its all illegal if you need to give a false view of the markets to someone else. i said this before you can't day trade this market anymore. 15 years ago it was easier to be one of the 10% profitable traders. 10 years ago it was easier to be one of the 10% profitable traders but now your trading against computers and the best of the best so the easy money is not so easy anymore. that's the answer to your question.
Hold Brothers $4 Million Manipulative Trading Case
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Not if the orders are pulled before they are confirmed or during the confirmation process. Yes that happens and how can the NBBO exist if the confirmation matching takes any time at all? What is NBBO if any arbitrage is possible?
I have (occaisionally) hit the order at price with a normal limit order to see a fill of 200 shares on 25000 showing (slow day and thinly traded) and the spread and the bid/ask moved accordingly with my 200 shares off the original fake size. When I checked back on the time and sales, they said there was no such order anywhere around that time but they saw my market order and the fake spread. I was told that these orders "conform to required legal order standards"
The explanation I got was that some firms had "complex" conditional orders that can make volume appear and disappear without leaving much trace or proof. The more I think about how this is done and why, I suspect that it is to wipe out profitability for human day traders and scalpers who when the spread was narrowed, ate the lunches of the human market makers pre-2000
I believe that there is some real garbage going on for the past few years (that didn't happen even 5 years ago), and only people that recognize it and actually followup see it. Proving it, is damn hard but I do have some in word document level 2 pictures. Doesn't matter to my service providers. Most traders just assume it is normal and all legal stuff and the questioners are whining. I think some of it is clearly criminal or at least against the spirit of the law, but since there is little I can do about it, I just adjust and move on.
The solution is as simple as requiring 500 milliseconds showing for every order. It doesn't have to be 5 seconds. The problem is the firms doing it would scream to their elected officials. I also predict that one day the same people will beg for some similar legal rules to be implimented - those who live by the sword, die by it as well.
Well lookie here - After posting above, I read a wall street journal report that Germany is taking on the HFT folks. In the article, they mention 500 milliseconds as I said in my post. (I am currently searching for the bugs in my office.) This is not rocket science if I can do it.
They also are imposing limits to the number of trades. That sounds sensible but my suggestion there (talking loudly (LOL) into the light fixture) is simply imposing a tax on more than say placing 100 orders from one desk or IP address an hour or something along those lines.
It is false liquidity to post orders that will almost never be executed to scalp pennies. What's more, in my view, HFT in of itself will present a too big to fail situation one day when the millions of waves line up to produce the huge black swan wave of a liquidity crash created totally by computers. Those trading in 1987 remember the portfolio insurance caused crash that Greenspan fixed by creating money out of thin air.
An unfair market that stacks the deck is actually a higher systemic risk to a market.
OK. off my soapbox now.
They also are imposing limits to the number of trades. That sounds sensible but my suggestion there (talking loudly (LOL) into the light fixture) is simply imposing a tax on more than say placing 100 orders from one desk or IP address an hour or something along those lines.
It is false liquidity to post orders that will almost never be executed to scalp pennies. What's more, in my view, HFT in of itself will present a too big to fail situation one day when the millions of waves line up to produce the huge black swan wave of a liquidity crash created totally by computers. Those trading in 1987 remember the portfolio insurance caused crash that Greenspan fixed by creating money out of thin air.
An unfair market that stacks the deck is actually a higher systemic risk to a market.
OK. off my soapbox now.
i make money trading, my questions are rhetorical. the purpose of which, is to give some of you who aren't particularly well-versed in market microstructure something to think about before making broad spectrum assessments like, "it's all illegal if you need to give a false view."
what does that even mean? a "false view"? if you post huge fake size, even if you have no intention of filling it and even if only for a few hundred milliseconds, and i stuff you, your "false view" is going to get awfully truthful very quickly.
this happened to hold a couple of years ago. one of their russian subsidiaries spoofed outrageous size on an etf. they got instantly stuffed, turned off their computers, and were never heard from again. hold spent the rest of the day liquidating that position and ended up eating about million on that trade.
the markets can and do work this stuff out.
Quote from traderpro:
If you read all my posts, they both do it illegally! Neither is more right than the other. Sounds like you just dont get it, this isnt the first time or the last! Watch this bing link on the whistle blower to the big institutions. BTW the sec is coming out with a CAT system for real time surveillance to monitor quotes after the flash crash, system was flawed and being corrected. The gimmicks we had in the mid to late 90's were far worse than today's manipulation .
Sounds like your learned the markets the wrong way, learn to chart, pick good companies and you will make a nice living
oh, i see. yes, i'll have to do that. thanks for the advice.
an execution trader has to get rid of a ton of size for his client. do you think he should show his entire hand to the whole market so everybody can front run his orders just for the sake of making the markets look crystal clear without any false impressions.
by your theory the game of poker should be illegal too since they are trying to give false impressions on the hands they are playing.
Your welcome! This whole manipulation case is about exploiting execution, at one time this was not illegal or wasn't looked at. The laws changed, we just need to follow the rules as they change. They pop stop orders as they know where the orders are set to execute, so on the big institutions shame on them. For the day traders, they got tempted but remember the public's money is at stake and for some their 401s, retirement and so on.
You will see more cases like this come in the future.
It's interesting that in this case the exchanges are also collecting fines from Hold for these trades: http://www.finra.org/Newsroom/NewsReleases/2012/P178687
ARCA: $700,000
BATS: $600,000
Nasdaq: $600,000
Nasdaq OMX BX: $600,000
ARCA: $700,000
BATS: $600,000
Nasdaq: $600,000
Nasdaq OMX BX: $600,000