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Layering, Spoofing and Momentum Ignition are not "HFT Strategies." They're illegal market manipulation techniques, most often used by manual traders. You don't

Layering, Spoofing and Momentum Ignition are not "HFT Strategies." They're illegal market manipulation techniques, most often used by manual traders. You don't need to be ultra fast to bully prices around or enter large non bonafide orders. I've never heard of a legitimate proprietary trading firm (i.e. one that pays a salary and hires highly qualified people, not a boiler room operation) intentionally using these techniques. Most are in the arbitrage, market making or statarb business. It would be much more interesting to see the author dive into which events lead to fast price changes. How quickly are price shocks on other markets are reflected on GDAX? How are changes in outright contracts like BTC/USD and ETH/USD reflected in ETH/BTC? Do USD denominated pairs drive price discovery more or less than EUR denominated ones, and does this change when US based traders are asleep? Lots of stuff to look at here.

ghgr 9y ago
Directly from Wikipedia [1]: > In July 2013, it was reported that Panther Energy Trading LLC was ordered to pay $4.5 million to U.S. and U.K. regulators on charges that the firm's high-frequency trading activities manipulated commodity markets. Panther's computer algorithms placed and quickly canceled bids and offers in futures contracts including oil, metals, interest rates and foreign currencies, the U.S. Commodity Futures Trading Commission said.[109] In October 2014, Panther's sole owner Michael Coscia was charged with six counts of commodities fraud and six counts of "spoofing". The indictment stated that Coscia devised a high-frequency trading strategy to create a false impression of the available liquidity in the market, "and to fraudulently induce other market participants to react to the deceptive market information he created".[110] I guess it's HFT if it's executed fast enough. [1] https://en.wikipedia.org/wiki/High-frequency_trading#Strategies https://en.wikipedia.org/wiki/High-frequency_trading#Strateg...
- mrchicity 9y ago
  Panther was a one-man shop that did nothing but market manipulation. Yes, they used automation but for every Panther, there are 1000 manual traders being fined by CME for spoofing every year. Automation doesn't imply state of the art HFT. The Flash Crash spoofer was using a Trading Technologies system that any small trader can rent with a few scripts loaded in. Look at real players with hundreds of employees. None of them make their money from market manipulation. It's all from low-latency arbitrage. If you're fast, you can make way, way more money doing legitimate trading than market manipulation.
davidgerard 9y ago
If you're looking for malicious actors in the wild, crypto trading is where you want to be. There's all sorts of things that are ridiculously illegal on proper security exchanges that are de rigeur in cryptos. c.f. Mt. Gox admitting to painting the tape in 2015, a Bitfinex officer with access to the database admitting to trading on his exchange in 2015. A bot set up to detect that sort of thing would have plenty of data to work with.

ghgr 9y ago

Directly from Wikipedia [1]: > In July 2013, it was reported that Panther Energy Trading LLC was ordered to pay $4.5 million to U.S. and U.K. regulators on charges that the firm's high-frequency trading activities manipulated commodity markets. Panther's computer algorithms placed and quickly canceled bids and offers in futures contracts including oil, metals, interest rates and foreign currencies, the U.S. Commodity Futures Trading Commission said.[109] In October 2014, Panther's sole owner Michael Coscia was charged with six counts of commodities fraud and six counts of "spoofing". The indictment stated that Coscia devised a high-frequency trading strategy to create a false impression of the available liquidity in the market, "and to fraudulently induce other market participants to react to the deceptive market information he created".[110] I guess it's HFT if it's executed fast enough. [1] https://en.wikipedia.org/wiki/High-frequency_trading#Strategies https://en.wikipedia.org/wiki/High-frequency_trading#Strateg...

mrchicity 9y ago
Panther was a one-man shop that did nothing but market manipulation. Yes, they used automation but for every Panther, there are 1000 manual traders being fined by CME for spoofing every year. Automation doesn't imply state of the art HFT. The Flash Crash spoofer was using a Trading Technologies system that any small trader can rent with a few scripts loaded in. Look at real players with hundreds of employees. None of them make their money from market manipulation. It's all from low-latency arbitrage. If you're fast, you can make way, way more money doing legitimate trading than market manipulation.

davidgerard 9y ago

If you're looking for malicious actors in the wild, crypto trading is where you want to be. There's all sorts of things that are ridiculously illegal on proper security exchanges that are de rigeur in cryptos. c.f. Mt. Gox admitting to painting the tape in 2015, a Bitfinex officer with access to the database admitting to trading on his exchange in 2015. A bot set up to detect that sort of thing would have plenty of data to work with.