I was asked to explain how this new court case would affect the market and WHY it has shocked the HFT companies who thought they had conquered the exchanges supervision depts !
MICHAEL COSCIA's CONVICTION OF SPOOFING / CHEATING last week SENT A HUGE MESSAGE TO THE MARKET PLACE .
THAT MESSAGE CLEARLY SPELT THAT USING ORDERS THAT ARE QUICKLY CANCELED is NOW DEEMED ILLEGAL [ wasn't it before, just not enforced?]
AS it MANIPULATEs THE MARKET BY FOOLING [enticing?] OTHERS TO TRADE.
THE COMMODITY EXCHANGE ACT OF 2010 PROHIBITS BIDS OR
OFFERS WITH INTENT TO CANCEL BEFORE EXECUTION .
FINALLY AFTER YEARS OF COMPLAINING TO REGULATORS WE have FOUND A COURT WITH the integrity and the COURAGE TO PROVE THE DEFENDANT's INTENT - WHICH WAS BLATANT .
THE MAJORITY OF PANTHER ENERGY's ORDERS - placed by Coscia TO PROVIDE LIQUIDITY - WERE CANCELLED WITHIN 400 MILLISECONDS.
THIS EVIDENCE PROVED THAT THERE WAS ALMOST NO PROSPECT OF him EVER FULFILLING ANY OF these ORDERS.
It did however ALLOW HIM TO FRONT RUN SMALLER ORDERS AND THEREFORE INTERCEPT AND STEAL HONEST RETAIL , HEDGE AND PENSION HOUSE ORDERS .
MR COSCIA CLAIMED HE ABSOLUTELY WANTED TO FILL EVERY ORDER, YET CANCELED THEM WITHIN A BLINK OF AN EYE !
THE JURY TOOK LESS THAN AN HOUR TO FIND him GUILTY ON EVERY CHARGE, which begs the more serious question of WHY EXCHANGES TOOK SO LONG TO IDENTIFY the FAULT ?
THE QUANDARY WE HAVE IS THAT THIS SUCCESSFUL PROSECUTION OF M.COSCIA WILL NOW QUESTION THE WHOLE ETHICS OF H.F.T. BECAUSE BLATANTlY CANCELING ORDERS BEGINS THE ARGUMENT ON SPOOFING.
SADLY THESE HFT HOUSES HAVE MANAGED TO HIDE AND BE PROTECTED BY EXCHANGES until now.
THIS NOW QUESTIONS THE BIGGEST VOLUME HFT HOUSES
WITH THEIR HIGH % OF CANCELED TRADES . THEY CAN NOW NO LONGER HIDE BEHIND BEING LIQUIDITY PROVIDERS BUT ARE NOW IN THE HEADLIGHTS as SPOOFERS - CHEATS AND UNDESIRABLES .
CFTC AND SEC HAVE FINALLY DECIDED TO CRACK DOWN ON SPOOFERS AND NOW ARE ADDRESSING "FAIR AND ORDERLY MARKETS" ; A role EXCHANGES ARE REQUIRED TO SERVICE BUT have CONVIENTLY FORGOTTEN .
THESE RULES /LAWS HAVE BEEN IN PLACE FOR YEARS AND YET HAVE BEEN EASILY ABUSED BY CERTAIN COMPANIES AND PERHAPS EVEN AIDED BY EXCHANGES WHO MANAGED TO LOOK ELSEWHERE .
TIM MASSAD CFTC BOSS STATED " IF THEY ARE ENTERING A LOT OF ORDERS WITHOUT THE INTENTION TO Consummate THEN THEY SHOULD TALK TO THEIR LAWYERS !"
THE BOSS OF ENFORCEMENT AT SEC IS ALSO ON THE CHARGE FOCUSING ON SPOOFING A WELL AS OTHER ABUSIVE TOOLS AND RECENTLY WE HAVE SEEN EXCHANGES SUPERVISION DEPT TIGHTEN UP AND FINALLY PROVIDE FAIRER MARKETS .
MY GRIPE IS STILL that THE FCA REFUSE TO DISCUSS ANY ABUSE: IN TRACY LEGG's WORDS " "THE MATTER IS CLOSED ."
FOR THOSE WHO ARE STILL CONFUSED THE MESSAGE BEING SENT OUT WILL HURT HFT AND EXCHANGES AS THESE CANCELLATIONS ARE NOW DEEMED ILLEGAL AND A CRIME IN CIVIL LIABILITY AND A CRIMINAL PROSECUTION .
LOOKING TO 2016 I CAN FINALLY (hahaha!) RAISE A BEER AND REALISE THAT IT WAS WORTH BANGING THE ABUSE / SPOOFING DRUM after alll, and that CHALLENGING THOSE WHO DEFENDED IT was necessary.
HOPEFULLY NEXT YEAR WILL RE- RESTORE FAIR AND ORDERLY MARKETS ; I THINK EXCHANGES HAVE BEEN GIVEN A WARNING TO PROVIDE THEM TOO ! HOPEFULLY THIS IS AN RIP TO SOME NASTY HFT PLAYERS .