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Spoofers Tricked High-Speed Traders by Hitting Keys Fast

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Re: Spoofers Tricked High-Speed Traders by Hitting Keys Fast

#81

Post by kasey_junk »

gizmo686 wrote: post #72
mhomde wrote: post #45

Earlier quoted context omitted.

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…

I would think that is is easier to prove intent in HFT (with the appropriate court orders). The source code should make it clear what the intent was.

Why? Very rarely will you see something that like:

//spoofing logic goes here.

It is usually expressed in a variety of algorithms in a variety of places. Further, even getting the code is very far down the path of legal proceedings and having the expertise to suss out intent is outside of the skill set of most regulators. Looking through emails/requirements materials and/or having an informant is much more in their skill set.

Re: Spoofers Tricked High-Speed Traders by Hitting Keys Fast

#82

Post by kasey_junk »

FireBeyond wrote: post #75
gd1 wrote: post #15

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 The fact that they may then be withdrawn 800 microseconds later when the HFT…

I don't think this makes it fraud. Fraud would be the inability to deliver. 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…

Well ok, it's not fraud. But it is a securities law violation. Because this specific act is illegal.

Re: Spoofers Tricked High-Speed Traders by Hitting Keys Fast

#83

Post by kasey_junk »

FireBeyond wrote: post #77
joosters wrote: post #5

Earlier quoted context omitted.

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?

"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.

No. Spoofing harms HFT. They would prefer if it didn't happen (well most would prefer it). If this were the case of regulatory capture by HFT firms (which are not big enough or powerful enough to capture much) they would make spoofing harder to do.

Re: Spoofers Tricked High-Speed Traders by Hitting Keys Fast

#84

Post by kasey_junk »

FireBeyond wrote: post #78
gd1 wrote: post #38

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. 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…

"Markets work on trust, if you don't actually want to buy/sell what you're claiming you want to buy/sell then you are lying." 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 re…

> "I don't want to sell this stock at this price, but I WILL" should never be considered fraud

A) it isn't fraud, it is order spoofing, which is precisely defined to be based on intention.

B) lots of our legal system is based on intention. It is a common aspect, not a rabbit hole.

Re: Spoofers Tricked High-Speed Traders by Hitting Keys Fast

#85

Post by gd1 »

FireBeyond wrote: post #78
gd1 wrote: post #38

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. 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…

"Markets work on trust, if you don't actually want to buy/sell what you're claiming you want to buy/sell then you are lying." 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 re…

You seem to be mixing up different levels of wanting and intention. I may not want to eat my brussel sprouts for dinner, but when I poke them with a fork and raise them towards my mouth I am intending to eat them. Not pull them away at the last second. I'm sure no one enjoys dumping a stock as it plummets, or wants to dump a stock when it plummets, but when they are actually carrying out the process of selling that stock, then they do want the trade to go through. It is their intention to successfully complete the sale of the stock. That's what we're referring to.

Re: Spoofers Tricked High-Speed Traders by Hitting Keys Fast

#86

Post by gd1 »

FireBeyond wrote: post #76
gd1 wrote: post #22

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 you describe is called 'slow playing' in poker, not bluffing. Put it this way, if spoofing (bluffing) were legalized in markets, how do you think it would work out for the little guy? Who has the advantage in no-limit Texas hold em? The guy with the biggest chip stack bullies the pot.

Re: Spoofers Tricked High-Speed Traders by Hitting Keys Fast

#87

Post by solve »

dagw wrote: post #37
solve wrote: post #35

The article has to be completely misrepresenting which part, exactly, was illegal here. Nearly every high frequency trader in every electronic market aims to do something very similar to 90% of what he describes here. Is it all because of the motive? And bots can legally do the exact same thing because it's harder to prove any motive behind a bot's actions?

which part, exactly, was illegal here. The part where he did this with the expressed intention to deceive the market. This is one of those cases where your intentions are far more important that your actions.

Internet lawyers... why did I bother.

Re: Spoofers Tricked High-Speed Traders by Hitting Keys Fast

#88

Post by mapt »

gd1 wrote: post #38
mapt wrote: post #30

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…

Every single trade is market manipulation. Actions have effects, regardless of intent.

Re: Spoofers Tricked High-Speed Traders by Hitting Keys Fast

#89

Post by kokey »

wombatpm wrote: post #68
kokey wrote: post #31

I quite liked the style of writing in this article. It's days like this that I wish news outlets like Bloomberg and IFR has RSS feeds for particular journalists.

The do: http://www.bloombergview.com/rss/contributors/megan-mcardle.... http://www.bloombergview.com/rss/contributors/matt-levine.rs...

Thank you!
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