Comment by joshstrange | Hacker News Reader

Comment by joshstrange | Hacker News Reader

Ok, maybe I'm horribly misinformed but I thought this was commonplace on wall street (trying to trick other algorithms and the like). Are we really going after this guy because he is just a guy and not some massive corporation? I mean it wouldn't be the first time the single person doing something is made an example of while corporations do it without repercussions but surely I'm missing something here...

Edit: ok this article (posted in new right now) http://www.businessinsider.com/what-is-spoofing-the-market-2... seems to have a lot more information. Relevant bit:

> The tactic [Spoofing] was outlawed in the 2010 Dodd-Frank regulation, but, as with other forms of fraud, it's hard to prove the trader's intent – in this case, the trader's intent to cancel the order. Prosecutors must prove the trader didn't change his or her mind for legitimate reasons after placing the trade.

Edit 2: Ok looks like regulators are just now starting to really go after these people. Who wants to take bets on the chance that ANY major financial orgs get in trouble (and no, fines that are pennies on the dollar for what they are making is not "trouble", I want to see people in jail seeing how we are trying to extradite this UK guy.)

It is unlawful to place orders deliberately intended never to trade. Obviously, every market maker has to place and cancel orders, but every one of those orders is submitted with the knowledge that they might trade, an eventuality the market-maker has to be prepared for.

In a layering spoofing scenario, the trader is deliberately structuring their orders to make it virtually impossible for them to trade. The point of doing that is to create the illusion of volume; the orders the spoofer places with actual trading intent will probably be in the opposite direction of their giant spoofing orders.

Obviously, lots of legitimate trading strategies rely on forms of deception (most often: "These piecemeal trades are not part of a concerted effort to buy a zillion shares, I promise"). Where the line is seemingly drawn is, your orders can conceal information from the market, but they can't directly inject fake information.

Here's a detailed SEC complaint, which accompanied a settlement, that does a decent job laying out how regulators establish someone's submitting orders with an intent to deceive rather than trade:

http://www.sec.gov/litigation/complaints/2015/comp-pr2015-4....

I think what he will claim is that his orders were not "virtually impossible" to trade with. The so-called "layer" orders were in the book for a reasonable length of time. His trading program was modifying the orders to keep them a few ticks from the inside, but they could have been hit by any contra side order that was big enough to trade through all of the orders in front of his. It's not unheard of for big trades to sweep multiple price levels in the ES book.

They will have to prove that his intent was to use the spoof orders to signal other participants to trade and I'm not sure that is as much of a slam dunk as all these news articles are claiming. I.e. there is no email where he just comes right out and says "these here are the spoof orders meant to move the price etc etc etc."

They're got something like 400 trading days worth of data to make the case with. If this spoofing case is like the last one I read, the spoofed orders aren't going to make any sense relative to the guy's assets, and his actual profits are going to contradict any thesis he proposes about the intent behind the spoofed orders. But we'll see, I guess.

Actually, what they've really got him on is him explaining the scheme in detail to a broker-dealer, describing it as, essentially, a conspiracy to manipulate the market and defraud other investors. This is much different than a case where all you have is trading records which might represent an algorithm detecting a reversing trend with no intention to manipulate. On the other hand, the CFTC is quite aggressive recently to deter behavior that doesn't seem particularly bad. Feels like a slippery slope from here to a place where breaking up large orders and routing to separate venues might be viewed as intent to defraud by concealing intentions.

It's the same story like that of Bernie Madoff and also the same morale. You're free to do whatever you want hustling & bustling screwing people over but if you dare to mess up with the wrong people, you're toast and you will be made an example of for everyone to see.

Not sure why you got downvoted with no reasoning, but you're right. I would bet my left testes that major money corps of the Three Sister Cities do the exact same thing but just make it less obvious and do it over longer periods of time. The whole things is rigged anyway, and the SEC is a joke.

Also, there are plenty of middle-men scapegoats to be sacrificed if the big boys get caught too. (see, gold manipulation scandal, libor, etc).

I don't give a shit about getting downvoted and I'll keep speaking my mind. As to why I was downvoted, the mindless HN swarm here can't handle any dissidence and when it encounters any opposing view that contradicts with its worldview, it attacks and neutralizes its prey as soon as possible to avoid the mental anguish that comes with challenging their preconceptions of the world around it.

You're not wrong. I came for the tech, I stayed for the show.

It's possibly because your original downvoted comment was a vague hit out at 'the man' castigating the establishment and placing this trader in the same bracket as Madoff.

It had no facts, no real argument, was unspecific, ad hominem and didn't advance the debate in any particular direction that was useful or informative.

Much like your second comment.

You could have pointed, for example, to the rise of HFT, and perhaps asked why this particular trader was being penalised unlike several larger HFT operations when he was front-running or pulling trades before they could be completed. (See Flash Boys by Michael Lewis). Then, chances are you might have been upvoted.

We can take dissonance. We just prefer it to be informative.

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