Can anyone explain what this guy was doing?

OddTrader said:
So the final direction of his executed orders is basically predetermined or decided on-the-fly?
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Yes, that's where the creative part came in. His genious was in the creation of the algo and the back-testing. Essentially this was a counter-trend trading system and if you have studied with other trading system experts, you'll find that for intra-day trading, these are the most profitable systems.
Keep in mind, he was just starting and stopping the system....this was all fully automated. He likely had parameters he could adjust like the # of ticks, etc. and whether or not his position employed a trailing stop or profit target or both.
 
OddTrader said:
Too much conflicting information from different sources so far. Anyway, thanks for your input.
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We'll know the exact details when the government gets him to hand over his source code which I am guessing is going to be C# or C++. That's gonna be a "biggie" in this case.
 
What he did was massive, and game'd the system, which is NOT what the investing model is. Another fault, is this type of conduct was never factored into the business model, whether CME member (professional making markets) nor Speculator (individual investors).

What he did, evidently was a perfect storm, as there were others of various size and depth participating in tandem, whether co-incidentally or by noticing patterns in the market and they spear fished and joined in.

This case will be transformative. One thing is certain, the nay-sayers over on BMT got this case completely wrong, and seem to be on his side as supporters.​
 
HFT do this same thing day in and day out on a much smaller scale. The only difference is he used noticeable/unignorable size. He's just causing front runners (whether they're bots or humans) to play into his resting orders on the other side which he then flips. Basic stuff and easily discernible by most experienced traders.
 
Rum Runner said:
He displayed large sell orders to drive the price down, so he could buy. then he lifted the sell orders hoping that the price would rise without that selling pressure. He would then exit for a tick profit.

And I seriously doubt he fooled any HFTs. More likely it fooled dumber/slower algorithms that monitored the order book.
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If this is illegal, then basically a lot of HFT is illegal too.
 
i960 said:
HFT do this same thing day in and day out on a much smaller scale. The only difference is he used noticeable/unignorable size. He's just causing front runners (whether they're bots or humans) to play into his resting orders on the other side which he then flips. Basic stuff and easily discernible by most experienced traders.
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So, is this kind of flash crashes preventable by the exchange?

If yes, ...

If no, ...
 
OddTrader said:
So, is this kind of flash crashes preventable by the exchange?
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Easily preventable. In the one flash crash, the CME stopped trading for something like 5 minutes.
Preventing spoofing: also easily remedied....charge for cancel orders, put a timer on orders, limit the # of cancels per hour, etc, etc.

Why don't they do it is the big question.......
 
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