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

21–30 of 200 posts

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

#21

Post by arcticbull »

caffeine wrote: post #19
arcticbull wrote: post #15

Earlier quoted context omitted.

> They didn’t spoof trades. They placed orders without the intent of trading anything. That's the definition of a spoof trade. [1] > Spoofing is a form of market manipulation in which a trader places one or more highly-visible orders but has no intention of keeping them. [1] https://www.investopedia.com/terms/s/spoofy.asp

I think you misunderstood GP - he is saying they didn’t spoof trades , ie order executions , which is correct because you can’t spoof trades. You are talking about spoofed orders . A spoofed trade doesn’t really exist - the closest thing would be a wash trade, where you trade with yourself to make other people think a price is trading.

I see your point, and thank you for the clarification. I've often heard this referred to as "spoof trading" and "spoof orders" interchangeably. I could be mistaken, of course. For instance [1].

[1] https://constantinecannon.com/practice/whistleblower/whistle...

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

#22

Post by derriz »

Why do CFTC try to police this? For the money or optics?

Orders far from the BBO are clearly irrelevant and those close to the BBO are not "free" for the spoofer given they have to bear the risk that the orders could be filled if the market moves.

Effectively it means anyone cancelling an order has to worry that their action could be interpreted as "spoofing" - which will make market making more risky and expensive.

The only ones this type of enforcement "protects" are are those who naively think they've discovered a strong trading signal based on order volumes away from the BBO. Putting a $1 bid on a Rolex on ebay which is currently attracting $10k bids isn't going to fool anyone into thinking that demand is increasing and is relatively harmless.

For me real manipulation involves actual trades, not cancelled/unexecuted orders, and should be policed stringently. E.g. banging the market at close in order to nudge the closing price in order to boost the value of a position in a different book.

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

#23

Post by dudeinjapan »

For the uninitiated, "spoofing" does NOT mean what you think it might, e.g. spoofing network packets or making fake trade records.

"Spoofing" simply means placing orders on the exchange orderbook which one supposedly does not intend to execute.

I've never understood this, because any bid/ask order on the orderbook CAN be executed against, until it is canceled. If they were "flashing" large bids/asks that were being immediately canceled to trick other algos into lifting, that is annoying but it's the algos that fall for the spoof that are stupid. The algos should just hit the large spoof bid and the spoofer will be left holding the bag.

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

#24

Post by adriancr »

dudeinjapan wrote: post #23

For the uninitiated, "spoofing" does NOT mean what you think it might, e.g. spoofing network packets or making fake trade records. "Spoofing" simply means placing orders on the exchange orderbook which one supposedly does not intend to execute. I've never understood this, because any bid/ask order on the orderbook CAN be executed against, until it is canceled. If they were "flashing" large bids/asks that were being i…

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 legitimate, that would mean price movement against them and leaving them holding bags.

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

#25

Post by rich_sasha »

dudeinjapan wrote: post #23

For the uninitiated, "spoofing" does NOT mean what you think it might, e.g. spoofing network packets or making fake trade records. "Spoofing" simply means placing orders on the exchange orderbook which one supposedly does not intend to execute. I've never understood this, because any bid/ask order on the orderbook CAN be executed against, until it is canceled. If they were "flashing" large bids/asks that were being i…

I think a market where everyone spoofs with impunity is a hellhole. Yes it’s hard to define and police, but that’s probably better than the alternative.

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

#26

Post by smabie »

dudeinjapan wrote: post #23

For the uninitiated, "spoofing" does NOT mean what you think it might, e.g. spoofing network packets or making fake trade records. "Spoofing" simply means placing orders on the exchange orderbook which one supposedly does not intend to execute. I've never understood this, because any bid/ask order on the orderbook CAN be executed against, until it is canceled. If they were "flashing" large bids/asks that were being i…

The algos are not trying to hit the spoof, they are using order book imbalance to modify their valuation. So the way it would work is that JPM could for example post a large spoof bid to trick the algos into aggressing into a JPM offer.

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

#27

Post by adriancr »

derriz wrote: post #22

Why do CFTC try to police this? For the money or optics? Orders far from the BBO are clearly irrelevant and those close to the BBO are not "free" for the spoofer given they have to bear the risk that the orders could be filled if the market moves. Effectively it means anyone cancelling an order has to worry that their action could be interpreted as "spoofing" - which will make market making more risky and expensive.…

> anyone cancelling an order has to worry that their action could be interpreted as "spoofing"

And getting investigated by CFTC, and CFTC finding proof that you never intended to execute it AND you profiting from steering market in the desired direction which would not have happened without the fake trade...

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

#28

Post by ohthehugemanate »

Across 8 years, what was the profit on this illegal activity? In any other branch of law there is a concept of the sentence providing a deterrent, or at least removing from the actor from the opportunity to repeat offend.

Can someone knowledgeable help me understand why these concepts seem missing from financial market penalties like this? The same people still have their license, and probably didn't even suffer a loss on the activity.

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

#29

Post by axismundi »

“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 perpetuate it. That's because there are virtually no other consequences for any individual criminals personally responsible for this, and none of them was persecuted, punished and forced to give up his ill-gotten gains.

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

#30

Post by derriz »

adriancr wrote: post #27
derriz wrote: post #22

Why do CFTC try to police this? For the money or optics? Orders far from the BBO are clearly irrelevant and those close to the BBO are not "free" for the spoofer given they have to bear the risk that the orders could be filled if the market moves. Effectively it means anyone cancelling an order has to worry that their action could be interpreted as "spoofing" - which will make market making more risky and expensive.…

> anyone cancelling an order has to worry that their action could be interpreted as "spoofing" And getting investigated by CFTC, and CFTC finding proof that you never intended to execute it AND you profiting from steering market in the desired direction which would not have happened without the fake trade...

There were no "fake trades" involved in this case - only orders which were cancelled.
Post reply on HN