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0 pointstotalZero4y ago0 comments

Spoofing is as old as time, as are most forms of market manipulation. The algo shops are fortunate that the regulators are accommodating the drawbacks of their machinery. That doesn't mean all of the regulations make sense in the broader context of market activity.

"Act fast because these are selling like hotcakes!"

"I've got another guy who wants to buy the car for $5k but I'd sell it to you for $6k if you can bring cash today."

"It's a buyer's market right now, so we should probably be willing to negotiate on the price as we sell your home."

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ClumsyPilot4y ago

The difference is impact - Market for old cars or shoes is not indexed and securitised with a potential to cause a global financial meltdown.

hogFeast4y ago

Spoofing has been going since the mid-90s with no impact to the global financial system. It was only made illegal when markets went full electronic, and large HFT firms started losing money to spoofers.

The real problem with market stability is nanosecond liquidity and HFT firms that will pull liquidity when things get dicey. Spoofing largely doesn't occur anymore, and you still see huge swings in prices because the liquidity isn't there anymore...investment banks have been regulated out the market, HFT firms flee at the first sign of trouble, there are relatively few speculators willing to buck the market anymore.

rich_sasha4y ago

Surely, HFTs are the key player for spoofing? To play this game, you need to be able to pull your orders faster than people can execute on them. E.g. you see flow on one exchange, you pull on the other?

As I see it, the main problem with spoofing is that it distorts the market information. Any trader, human or machine, can look at the current order book and assume it is somewhat bona fide. Without that, exchanges are just a random draw (more than otherwise). Hence the appeal of dark pools (well, at one time) etc.

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