Best of the Week
Most Popular
1. Market Decline Will Lead To Pension Collapse, USD Devaluation, And NWO - Raymond_Matison
2.Uber’s Nightmare Has Just Started - Stephen_McBride
3.Stock Market Crash Black Swan Event Set Up Sept 12th? - Brad_Gudgeon
4.GDow Stock Market Trend Forecast Update - Nadeem_Walayat
5.Gold Significant Correction Has Started - Clive_Maund
6.British Pound GBP vs Brexit Chaos Timeline - Nadeem_Walayat
7.Cameco Crash, Uranium Sector Won’t Catch a break - Richard_Mills
8.Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - Dan_Amerman
9.Gold When Global Insanity Prevails - Michael Ballanger
10.UK General Election Forecast 2019 - Betting Market Odds - Nadeem_Walayat
Last 7 days
UK Election Seats Forecasts - Tories 326, Labour 241, SNP 40, Lib Dems 17 - 12th Dec 19
UK General Election 2019 Final Seats Per Party Forecast - 12th Dec 19
What UK CPI, RPI INFLATION Forecasts for General Election Result 2019 - 11th Dec 19
Gold ETF Holdings Surge… But Do They Actually Hold Gold? - 11th Dec 19
Gold, Silver Reversals, Lower Prices and Our Precious Profits - 11th Dec 19
Opinion Pollsters, YouGov MRP General Election 2019 Result Seats Forecast - 11th Dec 19
UK General Election Tory and Labour Marginal Seats Analysis, Implied Forecast 2019 - 11th Dec 19
UK General Election 2019 - Tory Seats Forecast Based on GDP Growth - 11th Dec 19
YouGov's MRP Poll Final Tory Seats Forecast Revised Down From 359 to 338, Possibly Lower? - 10th Dec 19
What UK Economy (Average Earnings) Predicts for General Election Results 2019 - 10th Dec 19
Labour vs Tory Manifesto's UK General Election Parliamentary Seats Forecast 2019 - 10th Dec 19
Lumber is about to rally and how to play it with this ETF - 10th Dec 19
Social Mood and Leaders Impact on General Election Forecast 2019 - 9th Dec 19
Long-term Potential for Gold Remains Strong! - 9th Dec 19
Stock and Financial Markets Review - 9th Dec 19
Labour / Tory Manifesto's Impact on UK General Election Seats Forecast 2019 - 9th Dec 19
Tory Seats Forecast 2019 General Election Based on UK House Prices Momentum Analysis - 9th Dec 19
Top Tory Marginal Seats at Risk of Loss to Labour and Lib Dems - Election 2019 - 9th Dec 19
UK House Prices Momentum Tory Seats Forecast General Election 2019 - 8th Dec 19
Why Labour is Set to Lose Sheffield Seats at General Election 2019 - 8th Dec 19
Gold and Silver Opportunity Here Is As Good As It Gets - 8th Dec 19
High Yield Bond and Transports Signal Gold Buy Signal - 8th Dec 19
Gold & Silver Stocks Belie CoT Caution - 8th Dec 19
Will Labour Government Spending Bankrupt Britain? UK Debt and Deficits - 7th Dec 19
Lib Dem Fake Tory Election Leaflets - Sheffield Hallam General Election 2019 - 7th Dec 19
You Should Be Buying Gold Stocks Now - 6th Dec 19
The End of Apple Has Begun - 6th Dec 19
How Much Crude Oil Do You Unknowingly Eat? - 6th Dec 19
Labour vs Tory Manifesto Voter Bribes Impact on UK General Election Forecast - 6th Dec 19
Gold Price Forecast – Has the Recovery Finished? - 6th Dec 19
Precious Metals Ratio Charts - 6th Dec 19
Climate Emergency vs Labour Tree Felling Councils Reality - Sheffield General Election 2019 - 6th Dec 19
What Fake UK Unemployment Statistics Predict for General Election Result 2019 - 6th Dec 19
What UK CPI, RPI and REAL INFLATION Predict for General Election Result 2019 - 5th Dec 19
Supply Crunch Coming as Silver Miners Scale Back - 5th Dec 19
Gold Will Not Surpass Its 1980 Peak - 5th Dec 19
UK House Prices Most Accurate Predictor of UK General Elections - 2019 - 5th Dec 19
7 Year Cycles Can Be Powerful And Gold Just Started One - 5th Dec 19
Lib Dems Winning Election Leaflets War Against Labour - Sheffield Hallam 2019 - 5th Dec 19
Do you like to venture out? Test yourself and see what we propose for you - 5th Dec 19
Great Ways To Make Money Over Time - 5th Dec 19
Calculating Your Personal Cost If Stock, Bond and House Prices Return To Average - 4th Dec 19

Market Oracle FREE Newsletter

UK General Election Forecast 2019

Michael Lewis is Right “Spoofing” Proves Market Rigged on Daily Basis

Stock-Markets / Market Manipulation Mar 15, 2015 - 07:45 AM GMT

By: EconMatters

Stock-Markets

Brent Spoofing & HFT

As the European Market closes today and oil has some bearish sentiment to the trading day, one of the common techniques is to bang the European close in the Brent contract which being a much less liquid contract than WTI can be quite profitable. Usually this takes place around 10:00 to 10:30 am CST but with the time changes this week everything is pushed back an hour here in the US with the European close now being 11:00 to 11:30 am CST.



Specific Example of Spoofing

Well as this bang the close strategy is happening in Brent pushing the futures contract down $56.50 to $55.50 in 10 minutes a nice illustration of HFT Algo strategy plays out, in other words blatant market manipulation also called spoofing was conducted by some large firm. Here is the case and this isn`t specific to Brent, Oil, or an unusual event this happens in all markets throughout the trading day. So as Brent is going lower some firm wants it to go lower some more so around the $55.75-80 area they park a large order around 900 futures contracts. Now this isn`t a real order, the seller isn`t really going to sit there and take in 900 buyers, it is meant to manipulate the other trading algos and buyers in general from stepping in and buying oil with the idea of pushing the contract lower. In essence “Scare” the market lower! This usually works and today it worked pushing the Brent contract down to $55.51, and needlessly to say this firm benefited from this technique and covered before eventually pulling the entire order once a couple of contracts hit on the price that the seller parked this large fake sell order.

Read More >>Six Days Until Bond Market Crash Begins

Easy to Regulate Spoofing Activity

Now this kind of activity would be pretty easily to reign in, easily trackable, and easy to identify which firm utilized this spoofing manipulative strategy. Just pull up the Brent trading records on the ICE exchange for 3/13/2015, and see which firm entered an order previously to sell the Brent contract, then wanted to juice their returns or move the market in the direction of their scalp by placing an additional large order all at once as price is going down during the European Close around 11:25 am CST (900) contracts give or take, and then cancels this same large order once it is hit with a couple of offers to buy at that price. Needless to say Brent traded much higher than this original sell order once it was pulled from the market as the objective of pushing the price lower to fill their existing order was already achieved! This is spoofing, a common technique used in markets, often revolving around HFT strategies, is highly manipulative with both intent and market effect, and happens right out in the open for all to observe. This example of HFT manipulation is far more straight forward than some of Michael Lewis`s HFT claims that are much harder to prove beyond a ‘reasonable’ doubt.

Read More >>The Bond Market Has Reached Tulip Bubble Proportions

Spoofing just one HFT Market Manipulation Strategy

This kind of spoofing strategy usually takes place with 100 order lots in the oil markets, and the 900 contract effort was just hilarious, taking overkill to an entirely new level. I have even seen several firms lined up with 100 contract fake sell or buy orders on consecutive price levels. For example, 100 at $48.51, 120 at $48.52, 150 at $48.53, 105 at $48.54 etc. all with the same intent to move prices in the opposite direction of these orders. They don`t really want to get filled, in fact they will never get filled, as soon as a couple contracts hit one of these orders they are pulled from the market.

Now big orders get filled all the time but somebody with a big order doesn`t just advertise to the entire world in most cases, and if legit doesn`t cancel the order when it gets hit. Usually large orders are disguised in the market via various methods to maintain a lower or better cost basis on the overall position. This Spoofing Strategy works, and is highly profitable because its frequency has increased over the last three years with more and more firms adopting this HFT trading strategy. There have been a couple of small fines for this behavior, but the blatant occurrence of this strategy and the increasingly brazenness of the manipulative trading technique shows there is no regulatory force enforcing this trading impropriety by participants.

Markets are Rigged at both the Macro & Micro Level from the Fed to HFT Firms

Now this is just the tip of the iceberg when it comes to market manipulation, I thought I would just provide a concrete example of the kind of funny business that goes on every day in financial markets. The financial markets are manipulated from the macro perspective by the Federal Reserve with their outright asset purchases and various other market interferences all the way to the micro level of HFT scalping algos.

There is nothing wrong with scalping per se, but utilizing manipulative techniques like fake orders to ensure the scalp works and to increase the tick size profit of the scalp is illegal, and occurs every day at the micro level of market manipulation, and is one HFT strategy that is easy to prove which firms are conducting this illegal market manipulation activity.

Accordingly, Michael Lewis is right markets are rigged, but he really is underestimating the extent of market manipulation, financial markets really are the wild west, investors should always be wary of how they are being taken advantage of in financial markets. The phrase Caveat Emptor ‘Let the buyer beware’ applies here.

By EconMatters

http://www.econmatters.com/

The theory of quantum mechanics and Einstein’s theory of relativity (E=mc2) have taught us that matter (yin) and energy (yang) are inter-related and interdependent. This interconnectness of all things is the essense of the concept “yin-yang”, and Einstein’s fundamental equation: matter equals energy. The same theories may be applied to equities and commodity markets.

All things within the markets and macro-economy undergo constant change and transformation, and everything is interconnected. That’s why here at Economic Forecasts & Opinions, we focus on identifying the fundamental theories of cause and effect in the markets to help you achieve a great continuum of portfolio yin-yang equilibrium.

That's why, with a team of analysts, we at EconMatters focus on identifying the fundamental theories of cause and effect in the financial markets that matters to your portfolio.

© 2014 Copyright EconMatters - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

EconMatters Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules