This took place over a year ago - why is it being posted now?
CFTC Orders JPMorgan to Pay Record $920M for Spoofing and Manipulation (2020)
111–120 of 200 posts
Re: CFTC Orders JPMorgan to Pay Record $920M for Spoofing and Manipulation (2020)
#112Earlier quoted context omitted.
US prosecutors literally said that they cannot criminally charge JPM (in another case) because that would destabilize the US financial system. They are literally "too big to jail".
What's stopping them from charging the people responsible? Are the people so irreplaceable that they are effectively JPM?
they did charge them: https://www.cftc.gov/PressRoom/PressReleases/8013-19
Re: CFTC Orders JPMorgan to Pay Record $920M for Spoofing and Manipulation (2020)
#113Earlier quoted context omitted.
It’s crazy. If one tried to steal 10k from the bank, you would go to jail. If you steal millions through illegal trade practices, you just pay a fraction of what you stole.
Even if they had exactly the same outcome, one is theft the other is simply breaking the rules. It's a bit like killing a person using a gun and killing a person as a result of driving like the rules don't apply to you. Once it is established that you did the act, the first one undoubtedly puts you in jail for a very long time no matter who you are and the second one may get you a fine and no jail time so that no har…
Keep in mind that these categories are fuzzy. I Germany, a car driver was recently criminally convicted with murder after killing a pedestrian with his car.
The argument was that the way he was driving, we was accepting death. Like somebody shooting with a gun into a crowd.
https://www.lto.de/recht/nachrichten/n/lg-berlin-529ks6-20-k...
Re: CFTC Orders JPMorgan to Pay Record $920M for Spoofing and Manipulation (2020)
#114“This action sends the important message that if you engage in manipulative and deceptive trade practices you will be caught, punished, and forced to give up your ill-gotten gains,” added Division of Enforcement Director James McDonald. No, Mr McDonald, it's quite the opposite. The important message is that if your organization can keep the profits from criminal activities higher than the penalties, they can perpetua…
Facts.
Re: CFTC Orders JPMorgan to Pay Record $920M for Spoofing and Manipulation (2020)
#115Earlier quoted context omitted.
Ideally the less manipulation you have the better working market. So, it's good that spoofing is illegal. Their only purpose here was to: "Through these spoof orders, the traders intentionally sent false signals of supply or demand designed to deceive market participants into executing against other orders they wanted filled. " That being said, algos could have hit the large spoof bid, but imagine if it was legitimat…
> Ideally the less manipulation you have the better working market. So, it's good that spoofing is illegal. I think this is debatable. There's an ideal where no one spoofs and market prices are accurate at all times. But it's very difficult to enforce perfectly - there is no bright line test for whether you wanted a trade to execute or not, when you placed it. So in practice you are just always partially enforcing it…
I viewed the order book not as an oracle of the "real" price but as a multi-armed bandit which would spit out fills in a semi-stochastic fashion. my goal was to get the best fills, not to find the correct price. the best heuristic I found was a weighted liquidity provisioning scheme where I always entered one passive order and then followed up with an aggressive order after a certain period of time. you want to get in the queue so entering the passive order early is an advantage on some order books.
entering passive orders wasn't spoofing, but I was constantly cancelling orders. the difference between me and someone malicious was probably the frequency of my orders and how far from the midpoint they were - not vey frequent, and not very far. so its not a bright line.
Re: CFTC Orders JPMorgan to Pay Record $920M for Spoofing and Manipulation (2020)
#116since there is optionality in the order book perhaps a way to combat this would be to charge a proportionally higher fee for orders farther out of the money? like a real options book.
Re: CFTC Orders JPMorgan to Pay Record $920M for Spoofing and Manipulation (2020)
#117Earlier quoted context omitted.
Actually it was the SEC rules I had some exposure to but this was a few years ago and was communicated to us via the compliance dept. What I recall is that because of the difficulty in proving intent, the rules allow very broad interpretation on the part of the SEC. The bar for proving spoofing seemed very low as, for example, the SEC does NOT have to demonstrate that you made a profit from it. > But if the BBO isn’t…
> That might looks suspicious sure, but there may be other factors (not reflected in the book) influencing a change of desire on my part I think your example would easily satisfy regulators. But you have to have the logging with real time stamps to prove it or you need to be able to reconstruct the internal state by replaying the market data against that version of the code. Same goes for other pairs trades or other…
> I think your example would easily satisfy regulators.
That was kind of my point - the example scenario is clearly legitimate. The problem is that if spoofing is defined as submitting an order with no intent for it to execute, then in that scenario, that's exactly what I've done (for one of the orders).
So sure, it's seems clear that I should get a pass for doing it just once. What if I was doing a trade like this every day or tens or thousands of times a day? To the other participants, it looks like I'm flooding the book with orders which 50% of the time just get pulled for no apparent reason. The rule is supposed to protect other participants from being confused by such quotes, no?
Btw, I think it just muddies the waters by bringing up automated trading and the charge of "not having control over your algorithm" which is distinct from the specific charge of order spoofing. Whether the orders are entered manually or by a program does not fundamentally change their 'spoofyness' to other participants.
The fundamental issue I have is there is no quantifiable or clearly stated difference between spoofing and legitimate exposure control. I dislike laws which are so vaguely defined that the only way to remain law-abiding isn't to avoid specific behaviors but to avoid attracting any attention from the authorities.
Re: CFTC Orders JPMorgan to Pay Record $920M for Spoofing and Manipulation (2020)
#118“This action sends the important message that if you engage in manipulative and deceptive trade practices you will be caught, punished, and forced to give up your ill-gotten gains,” added Division of Enforcement Director James McDonald. No, Mr McDonald, it's quite the opposite. The important message is that if your organization can keep the profits from criminal activities higher than the penalties, they can perpetua…
I don't think people realize how much money JP makes. A cursor search shows that the fine is less than 10% of their last quarter NET income of 12.1 billion. I would certainly keep doing illegal things if my only penalty was a simple fine like that every 10 years.
JPM makes a lot of money doing a lot of things. You need to compare the fine vs. their trading revenue.
Re: CFTC Orders JPMorgan to Pay Record $920M for Spoofing and Manipulation (2020)
#119“This action sends the important message that if you engage in manipulative and deceptive trade practices you will be caught, punished, and forced to give up your ill-gotten gains,” added Division of Enforcement Director James McDonald. No, Mr McDonald, it's quite the opposite. The important message is that if your organization can keep the profits from criminal activities higher than the penalties, they can perpetua…
It's further enraging because people have been calling this out for years and mostly just been mocked and called conspiracy theorists for it.
Re: CFTC Orders JPMorgan to Pay Record $920M for Spoofing and Manipulation (2020)
#120Earlier quoted context omitted.
US prosecutors literally said that they cannot criminally charge JPM (in another case) because that would destabilize the US financial system. They are literally "too big to jail".
What's stopping them from charging the people responsible? Are the people so irreplaceable that they are effectively JPM?
They are not irreplaceable but it would create the sort of inverse "moral hazard" that might stop these practices, which are apparently what's being protected.