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I don’t see many prop traders or HFT scalpers going to jail. Regulations are by definition reactionary, not preventative.

tptacek 9y ago
What's an "HFT scalper"? Are you sure you understand the concepts you're using to compare cryptocurrency trading to?
- ShabbosGoy 9y ago
  http://www.smallake.kr/wp-content/uploads/2014/05/Bodek-H-Shaw-M-Introduction-to-HFT-Scalping-Strategies.pdf http://www.smallake.kr/wp-content/uploads/2014/05/Bodek-H-Sh... It’s secondary to my point, though. Certain types of market manipulation are encouraged by exchanges in order to provide liquidity. I wouldn’t be surprised if the major cryptocurrency exchanges engage in market manipulation. In fact, it would be trivial to do so. They have access to the order book before anyone else, and they write the matching engine. My main point is that regulations come after the fact, not before. Until the SEC states otherwise, cryptocurrencies aren’t securities. So why would securities regulations apply?
  - tptacek 9y ago
    The other term for "statistical front-running", a term this white paper uses, is "trading". Front-running occurs when a party to a trade has a fiduciary obligation to another party, and uses information gleaned from that party to trade to their disadvantage. A market maker has no such obligations: their responsibility is to make sure that tradable instruments trade like stocks (there's a price, and you can trade for it on the spot) rather than houses (there's a huge range of prices, and it might take months to find a buyer). There is no comparison between electronic market-making --- which "preys" on "institutional" traders by ensuring that their large block trades immediately influence market prices, rather than doing so after the trade is complete and the institution captured its free money for being able to trade without moving markets on the spot --- and "painting the tape" scams, where there is no underlying liquidity, no buy-side or sell-side at all, just fraudsters bidding up prices in a pump-and-dump scam.
  - dsacco 9y ago
    > Certain types of market manipulation are encouraged by exchanges in order to provide liquidity. This is unequivocally false, and we can’t look just past this claim because it’s “secondary to your point.” High frequency trading (and market making in general) isn’t market manipulation. The paper you’re citing uses pejorative terms like “exploiting” and “scalping”, but to the extent that HFT “exploits” market microstructure, it’s just rapidly buying and selling securities. This is not market manipulation; on the contrary, the decreased latency and increased trading volume actually improves both net liquidity and price discovery.

tptacek 9y ago

What's an "HFT scalper"? Are you sure you understand the concepts you're using to compare cryptocurrency trading to?

ShabbosGoy 9y ago
http://www.smallake.kr/wp-content/uploads/2014/05/Bodek-H-Shaw-M-Introduction-to-HFT-Scalping-Strategies.pdf http://www.smallake.kr/wp-content/uploads/2014/05/Bodek-H-Sh... It’s secondary to my point, though. Certain types of market manipulation are encouraged by exchanges in order to provide liquidity. I wouldn’t be surprised if the major cryptocurrency exchanges engage in market manipulation. In fact, it would be trivial to do so. They have access to the order book before anyone else, and they write the matching engine. My main point is that regulations come after the fact, not before. Until the SEC states otherwise, cryptocurrencies aren’t securities. So why would securities regulations apply?
- tptacek 9y ago
  The other term for "statistical front-running", a term this white paper uses, is "trading". Front-running occurs when a party to a trade has a fiduciary obligation to another party, and uses information gleaned from that party to trade to their disadvantage. A market maker has no such obligations: their responsibility is to make sure that tradable instruments trade like stocks (there's a price, and you can trade for it on the spot) rather than houses (there's a huge range of prices, and it might take months to find a buyer). There is no comparison between electronic market-making --- which "preys" on "institutional" traders by ensuring that their large block trades immediately influence market prices, rather than doing so after the trade is complete and the institution captured its free money for being able to trade without moving markets on the spot --- and "painting the tape" scams, where there is no underlying liquidity, no buy-side or sell-side at all, just fraudsters bidding up prices in a pump-and-dump scam.
- dsacco 9y ago
  > Certain types of market manipulation are encouraged by exchanges in order to provide liquidity. This is unequivocally false, and we can’t look just past this claim because it’s “secondary to your point.” High frequency trading (and market making in general) isn’t market manipulation. The paper you’re citing uses pejorative terms like “exploiting” and “scalping”, but to the extent that HFT “exploits” market microstructure, it’s just rapidly buying and selling securities. This is not market manipulation; on the contrary, the decreased latency and increased trading volume actually improves both net liquidity and price discovery.