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On today's news: some poor bugger to be extradited to the US, to face charges over his trading. News reports at Usual Suspects such as .

This story has been in the news before, and from my understanding, I can't see how he's done anything wrong. At least, not anything more wrong than those who bait a 419-er and successfully extract money from them. So perhaps if I tell the story as I understand it, Fools can correct my evident misunderstanding.

OK, his crime was placing and then cancelling large orders on the Chicago Mercantile Exchange to manipulate prices. And he somehow made lots of money from such trading.

Now, market makers must be well-accustomed to all kinds of different trading patterns, and have spreads to generate profits and protect from losses. Likewise pseudo-market-makers like a spreadbetting platform. The media reports seem to suggest that his actual "victims" were algorithmic trades that watched his trades and front-ran the Big Ones. Then when a Big One was cancelled, they were left with a trade they wouldn't otherwise have done.

That begs the question: how is it acceptable for any trader - including an HFT algorithm - to get the information about another trade in time to front-run it? That looks like insider trading, albeit insiders to an exchange rather than a company. Why does any system allow a trade to be seen by third-parties before it has been executed? If HFT algorithms are routinely profiting from front-running honest trades, should we not be applauding someone who out-smarts their abusive practice?

Sarao didn't use (nor have) any kind of privileged information or access to the exchange. He was only doing what any member of the public could have done. He didn't create the defects in the rotten system that led to a "flash crash", he merely exposed them.

It seems the Emperor is very touchy about his wardrobe.
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