Can anyone explain what this guy was doing?

OddTrader said:
Another theory, which I heard from a high-frequency trader today, is that by spoofing high-frequency traders out of $879,018 -- Sarao's alleged profits on the day of the flash crash -- he might have caused them to hit their loss limits and shut off their own trading algorithms. Without the usual market-makers to provide liquidity, the market would have been more easily spooked than usual, and it would have been a lot easier for it to produce the wrong price. Which, for a few minutes on May 6, 2010, it definitely did.
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Come on. HFT firms were in the market as the market started dumping. Sarao stopped trading before that. Most of the firms that stopped trading, stopped because a) they no longer believed the accuracy of the quotes, or b) it was some scary sh** going on and risk managers pulled the plug. I've heard that a large percentage of HFT firms that kept their machines on made a killing that day.

This type of spoofing is not affected by an algo that has any intelligence. And most HFT firms fall in this category. Do you think these guys don't know about the spoofing, don't you think they work around it? Of course they do.
 
My guess is the original sin was the IPO listing of exchanges! Now they have to allow not just HFT but also spoofing in order to make more and more money year after year to satisfy their investors as well as the security of their jobs.

Perhaps the ideal and best scenario beneficial to many traders, institutions and individuals, would be zero HFT plus zero spoofing. However the reality would be ...
 
Just charge a small cancellation fee and let HFT define itself at that point.

The real problem here is regulator ineptitude and conflict of interests of the exchange entities.
 
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