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Former JPMorgan metals trader pleads guilty to spoofing

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I'm sure precisely none of you will be surprised to learn that this was going on but it's interesting to get some insight into how they do it.


Spoofing involves placing and then rapidly cancelling orders in order to dupe the market.

Mr Edmonds learned the practice from “more senior traders at the bank” and used the strategy “hundreds of times with the knowledge and consent of his immediate supervisors”, according to the court filing.


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I'm not even convinced this is a crime.

The market is there, it is electronic, it matches bids with asks, once a bid or ask is hit the trade is executed - all the "spoofing" in the world doesn't change that fact, either the bid or ask gets hit, or it doesn't.

What all the "anti-spoofing" people are mad about is that they can't use level 1 and level 2 quotes, or use insight into book depth, to gain an unfair advantage over people who don't have access to that information.  They're pissed off that traders might use those tools against them, to use that unfair advantage to sucker them into believing the market is going to move one way when it's about to move another.  NONE of that affects mom and pop who don't have access to that information to begin with, the people who are "spoofing" are mostly gaining an advantage over computer algorithms.

Think about what they've made illegal ... it's as if you went to an auction and started telling people that item "X" was only worth 100$us when it's really in your own eyes worth 150$us, because you think that will dissuade people from bidding the price up.  Should that be illegal ?  No ... those other people are supposed to be making up their own mind about what it is worth, why are they even listening to you ?  If they can be swayed by your words then they shouldn't be buying it to begin with.  It's the same in the electronic markets ... why is a computer algorithm buying a stock at a given price based on nothing but the fact that it thinks other people have an interest in it ... should it be a crime for those human traders to head fake the computer algorithms by pretending their are going to be orders and then removing them after the computer has made a purchase ?  I don't think so ... these "anti-spoofing" people are just pissed off that they can't continue using an unfair advantage they've enjoyed since the stock market was created.

Edited by Lowlow

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The fact that a bid can be retracted very quickly before it is hit is what makes the situation different. Back in the days of open outcry, a trader could not signal that he wished to trade and then retract the signal as soon as another party showed interest in making the trade. Even though this might have been a useful way of discovering what price someone else was willing to trade at, or even to manipulate the price by simulating a fake demand, it was not permitted. Now, algo traders use it routinely to discover small differences in the price, in order to gain an advantage.

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