5 ms·

"Their algorithms are designed to pick up on stock prices fluctuating before major corporate announcements, indicating that those buying or selling have insider

"Their algorithms are designed to pick up on stock prices fluctuating before major corporate announcements, indicating that those buying or selling have insider knowledge..." As someone who has coded high frequency algos that tracked orders and fill rate velocity, I love this little tidbit of knowledge that FINRA utilizes it's own types of analysis. It intrigues me to imagine the accuracy and dismissal of false positives. sorry nerding out on the tech

bsder 8y ago
> It intrigues me to imagine the accuracy and dismissal of false positives. sorry nerding out on the tech Probably not tech for false positives. You probably don't have to winnow too far before humans can handle the remainder.
- quackerhacker 8y ago
  There absolutely has to be tech analysis of a trader's entire portfolio or majority of their trades in order to really investigate before it passes off to human review. The real beauty in this statement is the merging of fundamental analysis (news releases, ect.) with tech analysis. I don't mean tech analysis in the context of pivot points, sma's, rsi's, ect...I mean tech analysis on the evaluation of the winners of a significant price movement and their entire trades and current portfolio. THAT is the mind boggling algo. Just b/c a trader makes x amount on a move doesn't mean they had privileged info. A tech eval has to eval their entry and exits to see if they were prime/ideal moves and most importantly their order size and order type, but it ultimately comes down to pattern evaluating their order history across multiple assets and see if their transaction history is generally successful and positions are taking prior to news release...then flag for human review and substantiate evidence.
  - darawk 8y ago
    They're probably reviewing these things ex-post, quarterly or something. It's pretty straightforward to do this analysis, i'd say. Look for people that consistently long/short shortly before a substantial favorable dislocation. People doing HF are going to be picking up small dislocation, so a move-magnitude filter weeds them out. No discretionary traders are going to be as consistently correct and consistently well-timed. IMO it'd be a pretty straightforward filter to write.
  - stef25 8y ago
    Would there be any way of securing a conviction if there was no proof of insider knowledge, other than the actual buys & sells?
    - Retric 8y ago
      It’s legal to use other people’s insider information. It’s only when you’re the source directly or indirectly that it’s illegal.
      - jstarfish 8y ago
        I don't think this is accurate (in the US), and very dangerous advice if you are wrong. Not only does it contradict every post-hire training I've ever sat through, but Martha Stewart didn't go to prison for the fun of it-- she was a recipient of insider information three or four degrees removed from the source. It was very much illegal for her to use other people's insider information. The standing definition is that if you are trading on knowledge not available to the public regardless of how it was sourced or laundered, it's insider trading. I'd genuinely like to see any references you have that can attest to this more lenient interpretation-- it seems entirely self-defeating.
        bsder 8y ago
        > Martha Stewart didn't go to prison for the fun of it-- she was a recipient of insider information three or four degrees removed from the source. It was very much illegal for her to use other people's insider information. Martha Stewart went to jail for lying to the Feds, not insider trading, IIRC.
      - bsder 8y ago
        > It’s legal to use other people’s insider information. It’s only when you’re the source directly or indirectly that it’s illegal. This is dangerously incorrect in the US. You may not use ANY material business information that is not available to other traders. Now, you may do your own analysis of the business or the market and act on that. You can hire private investigators to dig through public trash to monitor pizza consumption and act on that. You can even use public web APIs to calculate actual customer acquisition numbers (shady, but probably just on the technically legal side of the line) and act on that. But, if you have any information about a company not generally available to the public, you may not act on it.
gammateam 8y ago
the bigger irony is that the SEC and FINRA were doing exactly what one of the hackers said they were doing, but got them - Ukranian and Russian trading firms - to settle over $10m just because they happened to know the other traders and would try to prove it in court that way if they didn't settle. okay, knows prominent traders and hackers who trade US equities from Russian timezones, small world? I don't like that story
- quackerhacker 8y ago
  I don't see that implication in the article. I think you're referring to this part "your guys were detected. They were trading with very big money and there was a lot of fuss about them, about how it’s not the season and when it was the season they traded." This excerpt most likely implies that the inside trades were for commodities (future contracts) and was sent to one of the relative people involved in the hack. What would be irony (but of course is speculation) is if any of the brokerages that the hackers submitted trades thru did front-running (matching their trades at entry).
  - cm2187 8y ago
    Could be the earning season (the times of the year where every company publishes their financial statements).
  - gammateam 8y ago
    "I don't see that implication in the article." - quackerhacker > Since 2010, the SEC’s Analysis and Detection Center has joined Wall Street’s self-regulator, the Financial Industry Regulatory Authority (FINRA), in monitoring the markets for signs of insider trading. Their algorithms are designed to pick up on stock prices fluctuating before major corporate announcements, indicating that those buying or selling have insider knowledge > One defendant in the civil case, David Amaryan, whose company Copperstone Capital won an award for best Russian hedge fund in January 2015, claimed that one of his employees devised an algorithm to pick up early trades occurring on the market and mimic them. The logic being that the early trades were made on the basis of someone else’s insider information. ... Amaryan and his three companies agreed to pay $10 million to the SEC.
anonymous5133 8y ago
What I always thought to be interesting is by analyzing those pre-announcement movements. We all know there are always people trading on insider information so it would be possible to use those pre-announcement movements to your advantage. If you see the stock price dropping before the announcement, then best to unload your shares or vice versa.
- AznHisoka 8y ago
  This doesn’t work because there is no insider trading in most cases, and even if there were, you might be fooled by mass idiots trading the opposite directon of the insider.
  - GoMonad 8y ago
    As an example why it might drop (or rise) with high volume: firms could be "derisking" before earnings.

bsder 8y ago

> It intrigues me to imagine the accuracy and dismissal of false positives. sorry nerding out on the tech Probably not tech for false positives. You probably don't have to winnow too far before humans can handle the remainder.

quackerhacker 8y ago
There absolutely has to be tech analysis of a trader's entire portfolio or majority of their trades in order to really investigate before it passes off to human review. The real beauty in this statement is the merging of fundamental analysis (news releases, ect.) with tech analysis. I don't mean tech analysis in the context of pivot points, sma's, rsi's, ect...I mean tech analysis on the evaluation of the winners of a significant price movement and their entire trades and current portfolio. THAT is the mind boggling algo. Just b/c a trader makes x amount on a move doesn't mean they had privileged info. A tech eval has to eval their entry and exits to see if they were prime/ideal moves and most importantly their order size and order type, but it ultimately comes down to pattern evaluating their order history across multiple assets and see if their transaction history is generally successful and positions are taking prior to news release...then flag for human review and substantiate evidence.
- darawk 8y ago
  They're probably reviewing these things ex-post, quarterly or something. It's pretty straightforward to do this analysis, i'd say. Look for people that consistently long/short shortly before a substantial favorable dislocation. People doing HF are going to be picking up small dislocation, so a move-magnitude filter weeds them out. No discretionary traders are going to be as consistently correct and consistently well-timed. IMO it'd be a pretty straightforward filter to write.
- stef25 8y ago
  Would there be any way of securing a conviction if there was no proof of insider knowledge, other than the actual buys & sells?
  - Retric 8y ago
    It’s legal to use other people’s insider information. It’s only when you’re the source directly or indirectly that it’s illegal.
    - jstarfish 8y ago
      I don't think this is accurate (in the US), and very dangerous advice if you are wrong. Not only does it contradict every post-hire training I've ever sat through, but Martha Stewart didn't go to prison for the fun of it-- she was a recipient of insider information three or four degrees removed from the source. It was very much illegal for her to use other people's insider information. The standing definition is that if you are trading on knowledge not available to the public regardless of how it was sourced or laundered, it's insider trading. I'd genuinely like to see any references you have that can attest to this more lenient interpretation-- it seems entirely self-defeating.
      - bsder 8y ago
        > Martha Stewart didn't go to prison for the fun of it-- she was a recipient of insider information three or four degrees removed from the source. It was very much illegal for her to use other people's insider information. Martha Stewart went to jail for lying to the Feds, not insider trading, IIRC.
    - bsder 8y ago
      > It’s legal to use other people’s insider information. It’s only when you’re the source directly or indirectly that it’s illegal. This is dangerously incorrect in the US. You may not use ANY material business information that is not available to other traders. Now, you may do your own analysis of the business or the market and act on that. You can hire private investigators to dig through public trash to monitor pizza consumption and act on that. You can even use public web APIs to calculate actual customer acquisition numbers (shady, but probably just on the technically legal side of the line) and act on that. But, if you have any information about a company not generally available to the public, you may not act on it.

gammateam 8y ago

the bigger irony is that the SEC and FINRA were doing exactly what one of the hackers said they were doing, but got them - Ukranian and Russian trading firms - to settle over $10m just because they happened to know the other traders and would try to prove it in court that way if they didn't settle. okay, knows prominent traders and hackers who trade US equities from Russian timezones, small world? I don't like that story

quackerhacker 8y ago
I don't see that implication in the article. I think you're referring to this part "your guys were detected. They were trading with very big money and there was a lot of fuss about them, about how it’s not the season and when it was the season they traded." This excerpt most likely implies that the inside trades were for commodities (future contracts) and was sent to one of the relative people involved in the hack. What would be irony (but of course is speculation) is if any of the brokerages that the hackers submitted trades thru did front-running (matching their trades at entry).
- cm2187 8y ago
  Could be the earning season (the times of the year where every company publishes their financial statements).
- gammateam 8y ago
  "I don't see that implication in the article." - quackerhacker > Since 2010, the SEC’s Analysis and Detection Center has joined Wall Street’s self-regulator, the Financial Industry Regulatory Authority (FINRA), in monitoring the markets for signs of insider trading. Their algorithms are designed to pick up on stock prices fluctuating before major corporate announcements, indicating that those buying or selling have insider knowledge > One defendant in the civil case, David Amaryan, whose company Copperstone Capital won an award for best Russian hedge fund in January 2015, claimed that one of his employees devised an algorithm to pick up early trades occurring on the market and mimic them. The logic being that the early trades were made on the basis of someone else’s insider information. ... Amaryan and his three companies agreed to pay $10 million to the SEC.

anonymous5133 8y ago

What I always thought to be interesting is by analyzing those pre-announcement movements. We all know there are always people trading on insider information so it would be possible to use those pre-announcement movements to your advantage. If you see the stock price dropping before the announcement, then best to unload your shares or vice versa.

AznHisoka 8y ago
This doesn’t work because there is no insider trading in most cases, and even if there were, you might be fooled by mass idiots trading the opposite directon of the insider.
- GoMonad 8y ago
  As an example why it might drop (or rise) with high volume: firms could be "derisking" before earnings.