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Another ex-JP Morgan precious metals trader pleads guilty to ‘spoofing’

42 points by momentmaker 7y ago

Scoundreller 7y ago
> pleaded guilty Tuesday to criminal charges of manipulating the precious metals markets for nine years. > Christian Trunz, 34, of London Started off pretty early...
- deleted 7y ago
  [deleted]
goldenkey 7y ago
When behavior becomes so common that it is normalized. A common phenom of corporate culture, see the Boeing 737 Max thread for a good discussion of this pervasive issue with corporations/capitalism: https://news.ycombinator.com/item?id=20552054 https://news.ycombinator.com/item?id=20552054
- blancheneige 7y ago
  I don't see anything fundamentally wrong with spoofing. If you really mean your market order then you don't care about whether resting orders are bluffing, unless you're bluffing yourself. You'll be matched against the best available bid/ask before these can be causally removed, period.
  - baybal2 7y ago
    Can somebody with a better knowledge of American securities law tell what is an actual charge for that "spoofing"? "Placing a trading position with a sole purpose to benefit an another existing trading position" — sounds exactly what most of day trading is.
    - 1e-9 7y ago
      Spoofing is the act of placing an order with the intent to cancel it before execution.
      - baybal2 7y ago
        But you have to cancel orders if you put multiple of them at different price points, and it was your intention to only let 1 through, or how does it work then?
        1e-9 7y ago
        Example: 1) Spoofer places an offer to sell a small amount at a high price. 2) Spoofer places a bid to buy a huge amount at a lower price. 3) The huge order to buy makes other buyers think the price is about to increase significantly, so they immediately buy at the Spoofer's higher price even though they would otherwise prefer to wait for a lower one. 4) Spoofer immediately cancels their large order to buy before anyone takes it. 5) Spoofer waits awhile and then goes back to 1), but reverses the buy/sell orders so they can capture an illicit profit.
        blancheneige 7y ago
        >3) The huge order to buy makes other buyers think the price is about to increase significantly, so they immediately buy at the Spoofer's higher price even though they would otherwise prefer to wait for a lower one. Wait a minute, how did we go from "facilitating the efficient exchange of assets" to "making it easier for speculator to gamble based on what other speculators are doing"? edit: If anything, spoofing should be allowed to make the price discovery more efficient. For traders wouldn't trade as much based on what other traders are doing hoping to squeeze a short profit. Rather, if they really want in, they will get in with a market or fill-or-kill order at their desired price, period. And it will instantaneously snatch the lowest ask and go deeper into the order book if they want to allow slippage and get a bigger size as well. This would restrain all kinds of quick buck momentum trading and whatnot which only serve to increase the noise around the price and are purely speculative in nature.
  - erik_seaberg 7y ago
    If Burger King puts up a "5¢ Whoppers Today" sign but takes it down when you reach the door, that's not a bluff, that's fraud.
    - blancheneige 7y ago
      >but takes it down when you reach the door like I said, your market order will be executed before the alleged spoofer can take his down, i.e. there is no way for him to react and cancel his limit order causally, unless you are yourself doing something fishy prior to that market order. so no, the analogy doesn't hold. it really is an insignificant thing outside of HFT which is speculation to the max anyway.
      - erik_seaberg 7y ago
        As I understand it, institutions are fleeing to dark pools because they can't trust the regular markets to stand behind the offered prices and actually execute orders.
      - goatinaboat 7y ago
        there is no way for him to react and cancel his limit order Yes there is http://barclaysdfslastlooksettlement.com/ http://barclaysdfslastlooksettlement.com/
  - 1e-9 7y ago
    It's fundamentally wrong because markets exist to facilitate the efficient exchange of assets and spoofing lowers this efficiency. More specifically, spoofing tricks others into thinking that their transaction costs will be higher or lower than reality. This causes participants to transact at unnecessarily bad prices, which damages the price discovery process and adds cost.
    - blancheneige 7y ago
      >More specifically, spoofing tricks others into thinking that their transaction costs will be higher or lower than reality. How so? If you want to market buy 100 shares at time t and the "spoofed" limit order is up at time t, you will buy into the spoofed order. Only if the spoofer somehow has knowledge of your intention to buy at time t and quickly pulls the rug from under your feet at time t-t1, where t1 would have to be an unrealistically small amount of time, can they mess with you. So clearly this argument against spoofing, i.e. that it's creating a false sense of liquidity, doesn't work in an environment when the quote can flicker dozens of time per millisecond. It's more likely that spoofing is used to, say, protect a margin position from liquidation by flashing a wall above/below it hoping to scare away other market participants. In which case it shows the latter don't really mean their move to begin with, or that they are merely trading to squeeze gains on short timeframe, which has hardly anything to do with "facilitating the efficient exchange of assets".
      - 1e-9 7y ago
        The spoofer tricks you into doing something you would otherwise not do. See my example below in my reply to baybal2.
  - tigershark 7y ago
    You look at the market depth to get a feel where the market is moving. And spoofing modifies the sizes at certain price levels.
    - blancheneige 7y ago
      This is like saying we'll allow you to play poker but you can't bluff.
      - erik_seaberg 7y ago
        Poker is zero sum. Adversarial. The only way to win is for someone else to lose, so of course we try to sow confusion. A market is supposed to enable trades that benefit both sides, because otherwise who would dare use it? Selling means I need money and I'd rather have the share price now, buying means you have money and you'd rather have the income in the future, and it doesn't have to be a regrettable mistake for either of us.
        Scoundreller 7y ago
        Unless you have access to an observer account that lets you see all the hole cards: https://upswingpoker.com/ultimate-bet-absolute-poker-scandal/ https://upswingpoker.com/ultimate-bet-absolute-poker-scandal...
- taneq 7y ago
  The term you're looking for is "normalisation of deviance". Little breaches get handwaved away and so people get used to ignoring the rules, and next thing you know some major bad thing has happened and everyone's pretending to wonder why.
  - 2OEH8eoCRo0 7y ago
    "white socks lose wars" - unknown Gy Sgt
cryptozeus 7y ago
“Trunz, who earlier today resigned from his position as an executive director at J.P. Morgan, said he “learned to spoof from more senior traders, and spoofed with the knowledge and consent of his supervisors,” according to the Department of Justice.” Seems like a systemic issue and this guy is just a little fish in the sea
1e-9 7y ago
The newsworthy aspect of this article is the trader's claim that his illegal activity was sanctioned by his supervisors at a large financial institution. The fact that a spoofer was caught and punished isn't news as that happens on a daily basis.

42 points by momentmaker 7y ago

> pleaded guilty Tuesday to criminal charges of manipulating the precious metals markets for nine years. > Christian Trunz, 34, of London Started off pretty early...

deleted 7y ago
[deleted]

goldenkey 7y ago

When behavior becomes so common that it is normalized. A common phenom of corporate culture, see the Boeing 737 Max thread for a good discussion of this pervasive issue with corporations/capitalism: https://news.ycombinator.com/item?id=20552054 https://news.ycombinator.com/item?id=20552054

blancheneige 7y ago
I don't see anything fundamentally wrong with spoofing. If you really mean your market order then you don't care about whether resting orders are bluffing, unless you're bluffing yourself. You'll be matched against the best available bid/ask before these can be causally removed, period.
- baybal2 7y ago
  Can somebody with a better knowledge of American securities law tell what is an actual charge for that "spoofing"? "Placing a trading position with a sole purpose to benefit an another existing trading position" — sounds exactly what most of day trading is.
  - 1e-9 7y ago
    Spoofing is the act of placing an order with the intent to cancel it before execution.
    - baybal2 7y ago
      But you have to cancel orders if you put multiple of them at different price points, and it was your intention to only let 1 through, or how does it work then?
      - 1e-9 7y ago
        Example: 1) Spoofer places an offer to sell a small amount at a high price. 2) Spoofer places a bid to buy a huge amount at a lower price. 3) The huge order to buy makes other buyers think the price is about to increase significantly, so they immediately buy at the Spoofer's higher price even though they would otherwise prefer to wait for a lower one. 4) Spoofer immediately cancels their large order to buy before anyone takes it. 5) Spoofer waits awhile and then goes back to 1), but reverses the buy/sell orders so they can capture an illicit profit.
        blancheneige 7y ago
        >3) The huge order to buy makes other buyers think the price is about to increase significantly, so they immediately buy at the Spoofer's higher price even though they would otherwise prefer to wait for a lower one. Wait a minute, how did we go from "facilitating the efficient exchange of assets" to "making it easier for speculator to gamble based on what other speculators are doing"? edit: If anything, spoofing should be allowed to make the price discovery more efficient. For traders wouldn't trade as much based on what other traders are doing hoping to squeeze a short profit. Rather, if they really want in, they will get in with a market or fill-or-kill order at their desired price, period. And it will instantaneously snatch the lowest ask and go deeper into the order book if they want to allow slippage and get a bigger size as well. This would restrain all kinds of quick buck momentum trading and whatnot which only serve to increase the noise around the price and are purely speculative in nature.
- erik_seaberg 7y ago
  If Burger King puts up a "5¢ Whoppers Today" sign but takes it down when you reach the door, that's not a bluff, that's fraud.
  - blancheneige 7y ago
    >but takes it down when you reach the door like I said, your market order will be executed before the alleged spoofer can take his down, i.e. there is no way for him to react and cancel his limit order causally, unless you are yourself doing something fishy prior to that market order. so no, the analogy doesn't hold. it really is an insignificant thing outside of HFT which is speculation to the max anyway.
    - erik_seaberg 7y ago
      As I understand it, institutions are fleeing to dark pools because they can't trust the regular markets to stand behind the offered prices and actually execute orders.
    - goatinaboat 7y ago
      there is no way for him to react and cancel his limit order Yes there is http://barclaysdfslastlooksettlement.com/ http://barclaysdfslastlooksettlement.com/
- 1e-9 7y ago
  It's fundamentally wrong because markets exist to facilitate the efficient exchange of assets and spoofing lowers this efficiency. More specifically, spoofing tricks others into thinking that their transaction costs will be higher or lower than reality. This causes participants to transact at unnecessarily bad prices, which damages the price discovery process and adds cost.
  - blancheneige 7y ago
    >More specifically, spoofing tricks others into thinking that their transaction costs will be higher or lower than reality. How so? If you want to market buy 100 shares at time t and the "spoofed" limit order is up at time t, you will buy into the spoofed order. Only if the spoofer somehow has knowledge of your intention to buy at time t and quickly pulls the rug from under your feet at time t-t1, where t1 would have to be an unrealistically small amount of time, can they mess with you. So clearly this argument against spoofing, i.e. that it's creating a false sense of liquidity, doesn't work in an environment when the quote can flicker dozens of time per millisecond. It's more likely that spoofing is used to, say, protect a margin position from liquidation by flashing a wall above/below it hoping to scare away other market participants. In which case it shows the latter don't really mean their move to begin with, or that they are merely trading to squeeze gains on short timeframe, which has hardly anything to do with "facilitating the efficient exchange of assets".
    - 1e-9 7y ago
      The spoofer tricks you into doing something you would otherwise not do. See my example below in my reply to baybal2.
- tigershark 7y ago
  You look at the market depth to get a feel where the market is moving. And spoofing modifies the sizes at certain price levels.
  - blancheneige 7y ago
    This is like saying we'll allow you to play poker but you can't bluff.
    - erik_seaberg 7y ago
      Poker is zero sum. Adversarial. The only way to win is for someone else to lose, so of course we try to sow confusion. A market is supposed to enable trades that benefit both sides, because otherwise who would dare use it? Selling means I need money and I'd rather have the share price now, buying means you have money and you'd rather have the income in the future, and it doesn't have to be a regrettable mistake for either of us.
      - Scoundreller 7y ago
        Unless you have access to an observer account that lets you see all the hole cards: https://upswingpoker.com/ultimate-bet-absolute-poker-scandal/ https://upswingpoker.com/ultimate-bet-absolute-poker-scandal...
taneq 7y ago
The term you're looking for is "normalisation of deviance". Little breaches get handwaved away and so people get used to ignoring the rules, and next thing you know some major bad thing has happened and everyone's pretending to wonder why.
- 2OEH8eoCRo0 7y ago
  "white socks lose wars" - unknown Gy Sgt

cryptozeus 7y ago

“Trunz, who earlier today resigned from his position as an executive director at J.P. Morgan, said he “learned to spoof from more senior traders, and spoofed with the knowledge and consent of his supervisors,” according to the Department of Justice.” Seems like a systemic issue and this guy is just a little fish in the sea

1e-9 7y ago

The newsworthy aspect of this article is the trader's claim that his illegal activity was sanctioned by his supervisors at a large financial institution. The fact that a spoofer was caught and punished isn't news as that happens on a daily basis.