71–80 of 89 posts
Earlier quoted context omitted.
I've read both "Flash boys" and "Dark Pools". Do you have any other book recommendations on this subject?
Those are the only ones I know of that do "narrative" non-fiction. If you are interested in technical books, Trading & Exchanges by Harris is good (if dated) and Algorithmic Trading & DMA by Johnson.
Earlier quoted context omitted.
>So they really were genuine offers to sell and buy shares. They weren't genuine, that's the point. They were offers made with the express intention and hope that they never get filled. The orders from high frequency traders in contrast are honest orders, when they are sent they honestly express that the trader wants to trade at that price. The fact that they may then be withdrawn 800 microseconds later when the HFT…
If you're saying that HFT algorithms don't publish trades from a pure manipulation purpose I call BS. There are many HFT firms that been caught with their hand in the cookie jar doing just that, the problem is that they are even more that hasn't. It's really hard to prove intent when trading is done in microseconds and the truth lies somewhere in the algorithm. Those who got caught got caught mainly because of their…
Earlier quoted context omitted.
I don't think fenollop means not withdraw it at all. He means after someone has said "I'll take that offer". At which point you can't withdraw it. So these people will make a loss of enough people take up their offers. This risk is mentioned in the article. It doesn't explain why "spoofing" is illegal though. It should be legal. They are trying to shift the market (so is everyone) through an action that exposes thems…
This system currently does not allow you to withdraw an offer once it has been matched. That is not what happened here. The reason "spoofing" is illegal is because it gives a huge information advantage to one party that the other parties do not have. Similarly to insider trading. I have no opinion on whether those should be illegal, but if the basic premise of the market changes from "we assume everyone here wants to…
Earlier quoted context omitted.
This system currently does not allow you to withdraw an offer once it has been matched. That is not what happened here. The reason "spoofing" is illegal is because it gives a huge information advantage to one party that the other parties do not have. Similarly to insider trading. I have no opinion on whether those should be illegal, but if the basic premise of the market changes from "we assume everyone here wants to…
The information isn't garbage though because people can purchase the shares that are being spoofed. Even if the spoofer doesn't want it to happen you can still do it. You agreed with me, you can't withdraw the offers once matched so the offers are legitimate.
In a spoofing allowed word, that volume is meaningless. Market makers can only differentiate on how quickly they can pull their fake orders and how much risk they are allowed to play with. Not something I'm sure we want to be optimize the rules for.
That said, given the difficulty in enforcement of this particular rule, it may be worthwhile to just throw our arms up and say, "we can't enforce it, so lets make it legal and everyone moves forward on an even playing field".
Earlier quoted context omitted.
It's an odd situation, for sure. After all, these share orders were being entered by humans and could have been sitting in the market order books for several seconds. In that time, anyone could have taken their orders. So they really were genuine offers to sell and buy shares. Compare that to high frequency traders where it is alleged that 'flash' market orders are submitted and cancelled so fast that no-one could ac…
>So they really were genuine offers to sell and buy shares. They weren't genuine, that's the point. They were offers made with the express intention and hope that they never get filled. The orders from high frequency traders in contrast are honest orders, when they are sent they honestly express that the trader wants to trade at that price. The fact that they may then be withdrawn 800 microseconds later when the HFT…
He is putting orders in with the intention and hope that they never get filled, but as long as they are both fillable and filled when matched, what fraud has occurred?
I can send you an offer for something with the intent and hope you won't accept it - maybe it's a lowball offer to sell my car - but as long as I sell it to you when you accept and an accord has been reached, no fraud has been committed.
(edited for tense)
Earlier quoted context omitted.
Why does his state of mind matter? I mean it matters for criminal matters, but why for civil? Either he actually was willing to make good on his offer or he wasn't. His reasons are irrelevant. "hope that they never get filled" is not a reason to make this a crime. If he actually refused to fill them, then sure. But hoping?
I don't write the rules, I'm just telling you what they are. I guess it boils down to the idea that bluffing is banned in financial markets. What differentiates making a bluff from a regular raise in poker? You have to 'make good' on the bet either way, yes? The difference is that you're 'hoping' that you don't get called, 'hoping' that your opponent folds. Not allowed in markets. Probably a good thing too, or they'd…
Earlier quoted context omitted.
That's exactly what I was thinking. When high frequency traders are doing it it's OK but when this guy tricks them into actually taking some risks it's fraud.
I think the only evidence for fraud here are the recordings of the people discussing their aims of manipulating the markets. If those didn't exist then it does sound like the trades alone could never be considered market manipulation. If that is the case, am I breaking the law if I just buy some shares and, during the phone call with my dealer, make a comment that I hope my share purchase drives the price up?
And if it's not, why isn't it? Basically it's a double standard, because (most of) the markets are too cosy with HFT firms.
Earlier quoted context omitted.
So if I offer a trade, and then withdraw the trade because I decide I don't like the idea anymore (or 'any other reason')... that's legal. And routine to do on microsecond timescales. But offering a trade, and then withdrawing the trade manually a few seconds later because I never intended to execute the trade... that's not legal? What was the original rational for creating this class of thoughtcrime? Why does it cri…
>So if I offer a trade, and then withdraw the trade because I decide I don't like the idea anymore (or 'any other reason')... that's legal. And routine to do on microsecond timescales. Yes that's right. So quickly you may as well assume that they are updating the price they are willing to buy/sell continuously in realtime. Which is the idea. And because they are updating their prices continuously and accurately, they…
No, that's patently not true. If you are UNWILLING, or UNABLE, to execute a trade when matched, then you are lying.
Plenty of people "don't actually want" to buy/sell, every day - using that phrasing, you could point to people who are forced to cover shorts or dump a stock as it plummets to recoup some of their losses.
"I don't want to sell this stock at this price, but I WILL" should never be considered fraud - for the very least reason that it opens a deep rabbit hole into a form of thought crime that really, do many market participants want opened - when they're asked to explain, with a straight face and credulity, what their market strategies are really intended to do.
Earlier quoted context omitted.
He tried to manipulate the market to take an advantage of the shift: http://en.wikipedia.org/wiki/Market_manipulation You are not allowed to do this if you are a simple guy from the street.
You are not allowed to do it, full stop.
Earlier quoted context omitted.
I don't write the rules, I'm just telling you what they are. I guess it boils down to the idea that bluffing is banned in financial markets. What differentiates making a bluff from a regular raise in poker? You have to 'make good' on the bet either way, yes? The difference is that you're 'hoping' that you don't get called, 'hoping' that your opponent folds. Not allowed in markets. Probably a good thing too, or they'd…
Saying that bluffing is not allowed is disingenuous. Why, then, are sellers allowed to break up big blocks of stocks into smaller orders to avoid triggering algorithms in the market? How is that not bluffing. "I have 1M shares to sell, but if I do that, I'm going to take a bath. But if I trickle them in, break them up, etc..." - what makes one strategy, and the other a bluff?
What makes one worthy of legal rules and the other not? Don't know.