Front Running, High Frequency Trading, Buy Programs and Market Manipulation Using Futures--Then and Now!

By Victor Sperandeo with the Curmudgeon

Stock Trading Order Flow in 1966:

Victor’s introduction to stock market structure began in January 1966 at Pershing & Co., where he worked as a “quote boy” earning $65 per week (approximately $850 in today’s dollars). Pershing operated as a “broker’s broker,” executing orders on behalf of 40–45 brokerage firms nationwide.

The trading environment was a horseshoe-shaped room designed for speed and efficiency. Teletype operators received paper buy and sell orders from over two dozen machines. These orders were physically routed by quote boys to order clerks positioned near direct telecommunication lines to the NYSE floor. Orders were transmitted via headset to floor clerks, relayed to floor brokers (“$2 brokers”), executed at the specialist post, and reported back through the same chain—typically in under two minutes.

Speed was the firm’s defining value proposition, and the trading system was remarkably efficient given the technology of that time.

Early Information Advantage and Prototype Front-Running:

Overseeing this operation was Pershing’s trader, Milton Leeds, a well-known figure in several Wall Street accounts. Leeds monitored the Dow Jones News ticker in real time. Upon identifying market-moving news—such as a dividend increase—he would immediately initiate proprietary trades through the firm’s house account.

This process allowed execution within roughly 45 seconds of the news release, well ahead of broader market response. As public buying interest followed, positions could be liquidated at favorable prices, often capturing gains of 0.5 to 1 point with extremely high consistency (he won ~99% of the time). While legal at the time, this represents an early form of information-driven trading advantage that resembles what is now broadly associated with “front running” in high-frequency trading. It’s all about speed of execution after seeing the order flow.

Evolution to Program Trading and Futures-Based Strategies:

The introduction of S&P 500 futures in 1983 enabled a new class of institutional trading strategies. By the mid-1980s, “buy programs” became increasingly prevalent.

A typical strategy involved accumulating large equity positions—sometimes on the order of $1 billion in stocks of S&P 500 companies—in a staged manner about one hour before the close of trading. As the position built, traders would hedge exposure by shorting S&P 500 futures, effectively locking in spreads. The unwind phase reversed the sequence: equities were sold in waves while maintaining short futures exposure, which would then be covered strategically.

These strategies, executed at scale, generated substantial profits—often tens of millions of dollars—while minimizing downside risk. The key execution principles were disciplined accumulation (which attracted more buyers), avoidance of disruptive price signals (no news to move stocks), and tight control over market impact (no selloffs). Victor participated in hundreds of such buy and sell programs over the years and observed their consistent effectiveness. It was like “riding a gravy train” in that there were huge rewards with very limited risk.

Recent Market Behavior and Structural Observations:

Starting on March 30, 2026, without any market driving news, a similar type of buy program was repeated, but on a far larger scale and with copious quantities of money. Market watchers observed: sustained up- moves with no test of the March lows, minimal counter-trend activity, limited or no news that might drive stock prices higher, and persistent bid support. Have a look at the six-month SPY and QQQ charts below:

This inexplicable straight-up move in stock index prices, concurrent with the Iran conflict raging and the Strait of Hormuz closed, is most likely due to concentrated institutional buying rather than a general market consensus. There seemed to be many “risk free” mega trades initiated by unknown entities since March 30^th. The magnitude and consistency of order flows suggest the involvement of large, coordinated capital sources.

While attribution is inherently difficult, such patterns raise questions about the role of policy-driven or government led market intervention.

Because the up-move in stock prices was so and without a news catalyst, Victor believes it was initiated by the "Plunge Protection Team (PPT)” --- a nickname for the President’s Working Group on Financial Markets, created in 1988 to maintain financial market stability to prevent another October 19, 1987 stock market crash

While no official documentation confirms direct PPT trading activity, the group’s structure—comprising the Treasury, Federal Reserve, SEC, and CFTC—places it at the center of both policy coordination and market oversight.

In 1989, former Federal Reserve governor Robert Heller publicly argued that the U.S. central bank could support stock prices by buying stock index futures in a downturn, a proposal that made explicit what many assumed had already been contemplated.

If government authorities wanted to arrest a decline in U.S. equities, stock index futures are the way to do it. A concentrated futures bid can lift the index, improve sentiment, force shorts to cover, and trigger systematic buying of equities and index ETFs.

Insider Trading in Oil Futures:

Comparable trading dynamics are also observable in crude oil futures, which can be used to influence broader economic conditions. On April 17, 2026, a massive $760 million short position was placed on oil futures roughly 20 minutes before an official announcement that the Strait of Hormuz would be reopened, according to a report by Reuters:

l Between 12:24 GMT and 12:25 GMT traders sold a combined 7,990 lots of Brent crude futures, according to LSEG data.

l Based on the price at the time, these trades were worth about $760 million.

l At 12:45 GMT, Iran's foreign minister posted on X that passage for all commercial vessels through the Strait of Hormuz was declared completely open for the remaining period of ceasefire, in line with the ceasefire in ‌Lebanon.

l The announcement pushed crude oil down as much as 11% on the day in the minutes that followed.

l Reuters reported that on April 7 that bets worth around $950 million took place just hours ahead of the U.S. and Iran announcing a two-week ceasefire.

l On March 23^rd, traders sold $500 million in 15 minutes before U.S. President Donald Trump's announcement that he would delay attacks on Iran's energy infrastructure, triggering a 15% drop in the crude price.

l The U.S. Commodity Futures Trading Commission is investigating a series of oil futures trades, including those on March 23 and April 7, that were placed shortly before major policy shifts by Trump related to the war in Iran, a person familiar with the matter said on Wednesday.

The Incongruity of Simultaneous Sharply Rising Oil AND Equity Prices:

Historically, rising oil prices have preceded several recessions, e.g. 1973-75, 1980, 1981-82, 1990-91. Buying stocks relentlessly as oil prices spiked higher (above $100 for Brent and WTI crude oil), which greatly increased recession risk, isn’t at all logical.

It should make even the novice investor or trader consider that the straight-up move in stocks had nothing to do with fundamentals or “a free market speaking.”

-->Traders do not suddenly become stupid! This ruse is very well understood by pros as outright manipulation. I was a specialist and a block trader and experienced it all personally.

Regulatory and Structural Considerations:

In principle, trade attribution is traceable. Execution records, account-level data, and communication logs could provide clarity regarding the origin and coordination of large-scale market activity.

Oversight responsibility lies with regulators such as the SEC and CFTC. It would be very easy to find out who was involved if the SEC and CFTC really cared. Just have them ask: which firm(s) executed the trades, go to the firm(s) to get the name of the account, get a warrant for the phone records, and find out who spoke to who.

-->The fact that there is no investigation about the straight up move in stock prices, without any minor sell offs, suggests to me that it was U.S. government directed.

Speculation on How PPT Trades Might Be Done:

It’s well known that the NY FED conducts open market operations in U.S. Treasury and agency securities. I believe they also surreptitiously execute S&P 500 and oil futures trades with high-level coordination from major investment banks (such as Goldman Sachs, JP Morgan, or Morgan Stanley, BofA, etc.). To do that, the NY Fed would have to have special, secret trading accounts with the CME Group (S&P 500 futures) and NYMEX (WTI Oil futures), paying 10% of the normal futures exchange trading fees.

Curmudgeon Comments:

Distinguishing between aggressive but permissible institutional strategies and coordinated market intervention remains complex. The evolution from manual execution to algorithmic and high-frequency trading has further blurred these lines, with speed and access to order flow now central to competitive advantage.

While speculation suggests the Plunge Protection Team (officially the Working Group on Financial Markets) might intervene in market crises, there is no public evidence that the Federal Reserve Bank of New York directly executes S&P 500 futures trades, as its legal authority is generally restricted to government securities.

Also, it’s interesting to note that this has been the fourth time that the S&P 500 has hit an all-time record high while 5% of its members fell to 52-week lows! The other three times came just before major bear markets: July 1929, January 1973, and December 1999. Have a look at this table courtesy of Jason Goepert on X:

Meanwhile, the InvesTech Advance-Decline Divergence Index has been in a downtrend since the end of March and fell further throughout the week. This indicates that breadth is not in line with S&P 500 performance, and it warns that the market is vulnerable.

Analysts at UBS said that a measure of how many stocks were materially contributing to the S&P 500 index’s performance — so-called “effective constituents” — hit a record low of 42 last week, far below the level of about 100 that has been typical in recent decades.

“What looks like broad market resilience is, to a large extent, a small group of megacap technology and AI stocks pulling the index higher, while much of the rest of the market has had a more difficult period,” said Valérie Noël, head of trading at Syz Bank. “That raises fragility risk. If sentiment towards AI-linked names reverses, the downside…could be significant,” she added.

Victor’s Conclusions:

Across decades—from manual tape reading to program trading and modern electronic markets—the consistent theme has been the monetization of speed, information, and scale. While the mechanisms have evolved, the underlying incentives remain unchanged.

Market participants should remain aware that not all price action reflects a decentralized consensus. Structural forces, institutional flows, and policy considerations can play a significant role in shaping outcomes, particularly during periods of highly unusual market behavior. Skepticism about recent market action should be prevalent, but you won’t find it discussed by the mainstream media.

When equity indices levitate with unusual persistence, when draw-downs are very shallow, when bad news (e.g., Iran war and rising oil prices) is shrugged off, and when the heaviest buying appears precisely where futures liquidity is deepest, investors are entitled to ask whether they are witnessing free markets or U.S. government manipulation via the PPT.

If markets are to deserve trust, they must also deserve scrutiny. If government officials deny manipulation, then they should welcome full transparency into who is buying, when they are buying, and why the market keeps behaving as if someone with a policy mandate is underwriting it.

End Quote:

Of course, no one admits the PPT trades stock futures or there’s insider trading in crude oil futures. We can learn some wisdom here from Lysander Spooner (1808-1887), a 19th-century individualist anarchist. He heavily criticized government overreach, defining it as inherent tyranny. Here’s his most famous quote on that subject:

“Those who are capable of tyranny are capable of perjury to sustain it.”

Change “tyranny” to “manipulation” and we have what Victor believes to be huge U.S. government intervention in stock and oil futures markets.

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Stay healthy. Wishing you success and good luck. Till next time………………

The Curmudgeon
ajwdct@gmail.com

Follow the Curmudgeon on Twitter @ajwdct247

Curmudgeon is a retired investment professional. He has been involved in financial markets since 1968 (yes, he cut his teeth on the 1968-1974 bear market), became an SEC Registered Investment Advisor in 1995, and received the Chartered Financial Analyst designation from AIMR (now CFA Institute) in 1996. He managed hedged equity and alternative (non-correlated) investment accounts for clients from 1992-2005.

Victor Sperandeo is a historian, economist and financial innovator who has re-invented himself and the companies he's owned (since 1971) to profit in the ever-changing and arcane world of markets, economies, and government policies. Victor started his Wall Street career in 1966 and began trading for a living in 1968. As President and CEO of Alpha Financial Technologies LLC, Sperandeo oversees the firm's research and development platform, which is used to create innovative solutions for different futures markets, risk parameters and other factors.

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