Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

CFTC Orders JPMorgan to Pay Record $920M for Spoofing and Manipulation (2020)

cftc.gov

Post reply on HN
Print view View original

181–190 of 200 posts

Re: CFTC Orders JPMorgan to Pay Record $920M for Spoofing and Manipulation (2020)

#181

Post by kodah »

toshk wrote: post #162
hogFeast wrote: post #158

Earlier quoted context omitted.

You misunderstand a lot about what went on there. One, there is no question that Sarao had nothing to do with the flash crash. The cause of the flash crash was a fund manager adding an extra zero to a trade they were making. The reason Sarao was blamed was to put pressure on him, and because the SEC needed to blame someone for there total failure to properly manage markets (the person who prosecuted the case against…

You are probably very right The story I remember was a popular documentary which had a story arch of a single trader single breaking the market from his parents bedroom. Which is a good story but most likely just a small part of the truth; also probably why the Wikipedia just mentions him shortly.

Personally, I treat documentaries as entertainment. They can be informative, but I usually only pay attention to the finer details they provide proof for. Any kind of arch or narrative I remain skeptical on.

Re: CFTC Orders JPMorgan to Pay Record $920M for Spoofing and Manipulation (2020)

#182

Post by BiteCode_dev »

BizarroLand wrote: post #164
axismundi wrote: post #29

“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…

If any of us had the opportunity to make $1 billion dollars and pay a $920 million dollar "naughty boy" fine after the fact, who here would say no? The fine should be ALL of the ill-gotten gains and then a naughty boy fine on top of it. To do otherwise means that you did not do justice.

If you are caught one time out of 10, this is still profitable and those people, being professional risk manager, will take the chance. Not to mention they can then invest the benefits in a difference venue, and make money from that, which will not be part of the fine.

Jail time however, is not something everyone will want to gamble on.

So, it should be what you said + jail.

Re: CFTC Orders JPMorgan to Pay Record $920M for Spoofing and Manipulation (2020)

#183

Post by genewitch »

konschubert wrote: post #113
mrtksn wrote: post #63

Earlier quoted context omitted.

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...

A year or three ago a guy driving a pickup truck killed a pedestrian in Vernon parish, LA, made a Facebook post akin to "hope this buffs out [of my truck]" and other negative things, and wasn't charged with anything because killing pedestrians isn't illegal in Louisiana, technically. I forget if he had political ties, but I don't think he did.

Re: CFTC Orders JPMorgan to Pay Record $920M for Spoofing and Manipulation (2020)

#184

Post by rich_sasha »

hogFeast wrote: post #160
ClumsyPilot wrote: post #136

Earlier quoted context omitted.

The difference is impact - Market for old cars or shoes is not indexed and securitised with a potential to cause a global financial meltdown.

Spoofing has been going since the mid-90s with no impact to the global financial system. It was only made illegal when markets went full electronic, and large HFT firms started losing money to spoofers. The real problem with market stability is nanosecond liquidity and HFT firms that will pull liquidity when things get dicey. Spoofing largely doesn't occur anymore, and you still see huge swings in prices because the…

Surely, HFTs are the key player for spoofing? To play this game, you need to be able to pull your orders faster than people can execute on them. E.g. you see flow on one exchange, you pull on the other?

As I see it, the main problem with spoofing is that it distorts the market information. Any trader, human or machine, can look at the current order book and assume it is somewhat bona fide. Without that, exchanges are just a random draw (more than otherwise). Hence the appeal of dark pools (well, at one time) etc.

Re: CFTC Orders JPMorgan to Pay Record $920M for Spoofing and Manipulation (2020)

#185

Post by genewitch »

lottin wrote: post #80
pid-1 wrote: post #69

Earlier quoted context omitted.

Shareholders literally own the company. Not making them accountable for their companies actions is prob the worse incentive system ever.

Apparently you didn't think very hard about that one. If you made the owner of a company criminally liable for any wrong-doing by the company's employees, nobody would risk owning a company. It would be impossible to have an advanced economy with these conditions.

I'm for the idea of no one wanting to own a company, who do I vote for?

Re: CFTC Orders JPMorgan to Pay Record $920M for Spoofing and Manipulation (2020)

#186

Post by BizarroLand »

TrainedMonkey wrote: post #172
BizarroLand wrote: post #164

Earlier quoted context omitted.

If any of us had the opportunity to make $1 billion dollars and pay a $920 million dollar "naughty boy" fine after the fact, who here would say no? The fine should be ALL of the ill-gotten gains and then a naughty boy fine on top of it. To do otherwise means that you did not do justice.

I feel like both you and parent are ignoring operational + reputation costs of being naughty boys. If we are saying the bad behavior should not be profitable the fine should be above (ill gotten gains - operational costs it took to acquire them + whatever interest those ill gotten gains received before the culprit got caught). Reputational losses are also a thing, agencies and whistleblowers will be paying a lot more…

I'm being dismissive but I doubt JP Morgan Chase is going to suffer any real backlash other than the direct financial punishment they are receiving here. There's also a good chance that they will file suit over it as it's worth spending a few million in lawyer fees to try to reduce or save the $920m entirely, so it's not even over yet.

Re: CFTC Orders JPMorgan to Pay Record $920M for Spoofing and Manipulation (2020)

#187

Post by csee »

dudeinjapan wrote: post #143
csee wrote: post #59

Earlier quoted context omitted.

Unlikely. You can't know which orders are spoofs because they're anonymous and blended with the majority of real orders. Anyone that tries to hit large spoof orders when they occasionally pop up will just lose money unless you figured out a way to detect their signal. Even then they'll just change up their tactics to better blend in if they start getting filled.

What's the difference between a spoof and bluff in poker?

The spoof can be pulled after a few seconds, once it's done its job.

Re: CFTC Orders JPMorgan to Pay Record $920M for Spoofing and Manipulation (2020)

#188

Post by hogFeast »

rich_sasha wrote: post #184
hogFeast wrote: post #160

Earlier quoted context omitted.

Spoofing has been going since the mid-90s with no impact to the global financial system. It was only made illegal when markets went full electronic, and large HFT firms started losing money to spoofers. The real problem with market stability is nanosecond liquidity and HFT firms that will pull liquidity when things get dicey. Spoofing largely doesn't occur anymore, and you still see huge swings in prices because the…

Surely, HFTs are the key player for spoofing? To play this game, you need to be able to pull your orders faster than people can execute on them. E.g. you see flow on one exchange, you pull on the other? As I see it, the main problem with spoofing is that it distorts the market information. Any trader, human or machine, can look at the current order book and assume it is somewhat bona fide . Without that, exchanges ar…

Well, not anymore because it is against the law...but I think it is acknowledged that it is still going on (it is very hard to prove because you have to prove what someone's intention was when they entered the order). But the speed at which they can trade is obviously an issue by itself.

Afaik though, human traders have been spoofing on Eurex since the late-90s (Paul Rotter most infamously). And no-one looked at the order book and assumes it is bona fide because humans understand human reasoning, the issue was HFTs who use that as an input to their pricing model. You have iceberg orders, they are basically reverse spoofing, and it is how most institutions execute large trades...they don't put a huge order in one go because it will get picked off by HFTs, they break up the order into lots of 100 shares or whatever, so no-one uses the order book now anyway because HFTs will pick you off if you do (again, that is why spoofing was made illegal, the only way HFTs can pick you off is if a regulator has banned false bid/offers).

And how is that different from spoofing? If I know I need 100k shares but I am bidding 100 lots at a time then I am hiding my intention just like a spoofer (and btw, doing this will get you fined in some OTC markets...if you tell your broker I need 10k shares and you take his offer, and you then say you need another 10k shares then you get reported...at least it is totally clear in that instance that the rules exist to stop brokers losing money). Again, the market is run by HFTs who are just trying to make the most money by doing the least amount of work, part of which is tilting the rules in their favour so no-one can hide their intention from their algos.

Re: CFTC Orders JPMorgan to Pay Record $920M for Spoofing and Manipulation (2020)

#189

Post by hogFeast »

toshk wrote: post #162
hogFeast wrote: post #158

Earlier quoted context omitted.

You misunderstand a lot about what went on there. One, there is no question that Sarao had nothing to do with the flash crash. The cause of the flash crash was a fund manager adding an extra zero to a trade they were making. The reason Sarao was blamed was to put pressure on him, and because the SEC needed to blame someone for there total failure to properly manage markets (the person who prosecuted the case against…

You are probably very right The story I remember was a popular documentary which had a story arch of a single trader single breaking the market from his parents bedroom. Which is a good story but most likely just a small part of the truth; also probably why the Wikipedia just mentions him shortly.

Bloomberg had a video about this, one of their journalists wrote a book about him. The conclusion of that book was that Sarao didn't break the markets, and it was probably not necessary to throw the book at someone who was mentally disabled because some incompetent prosecutors needed a scapegoat. If you only read about Sarao within the context of the Flash crash, you will get the wrong idea.

Re: CFTC Orders JPMorgan to Pay Record $920M for Spoofing and Manipulation (2020)

#190

Post by dig1 »

hogFeast wrote: post #158
toshk wrote: post #102

Earlier quoted context omitted.

Its not very different from the Flash crash, in 2015 an independent trainer named Navinder Singh Sarao was sued for manipulating the market, he was creating a lot of orders and cancelling them tricking the flash trading computers to push up the prices, he made around 45 million in the process while living in his parent house. In 2020 he was convicted with a year of confinement at home, no jail time, and a trading ban…

You misunderstand a lot about what went on there. One, there is no question that Sarao had nothing to do with the flash crash. The cause of the flash crash was a fund manager adding an extra zero to a trade they were making. The reason Sarao was blamed was to put pressure on him, and because the SEC needed to blame someone for there total failure to properly manage markets (the person who prosecuted the case against…

This. Even if someone is not convinced that this guy had nothing to do with the crash, think about the alternative. An individual, living in a parent's house with everyday equipment, can crash a trillion-dollar market in a couple of minutes. What would that say about the stability/security of that market?
Post reply on HN