Oct

7

 Perhaps one for the Department of Deception. Is the following not somewhat akin to moving the line in Las Vegas? Are there not examples of similar activities in other cases? A potential new crime at the millisecond level:

"'Spoofing,' a New Crime With a Catchy Name 'Spoofing,'":

A big hurdle in the "spoofing" case against a high-frequency trading firm is that a jury must decide whether one computer fooling another is a crime, Peter J. Henni…

"The indictment seeks to hold Mr. Coscia liable for trades executed in milliseconds by a computer, including one trade at 4:54 a.m. when he was probably asleep. The spoofing charges may send a chill through the high-frequency trading world because the evidence of fraudulent intent will come from a program that uses rapid-fire orders and does not depend on humans for its execution. So finding that Mr. Coscia engaged in spoofing may come down to a jury deciding whether one computer fooling another is a crime."

Ed Stewart writes: 

The indictment describes how Mr. Coscia's programs would enter small buy or sell orders for future contracts that he wanted to have filled. He then placed large orders on the other side of that trade at a higher or lower price to entice others to enter the market on the belief that the larger order would affect the price. Once the price moved so that his small order was filled, the program canceled the large orders. The program would then do the same transaction in reverse by entering another round of large orders that would move the price up or down to allow for Mr. Coscia to exit the position at a profit.

In other words he gamed other HFT traders who were using order book info to step in front of his large limit orders. As if jumping in front of a large limit order should be a protected activity? I would think non-HFT traders would applaud strategy, as it would increase the cost of stepping in front of orders, as the HFT would never know if it was a "spoof" or not. I see nothing inherently wrong with the strategy indeed it might be correcting a distortion itself.

The fact that this is a crime suggests to me that what is "level" to most is simply what tilts the odds in their favor.


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