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.......
oh man, I cancel orders all the time. That's all I do most of the time. And I am just a little podunck peon smalltime retail trader.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.......
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.
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.
If this is illegal, then basically a lot of HFT is illegal too.
I don't believe true HFTs are showing huge size like this. These are algorithmic traders, but probably not HFTs.
It is true that HFTs are canceling a lot of orders. Especially market making algos. It is not to spoof, it is to try and remain as market neutral as possible. And when you are constantly adding and subtracting to your overall position, the by product is a high cancel rate.
If Sarao is being prosecuted because a large percentage of his orders were never meant to be filled, then all HFT operators should be jailed for 1000x lifetime sentences. Clearly there is a double standard for Sarao vs. HFTs.
First of all. Firms and people that participate in HFT are running all sorts of algos. You cannot lump all together. Those that are showing orders with no intent of getting execution should be stopped. Plain and simple. However, most "HFT" firms are not doing this. There is a big difference between making markets with orders on both sides of the bid/offer and some guy showing huge size on only the sell side and 99% of the time moving out of the way.
Statistically speaking there is no difference. If an HFT cancels a large percentage of its orders, it should be prosecuted just like Sarao.
This guy isn't being prosecuted just for canceling orders. He is being prosecuted for a multitude of reasons. I suggest reading the filings.