Federal Court May Take Down Traders for “Spoofing” the Markets

Coach is Right ^ | 11/1/15 | Suzanne Eovaldi

[Oldpuppymax]

Are small, Mom & Pop traders who trust their hard earned dollars to Wall Street being abused? Does a bear wee wee in the woods? A very important trial just started in Chicago that will pull back the curtain on the hidden, high finance trading practice known as spoofing. What is spoofing? Well, the technique combines ultra-fast buys by brilliant computer geeks and smart money guys who make a ton of dough in less time than it takes you to read this sentence.

One definition of spoofing says it’s “a fraudulent trading practice that occurs when a trader who owns a particular stock places a large buy order through electronic trading systems and then cancels it within seconds.” In such a case, pumping and dumping is taken to a whole new level where only the bold go and the little people’s dollars become chump change. The phony trade makes the stock appear to be a winner, causing buyers to make purchases which will drive up the price of the stock. Very clever, very fraudulent and very illegal.

(By the way, could anything be more pathetically humorous than the fact that it was Christopher Dodd and Barney Frank who offered the law which made the phony practice of spoofing illegal. Dodd and Frank engineered the fraudulent, federal scheme which caused the nation’s banks to lose trillions in real estate “lending.” Bankers were told to make loans which had no chance of being repaid or face federal lawsuits for racism. So corrupt was this scheme of federal blackmail that Dodd and Frank chose to leave congress, worried that they might be prosecuted for the destruction they forced upon financial markets.)

Michael Coscia is on trial in federal court in Chicago for his “huge spoof orders...

[babble-on]

Without prejudice to the practice of “spoofing” described here, which is something that probably shouldn’t happen, the notion that it is damaging to “mom and pop” investors is silly.

In fact, real investors benefit tremendously from the amount of liquidity in the financial markets.

Where a bid-offer spread on AT&T used to be 12.5 cents or even more, and with a large commission due on top of that, the bid offer spread and the commission alike have been cut to a tiny fraction of their prior levels. This means that the friction costs of getting in and out of a share is really minuscule — an efficient market in the narrow sense of the word.

[Lonesome in Massachussets]

Anyone who buys stocks by chasing peaks richly deserves everything they get.

[alexander_busek]

Without prejudice to the practice of "spoofing" described here, which is something that probably shouldn't happen, the notion that it is damaging to "mom and pop" investors is silly. In fact, real investors benefit tremendously from the amount of liquidity in the financial markets. Where a bid-offer spread on AT&T used to be 12.5 cents or even more, and with a large commission due on top of that, the bid offer spread and the commission alike have been cut to a tiny fraction of their prior levels. This means that the friction costs of getting in and out of a share is really minuscule - an efficient market in the narrow sense of the word.

Are you seriously claiming that "gaming" the system by placing and then instantly cancelling sizable orders in any way "helps" the system?!

Are you seriously claiming that this makes the market "more efficient" and that, in effect, "everybody" benefits? That it's thus a "victimless crime?"

Regards,

[Orbiter]

Should read "...everything they lose."

Stated as an oversimplification, smart money exits a rising trend at a predetermined point along the conservative-aggressive spectrum. The same can be said for entering a falling trend (an even greater oversimplification). Smart money considers the saying "Buy low, sell high." a good suggestion knowing full well that it's precisely at these two points where dumb money is sure to be found holding the bag.

[babble-on]

Nope. Never said that.

Would you like me to explain what I did say?

[alexander_busek]

Nope. Never said that. Would you like me to explain what I did say?

Your original quote says it all - at least for me. I leave it to the other FReepers here to decide for themselves what you were implying.

Regards,

[babble-on]

I said it should not be allowed, but that the notion that it hurts small investors was wrong.

To explain why I am correct would necessitate explaining something to you about how financial markets operate today, something I suspect you are way too stupid to comprehend.

[alexander_busek]

[...] something I suspect you are way too stupid to comprehend.

I know the saying about "not wrestling with swine, because you'll only get filthy, before you realize that the swine enjoys it," but I'm curious: Why do you resort to rude remarks with a perfect stranger who has been nothing but courteous to you?

Regards,

[babble-on]

It wasn’t rude, just an honest statement of the futility of conversing with someone who lacks a basic understanding of the terms necessary to comprehend the subject at hand.