4 ms·

We can't legislate that you don't spoof - it'll simply be an arms race. If you want to participate in a market without spoofers, simply require a deposit for of

by fineman 11y ago

We can't legislate that you don't spoof - it'll simply be an arms race. If you want to participate in a market without spoofers, simply require a deposit for offers cancelled within a certain period of time. The problem is that the market is only capable of defending against what it is used to dealing with, if we "ban" scammers we end up with a market susceptible to scammers. If we "allow" everything we'll end up with markets that can withstand a sybil attacks. As another poster said, the "correct" metric is accepted offers, not outstanding offers. ("Correct" is complex of course...) It's like passing laws making web-scraping for email addresses into hacking. It feels like it'll make us safer, but because "only criminals have guns" it just ends up shooting a few people in the foot and weakening us overall against actual threats.

beagle3 11y ago
> We can't legislate that you don't spoof - it'll simply be an arms race. If you want to participate in a market without spoofers, simply require a deposit for offers cancelled within a certain period of time. That's like saying "we can't legislate vendors don't do a bait-and-switch" or "we can't legislate against false advertising". We can, we have, and it made life better for society at large. The false advertising arms race is still on - but the collateral damage to consumers is significantly smaller than it was before those laws were enacted. We can legislate "don't spoof", and we have (for some proverbial we), but any law is useless without enforcement - and there is no enforcement for these regulations. Additionally, at present the SEC is a part of the spoofing arms race, and is massively (and some say willingly due to regulatory capture) underfunded and incompetent in that race with no intent to win. You want to legislate it so that it has teeth? Publish pseudonymized order flow six months after the fact (changing identifiers every day, for example), and give someone who can use this data to prove spoofing 10% of the proceeds of any fines levied thanks to their work. (Sure, pseudonymity is hard, and may be impossible. But 6 months after the fact is enough time for that to matter little in case of trades). You want to stop it without changing enforcement mechanism? Charge for unexecuted orders, or otherwise limit their numbers. In fact, some european exchanges have very stiff penalties if you have >10:1 ratio of orders:fills - and spoofing there is almost nonexistent. But SEC behaviour indicates that they have no intention of fixing that aspect of the market. > It's like passing laws making web-scraping for email addresses into hacking. It feels like it'll make us safer, but because "only criminals have guns" it just ends up shooting a few people in the foot and weakening us overall against actual threats. No, it's not. Exchanges are few and (supposedly) extremely well regulated. The number of "bad actors" (spoofers or otherwise) is also small and under strict regulation. Your claim that it is is nonsensical. An equivalent claim is "It's like making shooting people in the streets a crime. It feels like it'll make us safer, because only criminals will shoot people but it ends up weakening us overall against actual threats". We have made that a crime, we've done what's needed to enforce those laws, and it has made us stronger, not weaker.
- fineman 11y ago
  > No, it's not. Exchanges are few and (supposedly) extremely well regulated. The number of "bad actors" (spoofers or otherwise) is also small and under strict regulation. Almost everything you said is directly refuted in the article, or by some simple reasoning. Exchanges are not well regulated, as this happened for years, and they appear to have come down on the smallest offender. This is feel-good enforcement, and in no way comes with even an attempted guarantee that the behavior has been stopped. You're free to assume it has, but that's a probably niche view among people investing with their own money. > Additionally, at present the SEC is a part of the spoofing arms race, and is massively (and some say willingly due to regulatory capture) underfunded and incompetent in that race with no intent to win. Impossible mandates have a way of sapping your will. > You want to legislate it so that it has teeth? No, giving a bad law bigger teeth seems like a poor idea. I want to examine the root cause of the issue and fix that once and for all. The issue appears to be that someone decided that you should be able to trust my signals, "because trust, mkay". So inherently we've got a situation like poker where I benefit if you misread me, and we've got a re-active nanny trying to make me play nicely... If instead we said to you "his buy/sell orders aren't an appropriate signal for you to base things on because they're easy to misread", we'd be done. Then if you wanted a system where people didn't game it like this you could do what I proposed earlier and simply make each order cost a small amount if cancelled early or whatever. You'd know precisely how much (the early-cancellation fee) you could trust my signals. And then if enough people agreed, they'd start only accepting bids that had a deposit and you'd have your way, unlike now where you only think you do. > An equivalent claim is "It's like making shooting people in the streets a crime [...] Wow, no. Equivalency fail. Hitler much? But though, if you trust in a prohibition on murder to keep you safe and refuse to defend yourself, perhaps there is some small amount of similarity...
hollerith 11y ago
Is the argument in your second paragraph still valid when we replace the word "scammers" with "murderers"? If not, why not?
- bko 11y ago
  I'm not the author of the original comment but I think scams are a lot more subjective and often are the result of a series of completely legal actions. The only identifying attribute of a scam be the intent of the actions, which is subjective. The act of murder is illegal in its own right, although sometimes justified in the legal system. I think the original commenter's point was that if you take for granted that people will act ethically with no ulterior motives, you lose a healthy skepticism that is very beneficial to a market.
- fineman 11y ago
  Are most analogies valid if you replace one party with nazis? Murder isn't an economic action bordering on indistinguishable from normal interactions. Publishing some bids you don't really want accepted is.

by fineman 11y ago

beagle3 11y ago

> We can't legislate that you don't spoof - it'll simply be an arms race. If you want to participate in a market without spoofers, simply require a deposit for offers cancelled within a certain period of time. That's like saying "we can't legislate vendors don't do a bait-and-switch" or "we can't legislate against false advertising". We can, we have, and it made life better for society at large. The false advertising arms race is still on - but the collateral damage to consumers is significantly smaller than it was before those laws were enacted. We can legislate "don't spoof", and we have (for some proverbial we), but any law is useless without enforcement - and there is no enforcement for these regulations. Additionally, at present the SEC is a part of the spoofing arms race, and is massively (and some say willingly due to regulatory capture) underfunded and incompetent in that race with no intent to win. You want to legislate it so that it has teeth? Publish pseudonymized order flow six months after the fact (changing identifiers every day, for example), and give someone who can use this data to prove spoofing 10% of the proceeds of any fines levied thanks to their work. (Sure, pseudonymity is hard, and may be impossible. But 6 months after the fact is enough time for that to matter little in case of trades). You want to stop it without changing enforcement mechanism? Charge for unexecuted orders, or otherwise limit their numbers. In fact, some european exchanges have very stiff penalties if you have >10:1 ratio of orders:fills - and spoofing there is almost nonexistent. But SEC behaviour indicates that they have no intention of fixing that aspect of the market. > It's like passing laws making web-scraping for email addresses into hacking. It feels like it'll make us safer, but because "only criminals have guns" it just ends up shooting a few people in the foot and weakening us overall against actual threats. No, it's not. Exchanges are few and (supposedly) extremely well regulated. The number of "bad actors" (spoofers or otherwise) is also small and under strict regulation. Your claim that it is is nonsensical. An equivalent claim is "It's like making shooting people in the streets a crime. It feels like it'll make us safer, because only criminals will shoot people but it ends up weakening us overall against actual threats". We have made that a crime, we've done what's needed to enforce those laws, and it has made us stronger, not weaker.

fineman 11y ago
> No, it's not. Exchanges are few and (supposedly) extremely well regulated. The number of "bad actors" (spoofers or otherwise) is also small and under strict regulation. Almost everything you said is directly refuted in the article, or by some simple reasoning. Exchanges are not well regulated, as this happened for years, and they appear to have come down on the smallest offender. This is feel-good enforcement, and in no way comes with even an attempted guarantee that the behavior has been stopped. You're free to assume it has, but that's a probably niche view among people investing with their own money. > Additionally, at present the SEC is a part of the spoofing arms race, and is massively (and some say willingly due to regulatory capture) underfunded and incompetent in that race with no intent to win. Impossible mandates have a way of sapping your will. > You want to legislate it so that it has teeth? No, giving a bad law bigger teeth seems like a poor idea. I want to examine the root cause of the issue and fix that once and for all. The issue appears to be that someone decided that you should be able to trust my signals, "because trust, mkay". So inherently we've got a situation like poker where I benefit if you misread me, and we've got a re-active nanny trying to make me play nicely... If instead we said to you "his buy/sell orders aren't an appropriate signal for you to base things on because they're easy to misread", we'd be done. Then if you wanted a system where people didn't game it like this you could do what I proposed earlier and simply make each order cost a small amount if cancelled early or whatever. You'd know precisely how much (the early-cancellation fee) you could trust my signals. And then if enough people agreed, they'd start only accepting bids that had a deposit and you'd have your way, unlike now where you only think you do. > An equivalent claim is "It's like making shooting people in the streets a crime [...] Wow, no. Equivalency fail. Hitler much? But though, if you trust in a prohibition on murder to keep you safe and refuse to defend yourself, perhaps there is some small amount of similarity...

hollerith 11y ago

Is the argument in your second paragraph still valid when we replace the word "scammers" with "murderers"? If not, why not?

bko 11y ago
I'm not the author of the original comment but I think scams are a lot more subjective and often are the result of a series of completely legal actions. The only identifying attribute of a scam be the intent of the actions, which is subjective. The act of murder is illegal in its own right, although sometimes justified in the legal system. I think the original commenter's point was that if you take for granted that people will act ethically with no ulterior motives, you lose a healthy skepticism that is very beneficial to a market.
fineman 11y ago
Are most analogies valid if you replace one party with nazis? Murder isn't an economic action bordering on indistinguishable from normal interactions. Publishing some bids you don't really want accepted is.