Do not attack the robots

i lost a lot of respect for ib/timber hil for pressuring the ose to go after these guys.

their bot was inefficient, and those traders removed the inefficiency. that's how a properly functioning market should work.

charging those traders with manipulation for exploiting a poorly written algorithm is anti-free market and anti-capitalist and is the only thing about this case that's manipulative.

peterffy is a huge hypocrite if he allows them to be charged and prosecuted without making a statement taking some responsibility. it's cutthroat capitalism when he's at the wheel, but when he gets out-competed he lets a strong armed socialist gov do his dirty work... very weak.
 
I am having a hard time deciding where I stand on this. On the one hand, if you enter a computer program into a market with the specific intent to get the best price possible, then if someone is able to exploit a pattern in your software you need to take responsibility for that bot. ALL programs are by definition succeptable to this kind of attack. Analogously, that is why random number generator inside a computer are not secure - the "random numbers" are generated by algorithms!

On the other hand, the securities rules are very specific on this issue. As far as I know, you must have an economic reason for entering an order into a matching engine, and the lowest common denominator here is arbitrage, which __is__ economic. Entering orders simply to cause prices to fluctuate on programming "errors" is not economic, and is therefore manipulation. It is the electronic version of "starting a rumor."

I am 95% certain I would have exploited the same inneficiency, but in retrospect would have felt wrong doing it. It is not in the spirit of what markets are about.

FWIW, I have heard of other suits with Timber Hill, and they seem to hate when anyone arbs them, legally or otherwise.
 
Quote from rdg:

I'm surprised that Timber Hill would publicly admit that their market making agent was fooled by this. A team won the 2004 Penn-Lehman Automated Trading Project doing very close to the same thing:

http://www.cis.upenn.edu/~mkearns/projects/newsandnotes04.html
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Perhaps, the monetary benefit (in the case of winning a compensation) outweighs the reputational hazzard.

An added beenfit (which is particularly difficult to quantify) from winning the case is it will create a precedent that will strongly discourage people from trading against algos defficiencies in the future.
 
On the contrary, they had by several occasions destroyed each other’s plans.
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from this article, you can see, there are no merit for the lawsuit, robot was designed with flaws. traders just took advantage of inefficiency in the market.

Never let machine to do a human's job, computer has hard time to value anything in free market on itself.
 
They whine when they are caught at their own game... Pathetic.

I would understand an unsophisticated long term investor to intent a trial against a manipulating boat, but not the contrary...
 
Quote from nitro:

I am having a hard time deciding where I stand on this.
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Personnally I have even an harder time understanding what they did wrong !?

I quote from the link : "Both traders purchased a large chunk of stocks at a specific price, followed by series of smaller purchases at a higher price. All within a short periode of time.

The Timber Hill robot reacted by raising the price on the shares, and Larsen and Veiby did what every skilled trader would do; they dumped their holdings and secured the profit.
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I don't see anything wrong ??!!?? They bought a block, then smaller lots and boom the suckers raise what ? Isn't it supply&demand ?
 
Timber Hill = IB ?

Unless I missed this, how exactly was all of this figured out in the first place?

And how exactly is any of this different than what happens every ms with all electronically traded futures contracts in the USA / globally?
 
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