Spoofing becoming illegal

[None Business]

One more, for the road.
3:41AM ET, Prompt Natural Gas
The entire process- dig hole, collect(/rob) contracts, fill hole back up- in one second.
Natural Gas 1c higher 10 mins later, of course.
If you were long Natural Gas on a daytrade with a tight stop-loss, and blinked your eyes, you would have missed it. You might have called your broker and said "Hey, where are my contracts?" and been told you'd sold them, at a loss, despite the market being up, smartly, as you'd expected.
Some guys in here will tell you 15 guys each decided to sell 5 contracts at the same time, then each changed their mind and bought them all right back, all within one second.
Or that it's a trend, despite zero trading in the one minute prior.
The truth is, these are criminals in Chicago at work. Theft is what they do. And the CME is an active co-conspirator.
To understand how widespread the problem is, in a different market follow the Barclays Dark Pool story. An entire new pool marketed based on only one idea- keeping these criminals out, how much traction they quickly gained with retain investors based on this single idea, and how quickly Barclays became corrupted once the Chicago HFTs started waving their bribe money around.
As I mentioned earlier, these corruptions are now ingrained and unassailable. The key for trading is to think thru how, or even if, you will stop-loss your trades.

 

[None Business]

Forgot to add above, you might have gotten into your trade at 3:28:30, a nice rhythmic time to get into a trade.

One hour later, here is "the rest of the story," as Paul Harvey would say.

 

[Greenie]

IMO If you are spoofing, you'd better stop ASAP. They are enforcing it now as "market manipulation". My firm made me sign a document with all the different tricks( spoofing, layering...) to avoid this year.

Yeah we used to do all that stuff back pre 2009. No one blinked an eye. Now its all gone loco.

"market manipulation" Geezus.

 

[jelite]

Forgot to add above, you might have gotten into your trade at 3:28:30, a nice rhythmic time to get into a trade.

One hour later, here is "the rest of the story," as Paul Harvey would say.

View attachment 147128

This one is a real beauty. On my one second chart(!), it doesn't even show the blip. What is crazy here, is that this mini-move filled an 83 contract iceberg (iceberg on the bid) at 3.760. It only took about 30 contracts to move the price down 6 ticks to 3.760 area where 137 contracts filled-of which 83 was the iceberg loading up on a long. Certainly doesn't seem like a coincidence. What puzzles my mind is not that this was done purposefully but rather how/if they knew there were enough stops at that area to fill such a sizeable order. Minimum of that move was 3.759 so the iceberg order was only broken by a tick.
None Business, keeping with the assumption that the financial world is a completely rigged place even in a place as 'transparent' as an exchange-I wouldn't be surprised if that was the case given all we know about LIBOR,FX rates rigging etc.- do you think that these entities have access to CME's stop order book?

 

[panzerman]

So if the machine algorithmns are just trading with each other to foment a market, what are some general methods to "game" the machines? It would seem when the machines are working, price movement is less of a random walk process. So would extreme value methods be most suitable at these times?

 

[None Business]

My theory is simple: since the Longs bought from the machine, the machine knows how Long the balmarket is (namely, how short he, the machine is), so he goes along trading until he accumulates a net position of a certain magnitude (long or short, here lets use 100 contracts, given jelite's tick surveillance), then attacks against that. Here, you can only make money if your long position has a very wide stop, since a short would not work here since the price was returned to where it started in microseconds, faster than any home trader's robot. Note jelite's point about how thin the stack was- this is key. To collect those 137 contracts, he doesn't want to reward too many lurker-bids on the way down. The full conspiracy theory is the market-maker sees everything, but this doesn't need to be true for the strategy to be essentially foolproof.

 

[None Business]

So if the machine algorithmns are just trading with each other to foment a market, what are some general methods to "game" the machines? It would seem when the machines are working, price movement is less of a random walk process. So would extreme value methods be most suitable at these times?

Yes, in that the best trades for me have been relatively straightforward ones related to how far up or down the market is, on the day and/or based on opposite-extreme values earlier in the day. I'd like to leave it at that since this is very close to the edge that feeds my family. But, this is how I trade. I also try to win the small games using robots, but, honestly, while they make a spot of money, overall, something I'm very proud of, it's taken a lot of work to build them (one full year), so I'm not sure the cost-benefit has been all that awesome.

 

[applejuice]

Thanks for sharing none business.
I don't dispute that you are making money and perhaps everything you suggest about the level of corruption is entirely true - but did you ever consider that many of these spikes may be very large players who don't care about losing a few ticks on each contract, just so long as they get the order filled right then and there?
Must say I favour your explanation simply because foregoing $15k while entering a trade seems completely illogical even if you have the deepest pockets in the world.

 

[None Business]

I've tried to give examples that were stark. The time of day, the size of the trades, all executed in microseconds. The CME markets I trade in are simply dominated by predatory HFTs engaged in truly massive amounts of wash trading. It fits in this thread because the wash trade is the modern spoof- both have the effect of robbing someone of a position with a stop-loss. The wash trade is harder to detect, and the CME doesn't want to detect them as-is.

 

[jelite]

I guess with sufficient intelligence CME could track this down (would they want to?). However, wouldn't you say that it could be a task requiring resources that match the ingenuity of those perpetrating this. I would imagine that this can be setup in a myriad of ways with many many accounts where long/short orders can be assigned to a randomized subset of those.