It's Just a Bug Bro Part 3: It's Actually a Feature Edition
===========================================================

| Author       | Source       | 
| :-------------: |:-------------:|
|  [u/hell-mitc](https://www.reddit.com/user/hell-mitc/) | [Reddit](https://www.reddit.com/r/Superstonk/comments/mr4tk4/its_just_a_bug_bro_part_3_its_actually_a_feature/) | 

---

[DD 👨‍🔬](https://www.reddit.com/r/Superstonk/search?q=flair_name%3A%22DD%20%F0%9F%91%A8%E2%80%8D%F0%9F%94%AC%22&restrict_sr=1)

Holy fuck guys hold on because shit is about to get real weird. And I don't know if this will change anything but it proves we are playing a bigger game than we all expected. I [touched on last night how I thought the banks were actually the ones pulling the strings in all this](https://www.reddit.com/r/Superstonk/comments/mqca35/its_just_a_bug_bro_part_2_loopholes_edition/). Loaning on ridiculous margins, holding our shares in street name (ie registered with GME in their name but our name on their books), and, as turns out, routing orders in their best interest (IEX is starting to sound pretty awesome).

Our Boy Ken

Someone posted a pic the other day of Kenny G. in High School and how their mom went to school with him when he was on the math team. This proves to be a lot more important I think than any of us thought. Our boy Kenny, as a Hedgie Manager and mathlete, probably is A LOT more successful than we all think.

[![r/Superstonk - It's Just a Bug Bro Part 3: It's Actually a Feature Edition](https://preview.redd.it/fxts65spg8t61.png?width=357&format=png&auto=webp&s=e627912d985fa2108708d76920991cc660237055)](https://preview.redd.it/fxts65spg8t61.png?width=357&format=png&auto=webp&s=e627912d985fa2108708d76920991cc660237055)

Yeah, that one. So I got to thinking, what has Kenneth C Griffin accomplished outside of running a massive hedge fund? Well, here we go to Patent Town (not as fun as tendie town). Outside of duckduck and oggole, his name is tucked away on several patent docs that explain the markets WAYYYY better than anything any of us have read in DD.

[![r/Superstonk - It's Just a Bug Bro Part 3: It's Actually a Feature Edition](https://preview.redd.it/g09spa4te8t61.png?width=1714&format=png&auto=webp&s=f3176cb0a3ef622ae3d9e68319c36ee863723308)](https://preview.redd.it/g09spa4te8t61.png?width=1714&format=png&auto=webp&s=f3176cb0a3ef622ae3d9e68319c36ee863723308)

I guess this kind of makes sense. The guy is probably a math genius, and it would make sense he has developed some decent equations and ideas around the market. But it goes deeper. In particular, the first patent (7587347), then it just gets crazy aligned with how GME is behaving.

Citidel's & Ken's First Baby

Computer implemented and/or assisted methods and systems for detecting, tracking and responding to toxic, or likely toxic, orders in an equities order flow using toxicity and/or profit analyzers

ABSTRACT

"Methods and systems are provided which enable equities broker-dealers to execute an equity trade order while simultaneously eliminating (or at least reducing) exposure to the negative consequences associated with toxic (or likely toxic) orders in the equities market. By using toxicity and/or profit analyzers, for example, to detect, track and respond to the level of toxic (or likely toxic) orders present in an equities order flow, a broker dealer can reduce the level of risk inherent in serving as counter-party to order flows, such as anonymous equities order flows. Various alternative embodiments are also disclosed."

In the most basic description of this patent, the software inherently recognizes, parses and rejects what are considered "toxic" trades. It seems a toxic trade is nothing more than a trade listed too far above or below the consolidated market price. Now, the information that they use to describe how it works makes more sense than anything else we have seen in market data. For one, did you know NASDAQ stands for "National Association of Securities Dealers Automated Quotation system"? Me either. Turns out, my first DD wasn't wrong when I said [Yahoo and NASDAQ were probably the best for accurate, free data](https://www.reddit.com/r/Superstonk/comments/mlqedv/its_just_a_bug_bro/).

Now, we have all seen over the last couple days that High Frequency Trading seems to be driving the price down on GME. Well guess what pops up in this document as well? Trade routing. Yeah, the kind of trade routing that you would want to have done for, oh I dont know, fast, special price movements? Kind of beating the price down through routing the trades exactly how you want to?

Well, it makes it even more interesting that they go out of their way to describe professional traders taking advantage of insider information, and how retail individual investors trade purely speculatively. I mean, if you were trying to consolidate power through several different arms, why wouldnt you? Here is a fun line:

"In many instances, a consolidating broker-dealer does not know the identity of the investor who submitted the order to which it will serve as counter-party. Thus, a consolidating broker-dealer that accepts equity orders (e.g., internalizes, executes and/or otherwise commits to the execution of the orders) from an OFP may be exposed to significant financial risk due to, in at least one embodiment, the anonymous nature of orders within that order flow. For example, as explained above, professional traders may seek to take advantage of the consolidating broker dealer by trading on information affecting future price movements which is not available to the general investing public (or to the broker-dealer). In such instances, these professional traders may send toxic (or likely toxic) orders to a potentially naive broker-dealer that may consequently acquire net trading losses from serving as a counter-party for these orders."

Basically, a broker dealer might experience losses if traders take advantage of fluctuating prices? SERIOUSLY?! Personally, I might experience a loss if a broker-dealer (Citadel) their wholesaler (probably Citadel subsidiary or their FUCKING BANK) decided to allow these HFTs to go through to market.

Here's on of the first pics to describe the flow:

[![r/Superstonk - It's Just a Bug Bro Part 3: It's Actually a Feature Edition](https://preview.redd.it/offwgo48n8t61.png?width=964&format=png&auto=webp&s=427b8114abefed6bf593cffb58e08cf8221c18d1)](https://preview.redd.it/offwgo48n8t61.png?width=964&format=png&auto=webp&s=427b8114abefed6bf593cffb58e08cf8221c18d1)

Oh, and here is how they get away with routing some after hours:

"It is common for one or more market-makers on a given market to be provided significant responsibilities, including overseeing the opening, providing continuous quotations in all of their assigned securities, and handling customer orders that are not automatically executed in connection with that exchange. In the case of the U.S. equities and options exchanges, these market-makers, which are responsible for maintaining fair and orderly markets, are generally termed "specialists." Depending on the particular exchange, the "specialist" may be referred to as, for example, a designated primary market-maker (DPM), lead market-maker (LMM), or primary market-maker (PMM), etc. Other market-makers in the crowd on an exchange floor, if any, are referred to as "floor market-makers." For U.S. listed equities (e.g., stocks listed on the American Stock Exchange (AMEX) or the New York Stock Exchange (NYSE)), there are also firms that make markets off the exchange floor, and these firms are known as "over-the-counter" (OTC) market-makers or third market-makers."

And here is how they flow some to hide it:

[![r/Superstonk - It's Just a Bug Bro Part 3: It's Actually a Feature Edition](https://preview.redd.it/5od3gf1qn8t61.png?width=948&format=png&auto=webp&s=8d24f0113a4c789bd71074d6a81bf488cda8092d)](https://preview.redd.it/5od3gf1qn8t61.png?width=948&format=png&auto=webp&s=8d24f0113a4c789bd71074d6a81bf488cda8092d)

FIG. 2 is a simplified illustration of another example of an order flow in the U.S. equities market, in which an order placed by an investor is internalized by a broker-dealer;

They can basically buy their same shares OVER AND OVER AND OVER again, through their own wholesaler. We hit the nail on the head again when we said they are routing market sells through their favored markets, and buy orders through their own wholesaler. That's why the HFTs are going lower, and they are probably net positive rebuying the shares at a lower price. Haha fuck.

But this can't go on forever. It seems to be resetting their risk and probability. Because of course, Ken et al. decided to create their own data platform to communicate between EVERYONE THEY DEAL WITH.

KENNYS LEGACY??

Method and system for measuring exposure of an investment fund to an issuer of financial assets

I can't decipher this as well other than it is a way for the web of Citadels broker-dealers, banks, wholesalers, markets, etc. to communicate risk, margin, price, everything. They can change what they want with the numbers to kick the can down the road. I am guessing, when "they" (whoever is pulling the strings) cut off Buying on RH and everywhere else, and the price tanked at almost $350 a little while ago, our boy Kenny realized that when they input the price at $350, they were getting fucking margined (maybe, this is speculation at this point).

But again, I think I have combed through these and things are pretty fucked. It almost looks like Ken had created a lot of this to actually benefit retail traders. Apart from the HF bottom line, he was down to build something that stopped professional traders from hurting the system. But it almost seems like since he wrote the fucking book, he (or the lawyers and rightful investors in citadel) took that away and made the system work in his advantage.

Buy and fucking Hold (just an opinion), because every share we remove and lock away in our own broker is less they can fuck with.

Obviously not financial, legal or software advice. And I can only hope a few more people read this.

TL;DR: Honestly, fucking read it. But because you're a lazy fuck, Ken and Citadel created the financial structure to stop "toxic" trading, and ended up using it to their advantage it seems. And he might not even be pulling the strings.

<http://patft.uspto.gov/netacgi/nph-Parser?Sect1=PTO2&Sect2=HITOFF&u=%2Fnetahtml%2FPTO%2Fsearch-adv.htm&r=0&p=1&f=S&l=50&Query=Griffin-Kenneth-C&d=PTXT>
