
JPMorgan traders charged by DOJ, accused of rigging metal markets - rainhacker
https://markets.businessinsider.com/news/stocks/jpmorgan-precious-metals-traders-charged-with-fraud-conspiracy-racketeering-doj-2019-9-1028527742
======
mrpim
The profits unlawfully gained by Smith, Nowak, and Jordan seem very small,
estimating them from the difference of the deceptive orders and the true
orders. In the orders of a few hundreds per year, which I would think is close
to nothing for JPMorgan traders. How is it worth The hassle for them to learn
to spoof prices?

Cocospirator 2 on the other hand seems to have gained around 10k for a couple
of years.

This is assuming they kept the whole profits and not the bank.

Can anybody explain what is the motivation behind this very low numbers? Is
the DOJ only releasing a subset of the fraudulent trades?

~~~
harry8
You only need to prove one case for it to be a crime. Proof is difficult.
Where there is one case, however little profit gained, there is crime. Where
the trouble has been gone to in one, for low profit it suggests that it is not
a "one off." There may strong suspicion that there are many, many more
criminal activities that are overly difficult to proove, yet. See one and
prosecute it very, very hard is the only possible honest strategy for law
enforcement about such matters.

But then "spoofing" is problematic. "While the order was in the market I was
absolutely willing to trade at that price." Is a pretty reasonable defence,
given that if someone does trade with you at the price you're showing, you are
completely stuck with the trade.

This kind of "spoofing" isn't something you really need to learn. I want to
sell at $X, so I put my sell order in, then put a bunch of buy orders in at a
lower price so anyone looking at the balance of buys vs sells thinks the price
is going to go up and trades with me at $X. I mean a grade school kid can work
that out without being taught. It has financial risk. It is illegal. Should it
be? Should the orders be anonymous or should every order have a trader and
firm associated in its market data? Would that help, ("I'll sms my rivals Joe
and Mary to put some buys in quid pro quo that I'm here when they need it.")

There's some tricky policy decisions and some tricky rules and enforcement
issues around it, given that there is no lobbying or regulatory capture from
enormously wealthy investment banks and your sole purpose is to provide
execution in the market for low transaction costs enabling the best possible
price discovery at all times. If you think there might be pressure from
lobbying and some regulatory capture it's possibly trickier...

But option (b) is that trading is really, really dull most of the time (being
there waiting for good conditions of high volatility) and traders get bored
when nothing happens and play silly games to entertain themselves rather than
to make any meaningful money.

~~~
sokoloff
I'm a small time trader for my own account ( _ridiculously small time_
compared to JPMC or similar). It's quite common for me to have orders in on
both sides of the market and in those cases, I'm genuinely happy to have
either side of the trade execute.

I don't believe that's spoofing. (And if it is, I'm going to be damned easy to
catch...)

~~~
harry8
orders on both sides is perfectly normal market making.

Spoofing is an order that you want at the tightest level, then a bunch of
orders that you don't, on the other side, at levels further back than the
tightest level to inflate the volume in total. Buy at level 1, sells at levels
3,4 & 5 where you never had any intention of selling. It's a problematic
defintion, and enforcement etc. I don't claim to be an expert on this, fwiw
having never spoofed an order and not being a trader.

------
digitalengineer
The website ‘Gata’ kept logs of a lot of the weird buying/selling behavior on
the precious metal markets and reported about this and other rigging
activities for over a decade: [http://gata.org/](http://gata.org/)

------
Fjolsvith
So basically metal prices can now get up to where they should be.

