That makes sense. I don't trade in this manner (fading spoofers), but I find it interesting.
CME Fined Trader $55,000 for ‘Spoofing’ Treasury Futures
- Thread starter dealmaker
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Cancelling orders is a completely legit practice. Every single order I place that isn't filled in a relatively short time frame is cancelled, and not for spoofing reasons (but because my hypothesis was wrong). By penalizing cancels, you are discouraging people from entering the market at all as you've exposed them to additional risks.
I do think CME should perform forensics on all orders, as you've suggested, but that is easier said than done. I'm more on board with what Tommo said... quit fiddling with the markets, and they will correct themselves with very little intervention.
What I really meant to say is: penalize EXCESSIVE cancels. That would effectively thwart the spoofers. Example: Each day 100->199 cancels=$20, 200->299 cancels $40, etc.
Kill trading for the day if over 1000 cancels.
Just trying to level the playing field by enforcing rules that are fair to all, that's all.
I regularly do hundreds of cancels a day if working autospreader orders. But these are often >20 ticks from market and have no influence on the market.
Also a lot of spoofers I know do it manually not fancy algos (although I'm sure a lot are computer driven) so I'm not sure I agree with the 'level the playing field' comment. Most traders have access to these tools
Also a lot of spoofers I know do it manually not fancy algos (although I'm sure a lot are computer driven) so I'm not sure I agree with the 'level the playing field' comment. Most traders have access to these tools
I figured that’s what you meant, but who decides what excessive is? What if your cancel 1000 contracts, but fill 10000 ?
"Level the playing field"... I hate that phrase, the field has never been and will never be level because some are operating on a deficit of brain power. Regulators are on a witch hunt for the smart guys to score political points with the "folks", and that drives me crazy. The field should be fair in terms of access to information, and access to the market (FIFO fills are the only fair way to go, IMHO). Regulation shouldn't protect the willing market participants from their own stupidity. For the most part, I think CME does a pretty good job of providing a fair market.
The vocal majority of chart traders will always think they are being cheated by the algos, just like the swing traders think they are being cheated by the those pesky day traders.
Of course you bring up a good point...I wasn't thinking it through thoroughly (but the CME should be !!). They certainly have the technology and capacity (with all of their cash horde) to maintain records on all accounts with regards to the PROPORTION Of cancels relative to FILLS over time. Spoofers are then easily identified by sorting high-to-low the cancel-to-fill percentage. Then they charge accordingly on a daily basis using some scale.
My feeling is the CME does not want to do this for two reasons:
1) the investment in this technology will cut into their profits.
2) the effect of this implementation will likely reduce trading volume cutting down their fee income.
As you can see, the money trumps the level playing field....which BTW is not cliche as how else would Sarao have pulled-out $10M per year doing it ?
I can assure you Saro didn't make 10 mill a year spoofing. It was one of many strategies he used. Ive known him stick 500 S&P's on and run them for 3-4 hours. That is where the big money is made. Not just dicking about with 3 tick winners risking half your account on putting spoof orders in you cant afford to get filled on.
Hero trader sure, but not this spoofing monster with the market in his back pocket the regulators like to make out.
I wouldn't be so sure of that. Do the math: If he got in 40 trades a day with 20 winners and a 2:1 profit/loss ratio, we are talking about $175k per day @ 500 contracts.
Even if that ratio went down to 1.5:1, that's still in-line with the $10M for the year.
In all of my backtesting with algos, the shorter the time-frame, the smoother the equity curve.
I doubt seriously he put very many 3+ hour trades on.
Sure you can make plenty with short term trades. My studies tend to suggest the same.
But im not talking from opinion im talking from experience. I know plenty of people that worked with Nav and regularly trade spoofers. So this isnt conjecture, this has been told to me from people that know him well.. even sat next to him. He built up to that level over years and years of trading. He started as a 1 lot trader with his own money. Just a few k in seed capital. To spoof S&P's you need 10,000 lot limits+ so even if it was his main strategy now it isnt some free money trick he just turned on, its skill just like any strategy really... bar the strategies that are truly against the interests of a "level playing field" like inside information.
What Nav was doing is what any of us can do, provided we are good enough, but 99.9% of traders arent. So i dont class what he was doing as abusing the level playing field of the markets. He built it up himself. Good on him I say. I wish that level of success on every trader