Saturday, 13 December 2014

Sec. 309. Procedures for the retention of incidentally acquired communications

The only thing necessary for the triumph of evil is that good men do nothing.

H. R. 4681 Intelligence Authorization Act for Fiscal Year 2015.

Passed with 325 votes to 100.

Yep, it's pretty onerous and Orwellian, as is usual. It has slipped though Congress with scant attention and virtually no debate.

Section 309 is the most damning element. It contains enough outs and weasel words to allow the US intelligence community continue to break the US constitution forever. As mentioned, it is most troubling that this Act, with such a terrible Section, seemed to slip through Congress without too many people paying attention to the detail. Where was the debate?

The text is reproduced below, but here are a couple of highlights:
(1) Covered communication 
The term covered communication means any nonpublic telephone or electronic communication acquired without the consent of a person who is a party to the communication, including communications in electronic storage. 
A covered communication shall not be retained in excess of 5 years, unless— 
(iii) the communication is enciphered or reasonably believed to have a secret meaning; 
(vi) retention is necessary for technical assurance or compliance purposes... 
(vii) retention for a period in excess of 5 years is approved by the head of the element of the intelligence community responsible for such retention...
So, what do they do if they want to keep stuff for as long as they like? They can keep it forever by simply approving the retention themselves using (vii) above. They could keep anything just for technical assurance or for their own deemed compliance reasons (vi). Also, (iii) could easily be misinterpreted to provide their own basis for whatever they wish to do.

Of course, if you're one of the planet's 6.7 billion non-US citizens, there is no change. Your data continues to be owned by the greatest back-up and archival facility ever known to man:
(iv) all parties to the communication are reasonably believed to be non-United States persons
What kind of parliament would let something like this slip through with virtually no debate? Distracted by Christmas, budget approvals and the torture debate? Quite clever of the intelligence community to manage the political agenda with enough clout to get this through. It reinforces the idea that security is a game of unrelenting persistence, patience and scheming. Well done NSA and friends.

Eisenhower would be turning in his grave.

--Matt.
________________________________

PS: A late burst from Congress managed to get 100 people to provide futile resistance but it was too little, too late. The NO vote was split fairly evenly between Democrats and Republicans.

PPS: Tim Berners-Lee on why internet freedom is important.

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Sec. 309. Procedures for the retention of incidentally acquired communications




(a)
Definitions
In this section:
(1)
Covered communication
The term covered communication means any nonpublic telephone or electronic communication acquired without the consent of a person who is a party to the communication, including communications in electronic storage.
(2)
Head of an element of the intelligence community
The term head of an element of the intelligence community means, as appropriate—
(A)
the head of an element of the intelligence community; or
(B)
the head of the department or agency containing such element.
(3)
United States person
The term United States person has the meaning given that term in section 101 of the Foreign Intelligence Surveillance Act of 1978 (50 U.S.C. 1801).





(b)
Procedures for covered communications
(1)
Requirement to adopt
Not later than 2 years after the date of the enactment of this Act each head of an element of the intelligence community shall adopt procedures approved by the Attorney General for such element that ensure compliance with the requirements of paragraph (3).
(2)
Coordination and approval
The procedures required by paragraph (1) shall be—
(A)
prepared in coordination with the Director of National Intelligence; and
(B)
approved by the Attorney General prior to issuance.
(3)
Procedures
(A)
Application
The procedures required by paragraph (1) shall apply to any intelligence collection activity not otherwise authorized by court order (including an order or certification issued by a court established under subsection (a) or (b) of section 103 of the Foreign Intelligence Surveillance Act of 1978 (50 U.S.C. 1803)), subpoena, or similar legal process that is reasonably anticipated to result in the acquisition of a covered communication to or from a United States person and shall permit the acquisition, retention, and dissemination of covered communications subject to the limitation in subparagraph (B).
(B)
Limitation on retention
A covered communication shall not be retained in excess of 5 years, unless—
(i)
the communication has been affirmatively determined, in whole or in part, to constitute foreign intelligence or counterintelligence or is necessary to understand or assess foreign intelligence or counterintelligence;
(ii)
the communication is reasonably believed to constitute evidence of a crime and is retained by a law enforcement agency;
(iii)
the communication is enciphered or reasonably believed to have a secret meaning;
(iv)
all parties to the communication are reasonably believed to be non-United States persons;
(v)
retention is necessary to protect against an imminent threat to human life, in which case both the nature of the threat and the information to be retained shall be reported to the congressional intelligence committees not later than 30 days after the date such retention is extended under this clause;
(vi)
retention is necessary for technical assurance or compliance purposes, including a court order or discovery obligation, in which case access to information retained for technical assurance or compliance purposes shall be reported to the congressional intelligence committees on an annual basis; or
(vii)
retention for a period in excess of 5 years is approved by the head of the element of the intelligence community responsible for such retention, based on a determination that retention is necessary to protect the national security of the United States, in which case the head of such element shall provide to the congressional intelligence committees a written certification describing—
(I)
the reasons extended retention is necessary to protect the national security of the United States;
(II)
the duration for which the head of the element is authorizing retention;
(III)
the particular information to be retained; and
(IV)
the measures the element of the intelligence community is taking to protect the privacy interests of United States persons or persons located inside the United States.


Sunday, 7 December 2014

FINRA ATS NSM Tier 1 weekly stats - week ended 10 Nov - updated 1 Dec

IEX is now #4. That Lava Flow at #6 is interesting in the context of their decision to shutdown in 2015. Credit Suisse and UBS remain at #1 and #2.

ITG is #12. One has to wonder if ITG customers know that "agency only" means that a customer's order for some names could possibly be traded against the ITG proprietary trading book which is hidden in plain sight? At least with Credit Suisse and Goldman Sachs you know of their potential to be on the other side of your trade. They don't mislead. Sometimes ITG discloses their prop trading activity in their 10-Q's, such as,
"Interlisted arbitrage trading, which accounts for most of our other revenues, generated $1.8 million in the third quarter of 2009, significantly down from the $4.4 million achieved in the comparable 2008 quarter due to a decrease in Canadian and U.S. interlisted trading volumes and an increase in competition in this area." Source: ITG - 10-Q for the fiscal period ended September 30, 2009
That, to me at least, seems to blur the common understanding of "agency only." Does this Bloomberg story hint that ITG's reputation is really as an agency-only shop without prop? I wonder what the SEC and a certain NY AG thinks? Maybe surprised customers could claim their trade fees from ITG back for the last decade or two?

Seven ATS platforms have "per trade" sizes well in excess of 1,000 shares and IEX isn't one of them. That is, despite their #FlashBoys hope to be a platform suitable for large institutional blocks, you still need to use HFT techniques to trade IEX well. IEX seem to be doing a good job but it is perhaps a little different to what Michael Lewis envisaged.

Happy trading,

--Matt.

Name Shares
Trades
Per trade
CROS CREDIT SUISSE SECURITIES (USA) LLC 332,102,591 11.25% 1,799,961 12.67% 185
UBSA UBS SECURITIES LLC 327,029,127 11.08% 2,299,498 16.18% 142
DBAX DEUTSCHE BANK SECURITIES INC. 195,254,900 6.61% 1,108,814 7.80% 176
IEXG IEX SERVICES LLC 191,720,074 6.50% 678,625 4.78% 283
MSPL MORGAN STANLEY & CO. LLC 171,558,600 5.81% 777,522 5.47% 221
FLOW LAVAFLOW, INC. 165,601,276 5.61% 834,201 5.87% 199
JPMX J.P. MORGAN SECURITIES LLC 163,801,415 5.55% 741,248 5.22% 221
SGMA GOLDMAN SACHS EXECUTION & CLEARING, L.P. 155,152,765 5.26% 839,811 5.91% 185
MLIX MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED 154,230,349 5.22% 672,986 4.74% 229
BIDS BIDS TRADING L.P. 130,247,400 4.41% 365,785 2.57% 356
KCGM KCG AMERICAS LLC 121,968,993 4.13% 709,040 4.99% 172
ITGP ITG INC. 121,452,700 4.11% 440,372 3.10% 276
EBXL LEVEL ATS 96,458,000 3.27% 616,258 4.34% 157
LATS BARCLAYS CAPITAL INC. 91,596,213 3.10% 551,491 3.88% 166
ICBX INSTINET, LLC 81,872,226 2.77% 338,540 2.38% 242
APOG CITADEL SECURITIES LLC 44,677,617 1.51% 246,816 1.74% 181
DLTA DEALERWEB INC. 43,896,832 1.49% 85 0.00% 516,433
XSTM NATIONAL FINANCIAL SERVICES LLC 42,367,701 1.44% 116,281 0.82% 364
LTPL CREDIT SUISSE SECURITIES (USA) LLC 38,513,986 1.30% 246,434 1.73% 156
PDQM PDQ ATS, INC. 37,457,924 1.27% 166,735 1.17% 225
MSTX MORGAN STANLEY & CO. LLC 34,003,400 1.15% 201,219 1.42% 169
LQNT LIQUIDNET, INC. 31,477,100 1.07% 676 0.00% 46,564
IATS INTERACTIVE BROKERS LLC 29,974,679 1.02% 95,669 0.67% 313
PULX STATE STREET GLOBAL MARKETS, LLC 25,872,846 0.88% 2,063 0.01% 12,541
NYFX CONVERGEX EXECUTION SOLUTIONS LLC 25,629,175 0.87% 38,386 0.27% 668
CXCX CITIGROUP GLOBAL MARKETS INC. 24,109,306 0.82% 140,051 0.99% 172
VRTX CONVERGEX EXECUTION SOLUTIONS LLC 17,684,595 0.60% 76,793 0.54% 230
LQFI CITIGROUP GLOBAL MARKETS INC. 13,384,483 0.45% 163 0.00% 82,113
XIST INSTINET, LLC 13,256,200 0.45% 18,602 0.13% 713
BOOK BLOOMBERG TRADEBOOK LLC 9,380,298 0.32% 41,439 0.29% 226
LQNA LIQUIDNET, INC. 7,942,400 0.27% 3,634 0.03% 2,186
MLVX MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED 3,891,300 0.13% 12,378 0.09% 314
MSRP MORGAN STANLEY & CO. LLC 2,499,700 0.08% 8,015 0.06% 312
AQUA AQUA SECURITIES L.P. 1,700,850 0.06% 181 0.00% 9,397
LEHM BARCLAYS CAPITAL INC. 1,438,933 0.05% 29 0.00% 49,618
RCSL RIVER CROSS SECURITES, LLLP 1,333,732 0.05% 5,581 0.04% 239
JEFX JEFFERIES EXECUTION SERVICES, INC. 706,586 0.02% 2,888 0.02% 245
FNBR FOLIOFN INVESTMENTS, INC. 425,410 0.01% 11,067 0.08% 38
WDNX WEEDEN & CO.L.P. 110,419 0.00% 167 0.00% 661
PROS PRO SECURITIES, L.L.C. 100 0.00% 1 0.00% 100






Total 2,951,782,201 100.00% 14,209,505 100.00% 208

FINRA ATS stats from June 2014 FWIW.
Original FINRA data