (private) data. Google Street View is becoming highly contentious in Germany right now as people are afraid of mis-use of images of their house.

One can be critical and realistic at the same time. Critical about the extent of potential mis-use. Realistic about the extent to which influence is possible (upfront and ongoing).

I do not think that a potential for mis-use automatically justifies to refuse the collection of data. We live in a complex world and things are not black and white. Transparency is key to build trust among the members of a community. Democracies still tend to be a lot better in this respect than other forms of organization. People are lucky if they are able to live in a community where they can trust those that are in charge. It is easy to get frustrated if you have tried to change things without success or have been subject to mis-use of information. Lack of trust among the actors of the financial community is part of the problem during the financial crisis. Financial transctions do not happen in isolation. There are always one or more counterparties that are involved in one way or another. One's right of privacy conflicts with another's right of being protected beyond simply trusting each other.

FIX Trading Community
11 August 2010 1:33pm

[ original email was from John Harris - john.harris@bondmart.com ]
What would the United States government have done if European governments said "no" to the invasions of privacy you cite, Hanno? Would it have invaded Belgium? Bombed London? Created a ring of land mines around France? Perhaps banned European banks from U.S. operations?

If you think about it, you will realize that imperious demands by the U.S. government on other governments or multi-national corporations are easily thwarted. A simple answer will do. "No."

What happens instead is pure theater, a Kabuki dance to create the false appearance that these government or companies are fighting for their constituents when the contrary outcome is already determined. Switzerland surrendered on bank secrecy because massive Swiss banks wanted Switzerland to surrender. Their businesses no longer depended on secrecy, or so they think. So they sold out their customers, their smaller competitors, and their countrymen.

By the way, respectfully, your point about a conflict between the right of privacy and right of protection is wrong. True rights never conflict. Information concerning orders and executions is property. Who owns or has a license to use that property is normally a matter of commercial negotiation. What this Big Brother/Total Information Awareness proposal will do is abrogate the property rights of market participants, while assaulting their freedom.

It is the nature of the government beast that it will eventually devour every shred of human freedom and dignity, until humans stand up to it and say "No."

This is a historical moment. The beast has lost all credibility and moral authority. All it has left is fear.

Who is afraid of the beast? Who will stand up to the beast? It's decision time.

> I guess FPL has been luckier than the SWIFT colleagues over in Europe that were forced by the US via the European Parliament to agree to provide information on bank data transfers flowing through their network. FPL does not have its own network and hence does not have such information. SWIFT moved its servers from the US to Europe and still could not avoid the current outcome.
>
> The US has created a similar issue related to travellers visiting the US. Airlines have been forced by the US to provides a significant amount of information about the passengers if they want to continue to have landing rights in the US.
>
> Concerns should be even greater with companies collecting (private) data. Google Street View is becoming highly contentious in Germany right now as people are afraid of mis-use of images of their house.
>
> One can be critical and realistic at the same time. Critical about the extent of potential mis-use. Realistic about the extent to which influence is possible (upfront and ongoing).
>
> I do not think that a potential for mis-use automatically justifies to refuse the collection of data. We live in a complex world and things are not black and white. Transparency is key to build trust among the members of a community. Democracies still tend to be a lot better in this respect than other forms of organization. People are lucky if they are able to live in a community where they can trust those that are in charge. It is easy to get frustrated if you have tried to change things without success or have been subject to mis-use of information. Lack of trust among the actors of the financial community is part of the problem during the financial crisis. Financial transctions do not happen in isolation. There are always one or more counterparties that are involved in one way or another. One's right of privacy conflicts with another's right of being protected beyond simply trusting each other.

FIX Trading Community
11 August 2010 1:48pm

[ original email was from John Greenan - john.greenan@alignment-systems.com ]
I will make one comment to this and then no more.

This statement "These people can share their opinions using a personal email id and leave company name blank when registering."

is naive.

If - for example - Scott Atwell posted on here with "no company name" do you think anyone would expect that this is somehow not Scott from American Century?? And - for example - if he said something damaging to American Century would his employer forgive that? Probably not. All employment contracts I have seen in this industry will impose a vow of silence onto the employee unless cleared by compliance whether speaking in a corporate context or a personal capacity. Just to be really clear - I use Scott and American Century merely as an example - I have never even discussed this subject with him.

So - I shall conclude. MANY people in this industry do not agree with this proposal but feel unable to comment.

This written while listening to http://www.youtube.com/watch?v=8PaoLy7PHwk

> Hi John Greenan,
>
> You are right. Not everybody is lucky to have an employer who permits the use of company provided email-id which is used to register at http://FIXProtocol.org/ to be used for posting anything which could be seen as critizing the "Big brother". We cannot go around privately meeting all people who have something to say. Then they could have fears like what if Mahesh is a spy and I maybe carrying some recording equipment. They maynot share any true opinions on phone because they could be scared of phone tapping. First of all I see no point in critizing governments because people elected the government officials and if these officials do not meet expectations of voters, they would get voted out in the next election and the new government which is formed would go around rectifying failed policies. Thats the advantage of democracy. Government is not a set of saints who have renounced worldly pleasures, they are also human beings like you and me, so there could be a few bad apples.
>
> If this Consolidated Audit Trail System infringes on freedom like John Harris pointed out in one of his posts above, let people state it. Because after all the debate I have had with John Harris, I am still not sure this SEC proposal is bad.
>
> These people can share their opinions using a personal email id and leave company name blank when registering. That way, they do not have to ask compliance. Avoid posting anything abusive and let SEC also know that this is they feel.
>
> Regards,
> K. Mahesh
>
> > John,
> >
> > I've followed this debate with interest from afar. You make a vast number of statements but I'd like to pick up on just one. "what is really remarkable about this debate is the deafening silence from the audience".
> >
> > I've discussed this thread with a number of folks within some big global firms. The issue is that any public statement by an employee of one of the mega banks on this sort of subject will have to be cleared by compliance. Do you think that an employee of (for example) Goldman Sachs will want to go to compliance to ask for permission to publicly criticise the SEC on a public forum?
> >
> > The fact is that many people have views on this subject but are often constrained. I am sure you will find people more forthcoming in a private meeting.
> >
> > Regards,
> >
> > John
> >
> > This post was created while reading http://amzn.to/dB8XB5 and listening to http://www.youtube.com/watch?v=B7dBBCHYcZs
> >
> >
> >
> >
> >
> >

FIX Trading Community
11 August 2010 2:00pm

[ original email was from John Harris - john.harris@bondmart.com ]
Thank you for your comments, John.

Not that long ago in the history of humankind, not that far away from the shiny new headquarters of Goldman Sachs, young men bled out from musket shots in cold, soggy fields, never again to see their families or to enjoy a glass of wine or a sunrise. They died in defense of deeply-held principles and in the hope that their children, and their children's children, would not be subjected to the kind of indignities and petty tyrannies now afflicting people throughout this country.

"He has erected a multitude of New Offices, and sent hither swarms of Officers to harass our people and eat out their substance."

Do you remember those words from the Declaration of Independence?

I would guess that some of the people with whom you have spoken were educated at Harvard or Stanford or some similarly-adept institution. Surely they are resourceful enough to figure out a way to stand up and be counted in the face of a totalitarian proposal that will greatly diminish the vitality and standing of the markets in which they earn their livings. If their ancestors could take a musket ball in the face, can't these bankers face or figure out a way around a compliance officer?

This proposal, by the way, goes far beyond what employees of investment banks must endure today in terms of surveillance of their own financial transactions. I guarantee that every newbie blanches upon first learning that the price of admission to employment in a U.S. investment bank is surveillance of their securities transaction by their employers. Now these same people are going to remain silent while every human being in America is subjected to the same indignity and trespass from the federal government?

Shame on them if they can't muster the courage to speak up and say "no."

> John,
>
> I've followed this debate with interest from afar. You make a vast number of statements but I'd like to pick up on just one. "what is really remarkable about this debate is the deafening silence from the audience".
>
> I've discussed this thread with a number of folks within some big global firms. The issue is that any public statement by an employee of one of the mega banks on this sort of subject will have to be cleared by compliance. Do you think that an employee of (for example) Goldman Sachs will want to go to compliance to ask for permission to publicly criticise the SEC on a public forum?
>
> The fact is that many people have views on this subject but are often constrained. I am sure you will find people more forthcoming in a private meeting.
>
> Regards,
>
> John
>
> This post was created while reading http://amzn.to/dB8XB5 and listening to http://www.youtube.com/watch?v=B7dBBCHYcZs
>
>
>
>
>
>

Hanno Klein
11 August 2010 2:09pm

> This is a historical moment. The beast has lost all credibility and moral authority. All it has left is fear.

The SEC Consolidated Audit Trail issue is not a historical moment. If at all, then there was a (recent) historical moment after 9/11 when the US decided to start a war on terror.

Unfortunately, this discussion has been blown out of proportion. Nonetheless, it was good to have had it and I am very sure that there were many more readers than writers involved.

FIX Trading Community
11 August 2010 2:45pm

[ original email was from John Harris - john.harris@bondmart.com ]
Blown out of proportion?

Let's put the matter in some perspective.

I can start a new national securities exchange in the United States today for the cost of my legal fees, staffing, and technology. A reasonably-focused business plan could be put into effect by an entrepreneur for less than $5 million, allowing several years of reserves for sufficient order flow to develop.

The SEC has estimated that the start-up cost for its Big Brother/Total Information Awareness ("Consolidated Audit Trail") program exceeds $4 billion. It estimates ongoing maintenance costs exceed $2 billion. Under its rule filing, the existing SROs would be required to come up with a plan for funding the creation and operation of this facility AND THEN FOR ADMITTING NEW PARTICIPANTS TO THE FACILITY.

So let's pretend that the SEC is all wet on its cost estimate and that this thing can be built for $100 million and operated for another $100 million per annum. Let's further assume that ten SROs are going to split this cost equally, so they each face a burden of $10 million up-front plus another $10 million per year.

Now, what are they going to charge new entrants for admission to the facility and how much will the new entrant have to incur on its own to create compliant infrastructure?

Let's say they set the price of admission ratably - that's highly unlikely, given that there will be incremental costs of admission - but let's pretend that's what they do. So the fledgling exchange will have to come up with something like a $9 million admission fee plus another $9 million per year for operation, under the most wildly optimistic scenario. If they exchange wants to have three years of operating cash in the bank, it will need to raise $36 million just to defease its obligation for the Big Brother facility.

That's an insurmountable hurdle for virtually any start-up, even in the most widely optimistic case.

So what this proposal would do, in all likelihood, is ensure that the SROs we have today are all that we will ever have. Innovation will suffer. Competition will suffer. Consumers will suffer. Capital formation will suffer.

Those of you who wish to bow before Big Brother are welcome to do so, obviously. Human beings have submitted to tyrants for centuries. Some of us won't be playing along, but thus has it always been.

> > This is a historical moment. The beast has lost all credibility and moral authority. All it has left is fear.
>
> The SEC Consolidated Audit Trail issue is not a historical moment. If at all, then there was a (recent) historical moment after 9/11 when the US decided to start a war on terror.
>
> Unfortunately, this discussion has been blown out of proportion. Nonetheless, it was good to have had it and I am very sure that there were many more readers than writers involved.

Robert Mitchell
11 August 2010 3:17pm

Maybe we should start a 'Politics' forum like on my favorite golf board so people aren't getting spammed with emails all day and all night about this discussion that doesn't help anyone design or implement FIX systems.

FIX Trading Community
11 August 2010 4:03pm

[ original email was from Tommy Hannon - th2006@cox.net ]
I don't think this particular discussion has anything to do with politics, yet everything to do with principles and ethics. I applaud John H. for his courage to speak up and, at the very least, get some of us to reflect upon how complacence can lead to tyranny.

> Maybe we should start a 'Politics' forum like on my favorite golf board so people aren't getting spammed with emails all day and all night about this discussion that doesn't help anyone design or implement FIX systems.

Mahesh Kumaraguru
12 August 2010 2:51pm

I have requested the Webmasters to give create a new forum for regulations & the reasons behind the laws

http://fixprotocol.org/discuss/read/a9fb17b0

rather than push all this into General Q/A.

John Harris was the first person to make me think about moral / ethical aspects of engineering instead of being blinded by the "beauty of technical aspects", his statements are eye openers.

> I don't think this particular discussion has anything to do with politics, yet everything to do with principles and ethics. I applaud John H. for his courage to speak up and, at the very least, get some of us to reflect upon how complacence can lead to tyranny.
>
> > Maybe we should start a 'Politics' forum like on my favorite golf board so people aren't getting spammed with emails all day and all night about this discussion that doesn't help anyone design or implement FIX systems.

Mahesh Kumaraguru
10 September 2010 3:35pm

Hi John Greenan,

Your post quoted below recently came up in a discussion with one of my friends and he said "What prevents some unknown person from registering an email id as kay_mahesh@non_yahoo_domain.ext, then using this email id to register at http://FIXProtocol.org/ with name as Mahesh Kumaraguru and leave company name blank, then post something critizing some government agency, now your employer cannot be blaming you for it. The name Mahesh Kumaraguru is not unique in the world."

Its a different thing that anonymous posts may not carry any value.

Regards,
K. Mahesh

> I will make one comment to this and then no more.
>
> This statement "These people can share their opinions using a personal email id and leave company name blank when registering."
>
> is naive.
>
> If - for example - Scott Atwell posted on here with "no company name" do you think anyone would expect that this is somehow not Scott from American Century?? And - for example - if he said something damaging to American Century would his employer forgive that? Probably not. All employment contracts I have seen in this industry will impose a vow of silence onto the employee unless cleared by compliance whether speaking in a corporate context or a personal capacity. Just to be really clear - I use Scott and American Century merely as an example - I have never even discussed this subject with him.
>
> So - I shall conclude. MANY people in this industry do not agree with this proposal but feel unable to comment.
>
> This written while listening to http://www.youtube.com/watch?v=8PaoLy7PHwk
>
>
>
> > Hi John Greenan,
> >
> > You are right. Not everybody is lucky to have an employer who permits the use of company provided email-id which is used to register at http://FIXProtocol.org/ to be used for posting anything which could be seen as critizing the "Big brother". We cannot go around privately meeting all people who have something to say. Then they could have fears like what if Mahesh is a spy and I maybe carrying some recording equipment. They maynot share any true opinions on phone because they could be scared of phone tapping. First of all I see no point in critizing governments because people elected the government officials and if these officials do not meet expectations of voters, they would get voted out in the next election and the new government which is formed would go around rectifying failed policies. Thats the advantage of democracy. Government is not a set of saints who have renounced worldly pleasures, they are also human beings like you and me, so there could be a few bad apples.
> >
> > If this Consolidated Audit Trail System infringes on freedom like John Harris pointed out in one of his posts above, let people state it. Because after all the debate I have had with John Harris, I am still not sure this SEC proposal is bad.
> >
> > These people can share their opinions using a personal email id and leave company name blank when registering. That way, they do not have to ask compliance. Avoid posting anything abusive and let SEC also know that this is they feel.
> >
> > Regards,
> > K. Mahesh
> >
> > > John,
> > >
> > > I've followed this debate with interest from afar. You make a vast number of statements but I'd like to pick up on just one. "what is really remarkable about this debate is the deafening silence from the audience".
> > >
> > > I've discussed this thread with a number of folks within some big global firms. The issue is that any public statement by an employee of one of the mega banks on this sort of subject will have to be cleared by compliance. Do you think that an employee of (for example) Goldman Sachs will want to go to compliance to ask for permission to publicly criticise the SEC on a public forum?
> > >
> > > The fact is that many people have views on this subject but are often constrained. I am sure you will find people more forthcoming in a private meeting.
> > >
> > > Regards,
> > >
> > > John
> > >
> > > This post was created while reading http://amzn.to/dB8XB5 and listening to http://www.youtube.com/watch?v=B7dBBCHYcZs
> > >
> > >
> > >
> > >
> > >
> > >