I totally disagree with this statement. Spoofing hurts HFTs and should be allowed.
Can anyone explain what this guy was doing?
- Thread starter hoodooman
- Start date
I totally disagree with this statement. Spoofing hurts HFTs and should be allowed.
Probably very little. Investors are not sitting there watching DOMs. Bots and traders are.
You're better off asking how many investors have been driven out of the market by HFT, dark pools, flash crashes (the major 2010 one was not the only one), busted trades in Big Money's favor, order flow selling, and all other manner of bullshit coming out of it now.
X2
"Can anyone explain what this guy was doing?"
Probably Nobody would have foreseen the outcome of the series of chain actions this time, or next time, beforehand!
If anyone can, (s)he would hold the (short) position for a much longer time during the day rather than closing it so quickly as usual!
Not a risk-free scheme at all!
Probably Nobody would have foreseen the outcome of the series of chain actions this time, or next time, beforehand!
If anyone can, (s)he would hold the (short) position for a much longer time during the day rather than closing it so quickly as usual!
Not a risk-free scheme at all!
It depends on what kind of investor we're talking about. I guess there are clever ones (they can work it out for themselves) and those stupid & greedy ones.....so it must be the stupid & greedy ones that are being targeted.....then the question would be.....WHY would they do that?
If it is seen to be "to limit the capability of the individual trader" then WHY would they wish to "limit" or "restrict" those traders?.....in other words, WHY the need to change/alter the rules.....for who? Why create/defend a barrier? Why enforce some form of a boundary line? That line is being tested isn't it?.....and WHY protect the "bigger market participants"?
So "protect the individual investor" and "bigger market participants".....What is going on here?
disclaimer, i'm a market maker. i have and do work at a larger shop. i remember this guy in particular in the es.
most market makers make a two sided market (and are willing to be filled on either side).
what he was alleged doing was spoofing a thick inside market (say the bid). then he would hit the bid right after sending his orders cancels (letting him get out of the way and tagging everyone else that joined the bid).
he is now short the es, and many people that were 'tricked' into getting on the bid are now long at a price that is now offered (this is not what you want to do).
now he will 'push down' the market with orders off the market creating false pressure on the contract. he will then do the opposite on the best ask price (after it comes down a couple ticks). market makers join, he cancels, he takes the offer and now he is flat(ish). He can either ride the excess back up, or get himself flat how ever he wants. The people who make markets will be at a loss for x ticks.
now, many people here will complain about this by saying 'HFTs are evil they got what was coming to them!'. what actually happens if if you are making legit markets, you start getting hurt, all of a sudden your 'edge' goes away and you size down. it keeps going away so you then exit trading that market. now enough firms that make markets in that one product do the same and you are left with a thinner book. heck, look at ESM5 now, compared to a couple years ago, you think people have exited that trade? this i assume you guys do not like because the market is now 'thinner' and more 'jumpy', but i could be wrong about what you want.
as someone that you could label hft, i'm not a fan of the above. it sucks. but you need to adapt, or you need to find a new career.
the real question is why did this practice go on for so long, it was distributive to the market place. also when he lied that he was all 'by hand' yet there are emails asking for automation to do this.... ya. lastly there is a HUGE risk in spoofing size. someone could come in and tag them on the faked size. i wish this would happen more often, but sadly taking someone else on for 3k es at a level 'because i think they are spoofing' is a fast way to be another ex-trader.
last thing, was someone mentioned other firms do this all the time with out getting in trouble.... you just don't hear about them getting in trouble from the exchange, or they are told to cut it off and they stop (as they should).
just my 2 cents. hate away.
most market makers make a two sided market (and are willing to be filled on either side).
what he was alleged doing was spoofing a thick inside market (say the bid). then he would hit the bid right after sending his orders cancels (letting him get out of the way and tagging everyone else that joined the bid).
he is now short the es, and many people that were 'tricked' into getting on the bid are now long at a price that is now offered (this is not what you want to do).
now he will 'push down' the market with orders off the market creating false pressure on the contract. he will then do the opposite on the best ask price (after it comes down a couple ticks). market makers join, he cancels, he takes the offer and now he is flat(ish). He can either ride the excess back up, or get himself flat how ever he wants. The people who make markets will be at a loss for x ticks.
now, many people here will complain about this by saying 'HFTs are evil they got what was coming to them!'. what actually happens if if you are making legit markets, you start getting hurt, all of a sudden your 'edge' goes away and you size down. it keeps going away so you then exit trading that market. now enough firms that make markets in that one product do the same and you are left with a thinner book. heck, look at ESM5 now, compared to a couple years ago, you think people have exited that trade? this i assume you guys do not like because the market is now 'thinner' and more 'jumpy', but i could be wrong about what you want.
as someone that you could label hft, i'm not a fan of the above. it sucks. but you need to adapt, or you need to find a new career.
the real question is why did this practice go on for so long, it was distributive to the market place. also when he lied that he was all 'by hand' yet there are emails asking for automation to do this.... ya. lastly there is a HUGE risk in spoofing size. someone could come in and tag them on the faked size. i wish this would happen more often, but sadly taking someone else on for 3k es at a level 'because i think they are spoofing' is a fast way to be another ex-trader.
last thing, was someone mentioned other firms do this all the time with out getting in trouble.... you just don't hear about them getting in trouble from the exchange, or they are told to cut it off and they stop (as they should).
just my 2 cents. hate away.
I don't understand why people don't adapt to a spoofer by:
1. Ignoring his huge quotes because they provide no new information to the market
or
2. Play along with the spoofer by letting him do the work and then following his footsteps
or
3. When possible, tag the spoofer by taking big size in the direction the spoofer does not want
People fake their intent in the markets all the time. I just don't see why one person gets arrested over putting in limit orders that almost never get filled when HFTs do this all the time and there are no repercussions. You can say the intent is different, but if you look at the actual cancel vs fill rates, you are probably looking at very similar percentages.
you adapt, or you don't. it's that simple.
1. it's hard to id one person's orders 100% of the way.
2. part of the whole thing is to get in on the first initial take out.
3. look at the pdf about what size he was showing. and you have to go thru 'normal' market to reach it. that's a lot of ES. its hard to take him out...
people fake, but they don't show the % of the order book or have the % of messages this guy had. and there are issues with messaging ratios. look up cme messaging benchmarks (i'll say i think they need to come down).
1. it's hard to id one person's orders 100% of the way.
2. part of the whole thing is to get in on the first initial take out.
3. look at the pdf about what size he was showing. and you have to go thru 'normal' market to reach it. that's a lot of ES. its hard to take him out...
people fake, but they don't show the % of the order book or have the % of messages this guy had. and there are issues with messaging ratios. look up cme messaging benchmarks (i'll say i think they need to come down).
If these orders are so far off the market that it would make taking them impractical, then why does the market react to them when they appear? It seems pretty stupid to me, especially if it is a repeated pattern where these large orders are never, ever filled.
Gee, if he was doing this for years, I wonder why he only caused a flash crash once? Something wrong with that logic for sure separate from whether or not he was following the rules.