Oct

26

 Interesting article on tools to detect fraud in silver.

Victor Niederhoffer comments: 

While we prefer an independent summary of important articles transmitted, there are some like the article on fraud in silver including spoofing, (bids or offers but cancel them before the close), banging (acquiring a substantial positions leading up to the close then offsetting the position in the final minutes to manipulate the closing price), and quote stuffing (flooding the market with large numbers of orders) that are so sui generous that they resonate through all our experiences.

How many of us have been victimized by these direct manipulations, and how many of them can be quantified in markets to show how temporary efforts at manipulation lead to opportunities. It would repay careful study.

As discussed, being on the rules committee is a good first line of defense to make these manipulations more effective and harder to punish. Also, setting of margins against the other side of your trade,by being on the margin committee, or entitlement to do so at your volition by terms of your contract, a la famous examples in the 2008 crash, and 2007 August stock market declines provides a nice synergistic platform in conjunction with the other manipulations, and many others not specifically named, but covered in part in such books as Reminiscences.

Alex Castaldo adds:

An interesting quote from the article:  "The CFTC's only successful manipulation prosecution in its 36-year history was against a broker charged with manipulating settlement prices for electricity futures in 1998."


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