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Comment by caffeine | Hacker News Reader

Unpopular opinion here: these rules are stupid. It’s like fining or jailing someone for bluffing in poker. Of course people are spoofing or doing other manipulative activity.

Similar things happen in retail all the time with no jail sentences, it’s just not algorithmic. “40% off but the offer ends in 3 hours!” is designed to mislead you into thinking there is a short-term mispricing of the product in a very similar way.

Or the real estate market, where basically every single price you see is a lie.

Or the used car market - it’s $15k, but when you go to pay you find out it’s $5k more to actually get the wheels or something.

If only any of these other markets were HALF as clean and transparent as the lit public order books (even if they were unregulated!) they would be massively better than they are now.

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"Or the real estate market, where basically every single price you see is a lie"

"these rules are stupid"

What never ceases to amaze me about free market extremists, is how much they take living in a civilised society for granted.

Try living in Russia where no-one is keeping fraud in check, you will quickly appreciate why we have these rules. A productive economy is imposible where every transaction could mean your savings dissapear into a black hole

No, I am being specific here. I am referring to rules regarding market manipulation in lit order books of publicly traded securities and derivatives. Those rules are stupid.

I don’t think all rules are stupid, just these particular rules.

The reason I think the rules are stupid is that they don’t prevent fraud, they just prevent behaviour which is considered pretty legitimate in every other marketplace. Like, a spoofed ask price isn’t fraud - you can actually buy the price, and you will be filled.

There is no chance order spoofing will cause your life savings to disappear in a black hole. I think regulation to ensure that remains the case (ie around custody) is very important.

A world in which lying is not punished is incompatible with progress.

It's not really lying though? When you send a spoofed order, you really are willing to buy/sell shares at whatever price you offered. It's just that you quickly retract that offer. It's not like you put in a order, someone accepts it, then you say "haha just kidding".

It is what you're describing because the buyers are a bit dim and will pile in.

If you place the spoof orders knowing that and trying to create that behaviour then yes it's lying, but with extra steps.

There isn't enough liquidity in those markets to make enough profit to create a regulatory change. If it was easy to misprice used cars and make millions of dollars the FTC would want to do something about it and thats ok. We live in a society and its important that we have trust in the rules.

Other markets are also rife with deceptive, arguably fraudulent practices so they should be policed first? The CFTC isn't even empowered to regulate those other markets.

I’m saying it’s not really deceptive or fraudulent.

Is it fraudulent that you offer your house for sale, but when you get a few buyers willing to pay the asking price, you move the price up?

Not really. But that is WAY more manipulative than anything that is even POSSIBLE in the public markets, let alone what’s allowed. (The FX markets are an exception where this can happen on certain platforms).

I’m saying we tolerate these behaviours in every other market because they are not really fraud. It’s not lying to say you are bid and then cancel it later, so long as you honor any trades you do get.

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