
Man Accused of Spoofing Some of the World's Biggest Futures Exchanges - SonicSoul
http://www.bloomberg.com/news/articles/2015-10-19/before-u-s-called-igor-oystacher-a-spoofer-he-was-known-as-990
======
boulos
It's always been unclear to me why the fines in these cases are so laughable.
Trader produces several millions of dollars of gains with purportedly bad
faith spoofing, fine is $275,000. Of course nobody would stop, the fines are
lower than income or even sales tax...

~~~
discardorama
I came here to say the same. These people are economics masters; if the
incentives are wrong, they'll take full advantage of them.

Make the fine 1.5X the profits, and watch the problem dry up in a flash.

~~~
rprospero
The 1.5x the profits issues may not be enough.

A few years back, I read a story about a doctor who ran a scam that would
assure the sex of your unborn child for $3000. Now, his treatment literally
did nothing and he knew this. Half his patients didn't get the gender they
paid for. He'd bring the distraught parents in, immediately hand over a full
refund, talk about how the procedure was only 99.95% effective, then offer the
parents another $1500 back as sign of his sincere regret.

Basic algebra shows that, despite doing nothing, he could expect to make $750
per patient, despite doing nothing, because the half of the children who had
the sex desired by their parents more than paid for the half that didn't.

As you said, these people are masters of economics. If there is less than a
66% chance of being caught, a 1.5x fine means that there's still money to be
made.

~~~
selestify
That's actually a well thought-out scam, where can I read more about this
doctor? I wonder how he finally got caught.

------
MichaelGG
Why write rules based on intent? Seems like it'd be far better to write rules
specifying limits on ordering. So if you cancel more than X% of orders, a set
suspension or fine gets issued. Write rapidly increasing suspensions or fines.

Or is it that there's just too much legitimate orders meeting this criteria?
If so are there no other material criteria to discriminate on?

Edit: It seems there are already limits in place both for absolute frequency
as well as trade/order ratios.

~~~
ikeboy
See [http://www.bloombergview.com/articles/2015-10-08/why-do-
high...](http://www.bloombergview.com/articles/2015-10-08/why-do-high-
frequency-traders-cancel-so-many-orders-)

~~~
MichaelGG
Yeah and the ratios are already limited by exchanges and the SEC tracks it
nicely:

[http://www.sec.gov/marketstructure/datavis/ma_exchange_cance...](http://www.sec.gov/marketstructure/datavis/ma_exchange_canceltotrade.html)

Some exchanges have a far higher ratio. Instead of ~10 (90%) it's ~150
(99.3%). But there's probably a good reason for this.

------
ikeboy
Make sure to see
[http://www.bloombergview.com/articles/2015-10-21/regulators-...](http://www.bloombergview.com/articles/2015-10-21/regulators-
bring-a-strange-spoofing-case) for some reasons to doubt the charges here.

~~~
subnaught
Turns out someone in the comments to that article had a better idea of what
was going on:

"He isn't trying to push the price with his big orders so much as get a
certain type of participant to join his level whose behavior he can exploit.
He's exploiting two things about market-makers. 1. They look at book imbalance
to decide where to bid and offer. By balancing out the book or skewing it one
way, he incites them to join and can sweep them. 2. Once they trade contracts
on one side of the market, their risk management logic creates price impact or
is predictable."

[http://www.bloombergview.com/articles/2015-10-21/regulators-...](http://www.bloombergview.com/articles/2015-10-21/regulators-
bring-a-strange-spoofing-case#comment-2320996180)

~~~
ikeboy
That's the government's claim, more or less. The article says that's not
evident from the actual trades done: he may have simply changed his mind after
the orders didn't get hit. A piece of evidence the article gives for this is
that much of the filling of his second order was later, well after algos had a
chance to see his cancellation. So there was no need for any spoofing anyway.

------
PublicEnemy111
This was a common strategy among pit traders in the 80's to place orders to
entice other traders to follow, while a partner would take a large position in
the opposite direction. Paul Tudor Jones was infamous for it and even laughed
about it on the documentary, "Trader".

It is ethically questionable, but shouldn't be illegal. You shouldn't be
managing money if your strategy is to follow bigger fish.

------
bruu_
I don't understand why other market participants can't adapt to spoofing.

I agree that fines won't work because it's just another variable influencing
the value of the spoofing strategy and if you get extreme about it you're
punishing legitimate parties.

Maybe the real problem is the culture of finance. I'm sure this guy isn't all
too embarrassed about what happened and there are plenty of people who would
love to hire him

------
NickHaflinger
So, a crook beat the other crooks at their own game. Where's the crime in
that.

~~~
TeMPOraL
Externalities.

~~~
orangecat
Which are what, exactly? As far as I can tell HFTs playing against each other
has no net effect on bystanders, other than providing marginally more
liquidity.

~~~
TeMPOraL
If so, why are we discussing HFT at all then? Isn't the primary reason people
bring it up because HFT algos can occasionally deadlock and the effects start
to affect the regular markets in a serious (read: dangerous) way?

------
raykaye47
Its sad that day trading attracts these geniuses that could otherwise use
their brainpower to solve more important problems in society.

~~~
ctvo
Is it also sad that there are a ton of geniuses working at the big 3 solving
internet advertising and social media?

~~~
flashman
As Jeff Hammerbacher said[1], "The best minds of my generation are thinking
about how to make people click ads. That sucks."

[1][http://www.bloomberg.com/bw/magazine/content/11_17/b42250609...](http://www.bloomberg.com/bw/magazine/content/11_17/b4225060960537.htm)

