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PaceAdvantage
04-21-2015, 02:22 PM
Hot off the Dow Jones news wire:

A U.K. man was arrested on Tuesday on U.S. charges that he contributed to the May 2010 "Flash Crash" in which the Dow Jones Industrial Average plunged 600 points, the Justice Department said.

Navinder Sarao is in the custody of U.K. authorities and faces charges of fraud, manipulation and a high speed trading practice known as "spoofing," the agency said.

Mr. Sarao also faces charges from the U.S. Commodity Futures Trading Commission , which claims he played an integral in contributing to the Flash Crash.Who knew it was that easy to move billions of dollars in under half an hour...

PaceAdvantage
04-21-2015, 02:24 PM
Kind of makes you wonder why it seems they never found out who was behind all those prescient pre-9/11 options trades in airline stocks...or did they find out and report it was all a coincidence? I seem to remember something like that...

But they caught this guy? :lol:

PaceAdvantage
04-21-2015, 02:38 PM
More detail:

http://www.cnbc.com/id/102573733

If this "lone wolf" with his own trading company was getting away with this kind of thing for so long, just imagine the tricks the "big boys" are getting away with right now here at home...

whodoyoulike
04-21-2015, 03:45 PM
I had just read another Bloomberg article which mentions "spoofing" which kind of reminded me of the horse racing complaints of "late bet cancellations".

I hope these POS whether in financial markets or horse racing get what they deserve.

http://www.bloomberg.com/news/articles/2015-04-21/futures-trader-arrested-for-alleged-role-in-2010-flash-crash-i8rkkccm

... "Spoofing and layering involve submitting market orders with no intention of filling them, with a goal of pushing prices in a direction favorable to a traderís strategy." ...

_______
04-21-2015, 05:47 PM
I would be extremely afraid to the point of being unable to invest if I believed a single person could have caused the flash crash in 2010. But I don't.

There is no doubt the guy was behaving badly. But the idea that a single trader did this is ridiculous. There was a lot more that contributed to that incident.

barn32
04-21-2015, 06:28 PM
Kind of makes you wonder why it seems they never found out who was behind all those prescient pre-9/11 options trades in airline stocks...or did they find out and report it was all a coincidence? I seem to remember something like that...Do you have a link for this?

badcompany
04-21-2015, 07:07 PM
I had just read another Bloomberg article which mentions "spoofing" which kind of reminded me of the horse racing complaints of "late bet cancellations".

I hope these POS whether in financial markets or horse racing get what they deserve.

http://www.bloomberg.com/news/articles/2015-04-21/futures-trader-arrested-for-alleged-role-in-2010-flash-crash-i8rkkccm


Another horse racing example would be putting some early money on a horse to suggest back stretch betting then putting in the big bet on another horse, late.

In financial markets, it can be a fine between legal and illegal. You're not supposed to "deceive" the market; yet, one of the most common algo trading strategies is to break up a large trades into smaller pieces as to not tip off the market. That said, with most day trading being algorithmic, I don't even know if that strategy is even useful anymore.

whodoyoulike
04-21-2015, 08:28 PM
Another horse racing example would be putting some early money on a horse to suggest back stretch betting then putting in the big bet on another horse, late.

In financial markets, it can be a fine between legal and illegal. You're not supposed to "deceive" the market; yet, one of the most common algo trading strategies is to break up a large trades into smaller pieces as to not tip off the market. That said, with most day trading being algorithmic, I don't even know if that strategy is even useful anymore.

I don't consider this market manipulation. Since, I don't think I could ever place a large enough order which would move the market, I don't have to worry about submitting smaller trades (pieces).

_______
04-21-2015, 11:04 PM
I don't consider this market manipulation. Since, I don't think I could ever place a large enough order which would move the market, I don't have to worry about submitting smaller trades (pieces).

I think what BC is talking about is a strategy used by larger institutions. Imagine you run Fidelity Magellan or some other multi hundred billion dollar fund. You want to establish a new position in a small cap company. Do you stomp in all at once with a 1,000,000 share order (which, BTW is a fraction of a fraction of a fraction of a percent of your total holdings) on a stock that trades 800,000 on a heavy day?

Or do you bleed in smaller orders?

whodoyoulike
04-21-2015, 11:42 PM
But, is this really considered market manipulation?

You're actually buying the stock in an attempt to not adversely affect your market price compared to artificially manipulating the stock price in the hopes of dumping it or not even planning to buy it.

I think there are several other methods to legally manipulate a stock's price e.g., the "investor" who buys a large stake in a company and then announces it prior to the S.E.C. quarterly filing requirement.

badcompany
04-21-2015, 11:46 PM
I think what BC is talking about is a strategy used by larger institutions. Imagine you run Fidelity Magellan or some other multi hundred billion dollar fund. You want to establish a new position in a small cap company. Do you stomp in all at once with a 1,000,000 share order (which, BTW is a fraction of a fraction of a fraction of a percent of your total holdings) on a stock that trades 800,000 on a heavy day?

Or do you bleed in smaller orders?

In both cases, the traders are concealing their intentions.

One guy is canceling orders; the other is feeding them to the market a little at a time.

_______
04-21-2015, 11:58 PM
But, is this really considered market manipulation?

You're actually buying the stock in an attempt to not adversely affect your market price compared to artificially manipulating the stock price in the hopes of dumping it or not even planning to buy it.

I think there are several other methods to legally manipulate a stock's price e.g., the "investor" who buys a large stake in a company and then announces it prior to the S.E.C. quarterly filing requirement.

I don't think it is. You don't think it is. And it doesn't appear BC thinks it is.

I think his point was the fine line.

badcompany
04-22-2015, 07:55 AM
I don't think it is. You don't think it is. And it doesn't appear BC thinks it is.

I think his point was the fine line.

That's exactly my point.

That said, intra-day trading is a completely different game. There's no investment objective. It's a game in which computers fight over tiny price fluctuations.

What that trader was doing is just a tactic, no different from an NBA basketball player faking a shot to get the defender to react.

It's illegal if the authorities say it's illegal.

PaceAdvantage
04-22-2015, 02:36 PM
Do you have a link for this?It's all over the internet...just google 9/11 options trading

Robert Goren
04-22-2015, 06:43 PM
That's exactly my point.

That said, intra-day trading is a completely different game. There's no investment objective. It's a game in which computers fight over tiny price fluctuations.

What that trader was doing is just a tactic, no different from an NBA basketball player faking a shot to get the defender to react.

It's illegal if the authorities say it's illegal.CNBC has had several "experts" on trying to say whether what he did was illegal. There was no real conscious other than it probably violated a 1920s New York state law. Otherwise it was one said they had a case and another said they did not. I can not see him being extradited.

badcompany
04-22-2015, 07:11 PM
CNBC has had several "experts" on trying to say whether what he did was illegal. There was no real conscious other than it probably violated a 1920s New York state law. Otherwise it was one said they had a case and another said they did not. I can not see him being extradited.

I don't buy this guy being responsible. Probably just in the wrong place at the wrong time.

The flash crash took place right at an intermediate low. Stock was being shaken out at the time. My guess is that some algo parameters were set incorrectly.

If anyone is interested, this is a good primer on how algorithmic trading works.

https://equity.natixis.com/netis/accueil/documents/Algorithmic_Trading.pdf

PaceAdvantage
04-23-2015, 01:26 PM
I don't think anyone is trying to say he was the main reason for the flash crash...I certainly didn't mean to imply that kind of thinking.

But it sounds like he may have contributed...

After all, he has made $40M...that ain't chump change....

badcompany
04-23-2015, 02:54 PM
I don't think anyone is trying to say he was the main reason for the flash crash...I certainly didn't mean to imply that kind of thinking.

But it sounds like he may have contributed...

After all, he has made $40M...that ain't chump change....

Unless I missed something, he made the money between 2010-2014. Sure, to one person, that's big money, but as a percentage of the financial market's handle, it's peanuts.

Consider that SPY trades about 80 million shares a day. With it selling at about 210, that's a DAILY handle of 16 billion dollars.