Tag Archives: rule of law

Trading for Peanuts: the Illusion of Transparent Markets


Yet investors worry that, in many cases, competition has brought down the visible price of trading by adding hidden costs. Two anxieties stand out. One is the worry that the current set-up of the markets allows high-speed traders to anticipate big orders and “front-run” them, moving prices in an unfavourable direction before an order can be executed. The other is the question of how robust the system is, with regulators still unable fully to explain events like the “flash crash” of 2010, when the Dow Jones Industrial Average plunged by 9% in minutes before rebounding.

Start with fears of front-running. Many institutional investors complain that ultra-fast traders spot big orders entering the market, and race ahead of them to adjust their prices accordingly. Attempts to hide from the speedsters can go awry. In January Credit Suisse and Barclays, two big banks, agreed to pay $154m in fines for misleading clients about the workings of their “dark pools”, where offers to sell and bids to buy are not published. In theory, that protects investors from front-running; in practice, several of the firms running such venues had concealed the central role that high-frequency traders played on them. (Credit Suisse didn’t admit or deny wrongdoing in the settlement.)

There is another, less-often-told side to the story. Speed is necessary to knit together a dispersed set of exchanges, so that investors are immediately routed towards the best price available and so that their orders are the first to get filled. And plenty of high-frequency traders are market-makers; it is their job to adjust prices in response to new information. Nonetheless, the idea that markets are rigged is widespread, not least thanks to the publication of “Flash Boys”, a book by Michael Lewis on the evils of high-speed trading.

One proferred solution is to level the field by slowing things down deliberately. IEX, whose founder is the hero of Mr Lewis’s book, is a trading platform that has applied to the SEC to become an exchange. It uses miles of coiled cable to create a “speed bump” that delays trades to the advantage of institutional investors. The SEC has received more than 400 letters in support of its application, but there is a vigorous debate about whether IEX’s system complies with the requirements of Regulation National Market System (Reg NMS). Some think that the better solution would be to get rid of Rule 611, which in effect requires orders to be sent to the exchange showing the best price, even though such quotes can sometimes be unobtainable in practice. The SEC will vote on IEX’s application by March 21st.

Share Trading, Complicate, then Prevaricate, Economist, Feb. 27, 2016

Who Cares about the Rule of Law in Afghanistan?

SIGAR.  image from https://www.sigar.mil/

Office of the Special Inspector General for Afghanistan Reconstruction, known as SIGAR: Rule of Law in Afghanistan: U.S. Agencies Lack a Strategy and Cannot Fully Determine the Effectiveness of Programs Costing More Than $1 Billion

U.S. efforts to develop the rule of law in Afghanistan have been impaired by four significant factors. First, U.S agencies lack a comprehensive rule of law strategy to help plan and
guide their efforts. Second, DOD [US Department of Defense] is unable to account for the total amount of funds it spent to support rule of law development. Third, DOD, DOJ [US Department of Justice], State Department, and USAID all have had problems measuring the performance of their respective rule of law programs. Fourth, U.S. efforts are undermined by significant challenges from pervasive corruption in Afghanistan’s justice sector and the uncertainty regarding whether the Afghan government can or will sustain U.S. program activities and reforms. U.S. agencies—led by DOD, DOJ, State, and USAID—lack a current, comprehensive interagency rule of law strategy to help plan and guide U.S. rule of law development efforts in Afghanistan….SIGAR determined that DOD, DOJ, State, and USAID have spent more than $1 billion on at least 66 programs since 2003 to develop the rule of law in Afghanistan.

The CIA Drone Program as a Violation of Human Rights

The Central Intelligence Agency’s drone program has come under attack by human-rights groups who say they are preparing a broad-based campaign that will include legal challenges in courts in Pakistan, Europe and the U.S.  WSJ’s Evan Perez has exclusive details of a British-based group taking legal action over an October drone mission that killed two youths in Pakistan.  The nascent effort is being modeled after the challenges brought by some of the same groups against the administration of President George W. Bush over detentions at the Guantanamo Bay military prison and in secret CIA “black sites,” say lawyers involved in the planning.

The British-based charity Reprieve and its Pakistani partners, in an initial step, sent a letter Dec. 2 to the U.S. ambassador to Pakistan, Cameron Munter, asking about his role in authorizing a drone strike on Oct. 31 that the lawyers said killed two youths, age 12 and 16. The letter offers Mr. Munter a chance to “disavow what happened” before the group files suit.  U.S. officials deny any youths were killed, and identified the dead as al Qaeda facilitators. U.S. officials say that the drones are a centerpiece of the campaign against al Qaeda and that the CIA takes extraordinarily steps to target only wanted militants and minimize civilian casualties.

Reprieve says the aim of the campaign is to hold senior U.S. officials responsible for possible human-rights violations in the drone attacks.The Obama “administration needs to think about the potential international legal liability of their officials,” said John Bellinger, a former legal adviser for the State Department during the Bush administration who is now at the Council on Foreign Relations. “They’re convinced they’re on the side of the angels and can’t believe someone might accuse them of war crimes.”

There is some precedent in recent years for using lawsuits and public campaigns to embarrass the U.S. and compel disclosures.  Legal actions filed in the U.S. and Europe helped expose details of clandestine CIA programs, prompting some governments to scale back their cooperation. These include the agency’s practice of extraordinary rendition, in which the U.S. moved prisoners to third countries for detention and questioning.

Mr. Munter and his spokesman didn’t respond to requests to comment. Lawyers said the planned lawsuit will accuse the ambassador of being a co-conspirator in the two deaths.  Reprieve Director Clive Stafford Smith said the group was also preparing to press European governments to detail their role in providing intelligence that allegedly has been used in the U.S. strikes. He said the group also intends to target European companies which help to build components used in the drone program.

While earlier legal campaigns produced few victories for human-rights groups, the attention they generated in some cases moved public opinion, resulting in policy changes.  A U.S. lawsuit against Boeing Co.’s Jeppessen unit, for its role as a CIA contractor in rendition flights, was turned back in 2009 by U.S. courts. But during its years under litigation, it brought attention and helped expose details about the CIA program.

In the U.S., the American Civil Liberties Union last year used a lawsuit on behalf of the father of Anwar al-Awlaki, a Yemeni-American cleric who the U.S. said was a leader of al Qaeda in the Arabian Peninsula, to force the U.S. for the first time to explain why Mr. Awlaki was being targeted for killing.  The ACLU failed in the father’s aim to stop Mr. Awlaki from being killed. “That said, the case has served a purpose—it has provoked a public debate,” said Jameel Jaffer, the ACLU lawyer who argued the case. He said the case “ultimately compelled the Obama administration to at least explain the understanding of the law. And ultimately the case was important in forcing a conversation about transparency.”  The ACLU is in discussions with family members about follow-up legal action. That includes a suit over another drone strike in Yemen that inadvertently killed the young son of Anwar al-Awlaki.

Mr. Smith acknowledged the uncertainty of bringing a lawsuit in Pakistan targeting Mr. Munter because of the immunities typically afforded to diplomats.  The letter sent by Reprieve’s Pakistani partners, the Foundation for Fundamental Rights, to Mr. Munter says Tariq Aziz, 16, and Waheed Khan, 12, were killed in a drone strike in Pakistan’s North Waziristan tribal area just days after participating in meetings in Islamabad organized by Reprieve, which gave cameras to Tariq and others to document drone strikes.  The Foundation’s letter to Mr. Munter says he may share in the liability for the deaths because, as ambassador, he is consulted before each strike, and can raise objections. The letter cites reports by The Wall Street Journal describing Mr. Munter’s role in the process.  U.S. officials deny that any innocent civilians, or children in particular, were killed in the Oct. 31 strike. The officials said the CIA is able to differentiate between adults and children and said they believe the individuals killed were adults who were involved in al-Qaeda’s activities.

ADAM ENTOUS,EVAN PEREZ and SIOBHAN GORMAN, Drone Program Attacked by Human-Rights Groups, Wall Street Journal, Dec. 9, 2011

Afghanistan: the army knot, the rule of law

The global community has failed to create a politically stable and economically viable Afghanistan despite pouring billions of dollars into the South Asian nation during a decade-long war against the Taliban, says the International Crisis Group.  The Brussels-based think tank said the United States and its allies still lacked a coherent policy to strengthen Afghanistan ahead of a planned withdrawal of foreign combat troops from the unpopular war by the end of 2014.

“Despite billions of dollars in aid, state institutions remain fragile and unable to provide good governance, deliver basic services to the majority of the population or guarantee human security,” it said in a report released this week.  Violence is at its worst in Afghanistan since U.S.-backed Afghan forces toppled the Taliban government in late 2001, with high levels of foreign troop deaths, and record civilian casualties during the first six months of 2011.  Afghanistan relies on foreign aid for around 90 percent of its spending, but many international donors are reluctant to channel aid through the country’s ministries because of a lack of capacity and rampant corruption.  Public sector corruption is seen as worse than in any other country except Somalia, and equal to Myanmar, according to Transparency International. President Hamid Karzai has acknowledged graft exists in his government but says foreigners are also to blame.

“The impact of international assistance will remain limited unless donors, particularly the largest, the U.S., stop subordinating programing to counter-insurgency objectives, devise better mechanisms to monitor implementation, adequately address corruption and wastage of aid funds,” said the International Crisis Group (ICG).

About $29 billion of that had been spent on the Afghan police and army, which “have thus far proved unable to enforce the law, counter the insurgency or even secure the seven regions” recently handed over to them, the report found.  “There is no possibility that any amount of international assistance to the Afghan National Security Forces will stabilize the country in the next three years unless there are significant changes in international strategies, priorities and programs,” it said.

By Michelle Nichols, World fails Afghanistan despite spending billions, Reuters, Aug 6 2011


Afghanistan: predatory government and shaky allies


While the United States has touted military success against the Taliban, officials admit they have made less progress off the battlefield in improving Afghanistan’s government and charting its political future.  Critics say the Obama administration lacks a strong political strategy to complement military plans, but officials contend they are making headway in the difficult task of turning a nation shattered by war into a stable democracy.  The White House is hoping its strategy — which rests on a bigger U.S. civilian presence to help improve basic services and governance, political support for reconciliation talks, and pressure on Pakistan to end militant safe havens — will bear more fruit as it starts to withdraw troops in July.

But more than nine years after the ouster of the Taliban government, Afghanistan is plagued by corruption. Ties with neighboring Pakistan are precarious and there is little evidence to suggest nascent talks with the Taliban will make quick progress.  Below are scenarios for several of the key areas of the United States’ political strategy for Afghanistan.


Afghan institutions are stronger than they were in 2001, but many Afghans still go without basic services like health care and clean water. Few Afghans trust courts and local government is often described as “predatory.”  Last year Washington sent hundreds of civilian officials to Afghanistan to help bolster governance at the local level, but officials say change will be slow at best.  Rule of law is critical. You’re not going to solve this by military means alone,” said John Dempsey, a senior State Department adviser who works on governance issues.

In the best scenario, U.S. efforts to get local jobs filled with technocrats would bear fruit. New judges would improve faith in the judiciary and service delivery would improve.  Such steps, however, will depend on improving security, especially in southern and eastern Afghanistan, and progress in curbing corruption that has plagued the public sector.

If that does not happen, civilian efforts to transform local government could fall flat. In that scenario officials continue to prey on Afghans and corruption goes on unchecked.  All of this could endanger the plan to put Afghans in full control of their own country by the end of 2014 and give Western countries a chance to exit gracefully.


As U.S. attention has turned from Iraq to Afghanistan, a gulf has widened between Washington and Afghan President Hamid Karzai over corruption, civilian casualties, and more.  “There is a trust deficit between the U.S. coalition and the government of Afghanistan. Often … Karzai has believed the United States was working to undermine him,” one former U.S. official said on condition of anonymity.

Widespread reports of fraud in the most recent presidential and parliamentary polls did nothing to put to rest some U.S. officials’ desire to see new leadership in Kabul.  This month the country was plunged into a new crisis when Karzai faced off against incoming lawmakers over his efforts to delay the new parliament’s inauguration.

In an ideal scenario, Karzai would get tough on corruption and foreign officials would smooth over past strains. A more productive relationship would blossom between Karzai and lawmakers, adding to the government credibility.  If this does not happen, U.S. officials may find a less cooperative central government that would make it more difficult to transition smoothly out of the war. Corruption would alienate Afghans and fuel support for the Taliban.


As security has deteriorated over the past year, a consensus has grown around the idea that the war in Afghanistan cannot be won without a negotiated settlement with the Taliban.  Karzai’s government has been speaking to the Taliban for at least two years but reportedly nothing of substance has been discussed.

If the U.S. gamble succeeds, last year’s troop surge will further weaken the Taliban and put the Afghan government in a stronger negotiating position. In an ideal scenario, Saudi Arabia and Turkey would broker discussions and true decision-makers within the loose, shadowy Taliban organization would come to the table.  If Western military efforts sputter, however, the Taliban will have little incentive to seriously negotiate. In this scenario, Taliban leaders in Pakistan would refuse to lift preconditions, including a full withdrawal of foreign troops, and would be loathe to risk losing by engaging with Western powers. Talks would fail to get off the ground.


Perhaps the most uncertain element in U.S. strategy is Pakistan, which Washington has been pressing to quash Taliban and other militants sheltered within Pakistani borders.  “It’s a dilemma because in some ways Pakistan is an ally. It allows supplies and attacks on al Qaeda in Waziristan, but it also acts as an adversary,” the former official said.

In one scenario, massive U.S. aid funds combined with veiled threats will convince civilian and military leaders in Islamabad to deploy troops to restive lawless areas along the country’s western border, reducing the need for U.S. drone attacks in those regions.  Pakistan would also crack down on elements of security forces who are cooperating with or supporting militants and Islamabad would do more to foster reconciliation talks.  In the other scenario Islamabad’s decisions are driven by awareness that U.S. military presence will soon shrink.  Preferring a stronger Pashtun Taliban than an Afghan government friendly to its arch-rival, India, Pakistan would hedge its bets. Taliban attacks in Afghanistan would continue.

Missy Ryan, SCENARIOS – Will U.S. political strategy succeed in Afghanistan?, Reuters, Jan 25 2011