Re:Guy trading at home caused the flash crash of 2010
by T-zex on Wednesday April 22, 2015 @01:39PM
(#9422085)
My understanding is that this guy did exactly the same thing you've described a HFT would do. The intention of $10.01 is to move a price, not to get a fill.
Re:Guy trading at home caused the flash crash of 2010
by tptacek on Wednesday April 22, 2015 @01:44PM
(#9422110)
No, the intention of 10.01 is to capture the fill when the market goes there. The intention of a spoofer is to induce the market to go somewhere it shouldn't, jump the hell out of the way so as not to fill at that bad price, and then profit from the correction back to the right price.
I.e., if the nbbo for SYMB is $10.00/10.10, an HFT might place an order at $10.01, then a bunch more pile on. Then the market moves down and the HFT cancels the $10.01 order and puts in another one at $9.95, in the hope that SYMB will move down to meet him. The goal is to get a fill from an uninformed (i.e. small) trader.
In contrast, this guy was deliberately avoiding fills, and more importantly, sent an email proving this was his goal. (That latter part is very important when the illegality of a specific action varies depending on what your goal is.)