Jan

2

 The CME and the CFTC are doing a great job at destroying the market ecology by exterminating the 'spoofers' out of the futures markets. This clever species helps maintain the equilibrium of order flow by gaming liquidity asymmetries and thus keeping the population of naive momentum front-running strategies in check. It reminds me of the extinction and later reintroduction of the wolves in Yellowstone.

Ed Stewart writes: 

I can't see how spoofers are bad for anyone but the momentum front runners, as you suggest. There must be a "god given" right to jump in front of slower moving participants that we are not aware of. I'd love to know how the spoofing practice developed. My guess is it started as a counter-strategy to neutralize front-running before it became a source of profit?

anonymous writes: 

And "they" destroyed limit orders when they busted the trades during the flash crash. I guess front-running is the only virtuous and god-favoured strategy?


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2 Comments so far

  1. Jim Davis on January 3, 2015 9:33 pm

    I wonder how the pitiful ES market depth we’ve seen lately relates to the harassment of the poor spoofing community?

    You mean 75% of the size was fake all along? ;-)

  2. Stunned speculator biting lip here for past 5 years on January 8, 2015 2:06 pm

    With all due respect: to not see/ understand how predatory algos “harm” price discovery, obfuscate/ destroy “true” liquidity ratios/ metrics therein and distort short term intermarket relationships .. For those who are true stewards of capital with significant aum is simply terrifying. This isn’t 2009. “This” isn’t new. Fwiw note what (read as: who) Dalio just did (new hire)..

    I know most erudite folk here shun zerohedge for valid/ invalid “reason” that said check it out if only to learn n understand HFT on a most ‘basic’ level. Since fed liquidity and HFT dominate mkt landscape it is simply irresponsible to not grasp the what n how forget why for now. GL

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