Back in 2013 Citadel , the biggest HFT , found that spoofers were robbing their algos of monies ! The spoofer places orders that it had no intention of filling and enticed Citadel into trading , then cancelled them , leaving them with losing trades . Blow
me down we cannot have Citadel losing monies or being out spoofed as they virtually control most exchanges as being market makers and board members .
The issue here is that exchanges have constantly denied any spoofing and regulators far to slow to monitor fair and orderly markets . Finally in 2015 we saw some convictions and more importantly the market players began to police the market where exchanges
refused to ! CMC group in 2015 brought 16 convictions and it appears that the "spoofing" police have been given some tools to work with ?
However what is the simplest way to prevent spoofing ?
The easiest way to prevent spoofing in any form is to take away anonimity, the invisible trader , who can bid or offer and cancel and then disappear .One of the benefits of "open outcry" markets was that there was always a face / name behind every order and
therefore spoofers were quickly exposed and ignored . The benefits of tagged traders and a virtual pit would restore fair and orderly markets and its that simple .
How widespread is market abuse ? The CFTC receives complaints every week as exchanges struggle to monitor abuse . Several prop houses now teach their graduates how to trade against spoofers , flippers, washers etc as they have accepted
that exchanges struggle to referee real time trading . Exchanges argue that spoofing is difficult to prove and sending traders to prison takes years as e mails ,phone records and Internet chats need collecting etc .
However to the trained eye "spoofing" is easy to monitor and in order to protect fair and orderly markets we need to be able to immediate suspend traders , this would of prevented Navinder Sarao from chaos in 2010 . Exchanges have these tools available
and with the end of anonimity the market could track and monitor the spoofers who would soon exit the market place .
CFTC chairman Tim Massad has said that budget constraints had hampered the war against spoofing and its staff is no bigger than it was before 2010 and Dodd Frank and Commodity Exchange Act . Therefore ending anonimity and re naming trades and orders is without
doubt the cheapest and most productive way forward in 2016 !