4 ms·

I'm having trouble being outraged. Some of their behaviour was clearly fraudulent, and yet it seems to be a case of obeying the letter of the rules, but not the

I'm having trouble being outraged. Some of their behaviour was clearly fraudulent, and yet it seems to be a case of obeying the letter of the rules, but not the spirit. As for the alleged "spoofing," again, I'm not sure what to say. It is normal for market makers to place orders on both sides of the market (though not at the same price). While either order could execute, they certainly don't expect both to do so. And further, market makers are regularly making and cancelling orders that they don't expect to execute. I think the court needs to find a clear distinction in what they did in order to convict them of a violation, and it is not obvious to me that the distinction exists.

ikeboy 11y ago
Footnote 3: >All orders for multiple accounts beneficially owned or controlled by the same person or entity, and all sub-accounts of a person or entity’s master account, must be aggregated when determining whether the 390-order threshold has been exceeded by that person or entity.
kasey_junk 11y ago
The distinction between spoofing and market making is very clear. When a market maker puts an order on both sides of the market the would absolutely love it if both orders traded. That is, in fact, how they make money. In general they would love every single order they put in to trade, so long as it happens in the right order. When a spoofer puts in a spoofed order, that order is all cost. Under no scenario do they want that order to trade. The hard distinction to make in this case is not between normal market making behavior and spoofing, but between normal hedging behavior and spoofing. Hedges look like pure costs, but they are costs you are happy to pay to give up some risk. So spoofing all comes down to intent, which seems pretty easy to prove when you have chat transcripts. Whether spoofing should be illegal is another discussion, and probably one the legislature should have, but for now while it is illegal, it should be aggressively enforced as if it's not, it incentivizes the bad actors.

ikeboy 11y ago

Footnote 3: >All orders for multiple accounts beneficially owned or controlled by the same person or entity, and all sub-accounts of a person or entity’s master account, must be aggregated when determining whether the 390-order threshold has been exceeded by that person or entity.

kasey_junk 11y ago

The distinction between spoofing and market making is very clear. When a market maker puts an order on both sides of the market the would absolutely love it if both orders traded. That is, in fact, how they make money. In general they would love every single order they put in to trade, so long as it happens in the right order. When a spoofer puts in a spoofed order, that order is all cost. Under no scenario do they want that order to trade. The hard distinction to make in this case is not between normal market making behavior and spoofing, but between normal hedging behavior and spoofing. Hedges look like pure costs, but they are costs you are happy to pay to give up some risk. So spoofing all comes down to intent, which seems pretty easy to prove when you have chat transcripts. Whether spoofing should be illegal is another discussion, and probably one the legislature should have, but for now while it is illegal, it should be aggressively enforced as if it's not, it incentivizes the bad actors.