Instead of complaining about stop runs, spoofing, etc. why not just work at detecting that sort of thing and then trade against it? If something is rigged and you know it is rigged that would seem to give you an advantage on several levels.

When spoofing in size first became widespread, it didn't take long to work out the mechanics of it and then actually take advantage of the spoofers. Clearing a couple of levels of the ES book when the spoofer was posting huge size knowing they intended to trade in the other direction was kind of funny and quite profitable.

Does anyone else have stories along those lines?

Scott, I totally agree on your point that the markets are rigged. IMVHO, the ES is one of the best teaching

tools to show beginners that it is rigged down to a tick level.

all the best

When I was on the floor many years ago we spoofed the markets manually - we offered aggressively to draw out sellers when we needed to buy. We up ticked the market to set of stops. Inevitably this is being done better and much more quickly by machines. This is inevitable. But I think that a lot of people confuse this with some sort of conspiracy to take out their stops. Beleive me; the market does not care about your tiddly stop. If it goes and the market whips around in your face, it is because it was a badly placed stop. You are a minnow, and you have chosen to swim with sharks. Unless you are actually trading at tick level, these shinanigans do not affect you. Supply and demand prevail unless you choose to join the noise at tick level. People often use it as an excuse IMHO

I agree however it is blatantly obvious that certain exchanges have allowed parties to see flags and this is illegal , sadly the slippage is painful as the "flags " still show its a market order . MAR on July 5th will be both interesting and a disaster as every compliance machine will flag up garbage !

Group, in my opinion, when a Stop Loss is triggered it has both a purpose and a meaning.

Purpose: preserve the account.

Meaning: 9 out of ten times is saying that the entry rules are very low in quality.

all the beat

@Guy - there is no such thing as front running in the futures market; it isn't even theoretically possible because of the central order book. No victims in this scenario no matter how you frame it.

When I see talk about "rigged markets" it is almost always on the equities side of things which I never trade.

I do agree that making the rules clear and enforcing the rules once properly promulgated is the way to go. But beyond the obvious, my point was don't play a game when you don't understand the rules and don't play a game with a negative expectancy unless you are doing it for fun.

@Guy - reading your post over again, I think it may be a language issue. I am not suggesting that someone cheats a cheater. In the scenario in question (outlined above), it isn't possible to cheat in the way you appear to suggest (unless you have found some clever way to cheat I haven't seen).

I always play by both the letter of the law and the spirit of the law but make no mistake, I play to win within those rules.

Then, maybe I should quote you: “...Instead of complaining about stop runs, spoofing, etc. why not just work at detecting that sort of thing and then trade against it? ”

I don't think I made a bad interpretation of that statement!

Scott, let me just humbly remark that even in exchange traded markets not all trade data is reported in equal quality to all market participants. This has been the main target for the most recent regulatory activities. Even time and sales leave quite a lot of space for guessing whether some of market participants are more informed and therefore a bit ahead of others (however perhaps the reason and the consequence should be swapped in this case).

However as soon as it comes to something that is traded at many different trading venues, especially structured derivatives, then oh yeah, here we go. It's another story though that this way of doing business was in fact quite satisfactory to all parties to a certain extent.

A few took to courts the exchange members who jumped ahead of the order queue during the early days of high frequency trading (and fought it for years), they finally managed to stop the practice. Some members lost their edge completely. Then every member firm only looked to get closer to the exchange to capture the best prices. Today it is all about speed for some member firms and they continue to spend insane amounts to their infrastructure. If you want to call it rigging, this was the only rigging I can think of. For everyone else, the statistics deviate only for a while, and revert back to the mean eventually. So, it is still about the portfolio construction. There is no holly grail in investing or market timing, but risk management. This is what's fair about markets; if you build a portfolio with the appropriate risk management, you can get steady results as long as your target markets are developed to offer the liquidity. In other words, there is always the counter-party risk...

Alex Krishtop, agree with your generalized comment, but if you list out what makes the market "unfair" we can and have addressed most of these..

Transparency and level playing fields are just one aspects of a fair market, HFT playing in delay pools off market pools ect also count. The objective of my Fair market is simply to allow the market to correctly price all risk, what ever that is perceived to be.

Perhaps we can say we start by removing all the distortions and unequal market access and allow each and every risk to be determined solely by the market, then whats left can be the fair market.

Did you actually look at the link?

Mr. Boulette, how can you, in one sentence, say: “@Guy I agree you didn't make a bad interpretation of that statement” and then follow it with: “you made a completely uneducated one.”

Note, that I have gotten accustomed to your kind of spin over the years. However, knowing that you are a “moderator” with the power it entails, I will have to refrain myself.

Trade fairness is very simple. You decide to sell q at x, and I agree to buy q and pay x by pressing enter on my 5-monitor system.

Can't be fairer than that. We both get what we wanted.

You didn't cheat by offering your stuff, and I couldn't cheat by accepting the trade. Of all the trades I've done over the years, they all have been of this type.

That we have a different understanding motivating our respective moves is a given, I can assure you. Our intentions concerning what to do after a trade can as well be totally different.

...more

When we accepted the trade, we both agreed on q and x, and became responsible for our own actions. On that basis, there can not be any cheating whatsoever by either of us.

Now, if you want to front-run spoofers as you proposed earlier, you could easily imagine that on my side of the equation I might find it more than borderline. First, your statement would imply that you can identify spoofers, which I doubt very much. But whatever, say it is the case, then I would see your duty to report such spoofers to market authorities. Thereby providing tools to these same authorities to do their bloody job which is provide a more leveled playing field.

Will there still be cheaters out there? Yes. Will there still be frauds? Yes. Will there still be spoofers? Yes. Will there still be front-runners? Yes. But the job of market authorities is to eliminate as many as they can, and there, I don't think they are doing that excellent a job.

@Guy I put it that way because I decided to delete what I originally wrote. As to my spin, as I said, you have your own reasons for whatever views you hold. The only thing you need to refrain from is from making personal attacks on people. As you well know by this point, the moderators in this group won't allow that under any circumstances, from anyone.

Now, if I understand you correctly since you only use limit orders and I predominately use limit orders (provide liquidity) unless exiting a trade at the market, you do not see us as the issue in that regard.

At the risk of boring those reading this thread I will explain why it is obvious you don't understand the futures market with regard to the thread topic.

Front running is jumping ahead of another order that has indicated a preference to buy (I will speak from the perspective of a long for consistency), especially when you have superior information, in the usual case advance knowledge due to lower latency.

What I said I did was hit the spoofers, not front run them. One of the reasons you see less of the old form is because several decently large traders figured out the spoofers really had no intent of being long and in fact intended to go short. Guess what, when someone posts a 500 or 1000 lot intending to scare the market higher and they get taken out completely and are now long instead of being short as intended and the market is headed lower, they are not happy traders at that moment. They quickly learn that isn't a good trade plan.

That is just one hole in your understanding but there is another that I am very curious about.

You clearly don't believe I can identify spoofing patterns with a dma data feed, low latency and algos specifically designed to detect it but you can apparently spot it with the naked eye. Do I have that correct or are you just taking someone's word that spoofing exists and have never actually seen it personally?

What I now do is what I started this thread with - since the spoofing has gotten more sophisticated and no longer allows you to take a huge position against them (i.e. use the spoofing against the spoofers), if I spot it and I don't have another reason for having orders at those prices, I simply don't play the game. I make money by not losing money. I don't trade if I don't have a high probability of winning within the letter and spirit of the rules.

Seeing bad guys in every nook and cranny and behind every action normally indicates someone who isn't winning or maybe doesn't even trade at all and desperately needs someone to blame.

Mr. Boulette, I won't even try to reply.

One thing that hasn't been mentioned is that if there is a suspected fraud or fraudulent activity, i.e. Against the rules or not in the spirit of things, is there not have a duty to inform the regulators?

If you're actually depending on tick level data rather than the general direction of the market, aren't you literally trying to predict the "noise" of the market?

@Scott, fair enough - there are large buy-side firms that don't have the return on trading to pay for high speed data/market access and therefore suffer when their large orders hit the market only to find other traders can see the market ahead of them. The market is rigged against them, by their dealers, but it doesn't affect every trader. They don't have a choice about trading, and the biggest dealers have been found guilty of bias against clients, so this is an unavoidable tax on them.

Have traded institutional derivatives for 8+ years, spoofing, front-running and price manipulation occurs across markets. My experience has been mostly in the non-algorithmic space but the buy and sell side use those tactics to gain an edge.

Generally, I think broader markets can be easily manipulated or rigged. The FOMC has used trades in futures, derivatives and indices to buoy markets; not dissimilar from China's recent equity market intervention.

On an individual equity basis, I don't think there's any question rigging/manipulation take place on quantitative, think algorithmic and qualitative basis. The price behavior in certain repeat offenders simply defies logic; occurring way to frequently to be coincidental. Would recent price action in Valeant, Chiptole, Amazon, Tesla, Priceline, Apple or Google support the concept of rigging or manipulation? Or forget individual equities or indices, how about volatility?

@Andrew - "noise" is easily predictable; at some point "noise" becomes "signal". One way of benefiting is to enter on signal, exit in noise; the random walk can be your friend. Another way is don't try to predict where price will go but where it shouldn't and use that information to make your trades.

@Dan - I understand what you are talking about and frankly don't have a good answer. It would be easy to say they could wait for the order book to be thick enough to handle a market order or route their orders rather than rely on NMS or pay for a shredding algorithm but I can definitely see where that might not be practical and certainly likely isn't palatable. The situation you are discussing seems like a legitimate problem rather than just whining about a rigged market.

@James - It may appear I am saying these situations don't occur, I am not. My issue is the choice of where and how to trade. I can argue cars should be way more careful when there are bicycles on the road (and I do regularly argue that) but there are still plenty of roads I don't ride on.

Andrew Bushby: '... tick ... data rather than ... general direction of the market ..."noise" ... '

ESU16

2016/06/09 17:00:00 2104.50 first

2016/06/10 15:59:56 2087.00 last

2087.00 - 2104.50 = -17.50 or $875 per contract for short sale (before commissions). "A general bearish direction"?

Well, P(last) - P(first) = P2 - P(first) + P3 - P2 + ... + P(last) - P(last -1) = dP2 + dP3 + ... + dP(last). The number of trade ticks was 145,961. Therefore, mean increment = -17.50 / (145,961 - 1) ~ 0.00012. One can say that more days (sessions) must be considered. But each will bring 100,000 - 700,000 new "random" variables-summands dP. There are speculations that the Central Limit Theorem makes the sum a Gaussian variable. Those rarely pay attention if conditions of its application take place. Statistical analysis of daily increments or log asset returns does not confirm Gaussian properties. Best Regards, Valerii

@Valerii - it has been too long, welcome back. The random walk is your friend (if you are trading on a tick level)

Group, Scott is not doing anything illegal or unethical. Since the very first electronic trades were done over the internet this “spoofing” as it is now called today was in place. I studied a similar method about 15 years ago. Back then it was simple to see and counter the market makers moves based on the faults bid and ask qualities. In those days when the flash bid and ask come thru was just simple math.

Rules then on the ES:

all bid/ ask size less than about 2500 were ignored.

you then looked to see which price ticks had less than 1000 in volume at that tick level( and there would be about 2 points in this range)

when you saw the bid ask about 3500 was a signal that the market makers wanted to stay in the above range to fill in the tick levels

when you saw a bid / ask size go over 5000 you knew the market was fixing to spike to the next level.

it simple cognitive knowledge built up over time,

all the best

There is another angle of view at -17.50 / (145,961 - 1) ~ -0.00012. |-17.50 / 0.25| = 70 minimal non-zero ES price increments. On Friday June 10, 2016 there were 145,960 increments and only 70 of them created imbalance. This is 145,960 plus minus 70 or 100% * 70 / 145,960 = 0.05% of all price changes. Of course, if it would be all, then nobody would trade. Best Regards, Valerii. P.S. Scott, thank you, I was "walking" around LinkedIn (not quite randomly!).

@James, thank you for getting my point more than anything (the kind support is great too). If as traders we can't acknowledge the environment we are trading in and all its component parts, then how can we expect to trade profitably?

@Valerii - thank you for those insights, I appreciate it. I am definitely going to take a closer look at this approach.

Market never have and never will be a level playing field, despite Charles’ vision. The reason being, markets like life were never meant to be fair. There are people who are tall and people who are short, people who are fat, skinny, dumb and smart. There is no fair in that context. All we can really ask for is reasonably equal opportunity with a minimum of barriers (financial or regulatory).

The fundamental problem is that better capitalized players will always be willing and able to pay more for superior services. The question is where do you draw the line? Flash orders obviously went too far. Chasing spoofing to me is a pointless pursuit as it is almost impossible to prove criminal intent (mens rea), so that we should learn to live with. The big boys may even want to have some fun picking off the spoofers.

We the people need to not just complain, but also make prudent decisions about how much regulation we want. For example, the only reason I see proprietary market makers are regulated is because of the ineffective risk controls in the exchanges (and a lot of whinging). This whole issue has allowed regulators to massively expand their reach and influence to a point where they are asking for our IP (this has gone WAY too far).

Governments and regulators revel in our complaints as it gives them an opportunity to take away our civil liberties and if we are lucky sell them back to us at a price, effectively making government sanctioned oligopolies

So who are the real criminals? Traders who trade against other traders as well as the market (as any good trader should) or the regulators who have found an opportunity to expand their empire and reach further into our lives.

Be careful what you wish for, you may just get it.

Brilliantly put, Philip. Thank you for this post.

Philip York: "Governments and regulators revel in our complaints as it gives them an opportunity to take away our civil liberties ..."

Why do not Google: Illinois HB0106? How about paying $1 transaction tax for every agricultural futures contract and $2 for every other contract, namely "a stock contract, futures contract, swap contract, credit default swap contract, or options contract"? This is going to happen ...

Best Regards,

Valerii

@Philip - thank you for your most eloquent and thought provoking post. In my experience, those who trade for a living want to know the rules, play by the rules (spirit and law) and have a level playing field in terms of the externals.

The internals of the individual trader - level of effort, knowledge, ingenuity and clarity of purpose, as you say, will never be level.

@Valerii and group. Valerii has noticed a extremely powerful number sequence of the ES. How, I am not trying to imply that I am the first person

to find these number sequences in the markets. I can honestly say that I found the importance of 17.5 from about 1999 and say 2002 with out any

previous knowledge that these number sequences existed. In later years, Art Cashin did mention a very similar number as it related to the

to it usages in the old S&P pit. This was on one of the limit down days and he was asked by Joe Kernan how much further could the markets fall.

In a very worried voice he replied : I do not know, it has already crash thru the 17.6 rules.

all the best

Hi Valerii, Agreed - although tax rates in general are negatively correlated to economic growth and wages growth, financial transaction taxes are actually the worst. This is government's idea of a solution - lol.

In the primary market, taxes on loans and capital raisings are a direct tax on growth and in the secondary market they rob liquidity and in doing so widen spreads further exacerbating the impact. The ultimate loser? The man in the street if he has managed to muster enough wealth to hold pension money outside of Social Security which has just been stuffed full of IOU's from an entity that doesn't produce anything - government.

James Hudson: "Valerii has noticed a extremely powerful number sequence of the ES." I cited the last session of ESU16. The ranges (High - Low) greater than a dozen of points are not exceptions. Afew recent sessions for ESM16 (expiring now)

2016/05/16 (H = 2068.50) - (L = 2035.00) = 33.50

2016/05/17 2069.50 - 2036.75 = 32.75

2016/05/18 2057.75 - 2030.75 = 27.00

2016/05/19 2044.75 - 2022.00 = 22.75

2016/05/24 2077.25 - 2041.25 = 36.00

17.50 is a good move but more close to an average of these days (when S&P is greater than 2000 points).

Best Regards,

Valerii

Philip York: "... financial transaction taxes are actually the worst ...".

If an entity acts to decrease market liquidity, make winning strategies losing due to higher costs, eliminate small traders, wipe out from data centers well established trading companies, and all is a definite anticipated outcome, then one also call it "market manipulation". This is where we fit back in the discussion on "Rigged Markets".

Best Regards,

Valerii

So now we come to understand that the biggest manipulators of markets are government (and their lobbyists) and in doing so they are also the biggest creators of financial calamity. As Valerii pointed out they are the biggest danger.

Last year the CSI300 contract was the largest volume contract in the world regularly cracking over 2 million contracts a day. Today it barely cracks 20 thousand contracts a day.

The 2008 GFC started with Clinton's affordable housing initiative, but anyone who understands markets understands that any attempt to make houses easier to buy will just push prices up. California has raised the min wage to $15/hr, but unless minimum wage earners can increase their productivity, it will just put them out of a job.

If this is the kind of stupid response we get when we complain to government, best we keep our mouth shut until we can solve of the real problem.

For a laugh or two:

https://www.youtube.com/watch?v=gvZSpET11ZY

I suppose to get back on topic... I remember trading equities some decades ago when insider trading was the norm. Trends were much easier to spot then as you could easily see the insiders loading up in the underlying and the options. These days equities seem to gap all over the place and so methods needed to changed.

I remember having throw out a whole slew of algos (like the harmonic James mentioned) after the 1987 crash. Big disruptions like these often change the characteristics of markets.

Maybe we should outlaw market volatility and bring back insider trading.

Best wishes and good trading.

Rigged in the short term i guess, markets are still predictable and will be always predictable

It seems that both Philip and Aleksandr make the same point - whatever the underlying impetuous for a move, legal or illegal (rigged market or not) doesn't alter whether or not the move can be identified and therefore traded. This ties in with my premise; I don't trade any markets, or moves for that matter, that I don't understand. In my opinion, what professional trader would?

@ Scott, I agree. Even if there are issues beyond my control like HFT's zipping in and around my orders. If these end up nickel and diming me, well that's just life and I need to factor it in as a cost, because at the end of the day - the costs are still a hell of a lot cheaper than when I started trading.

I remember back in the 80's and 90's being incredibly frustrated that none of my short-term algos would work on the equities because the costs were just too high. That is no longer the case.

What we really need is an industry lobby group that is not biased by an individual agenda. I tried that - it ain't easy. Also, as I went up the chain I was hit with the question of, "do you have anyone on your board that went to school with someone on the legislative counsel?" So, it seems the elite like their little closed shop stacked with the ignorant and arrogant. All in time - sigh.

It would be absurd to ignore that markets do include participants that openly act to influence prices. The US Treasury ESF exists since 1934 to intervene in markets. Intervention is constant since the 2008 crisis. QE3 is unending intervention through monetary policy to affect economic conditions. Ben Bernanke now works for a company with a job posting that says they use strategies to "transform the global economy". They openly manipulate markets using algorithmic trading. The ECB just attempted to quell BRExit fears by announcing their intent to increase market intervention.

Indeed, "why would you play the game"? This an entertaining show. Wealth continues to be consumed in subtle ways from everyone that sits comfortably watching the show. It would be folly to play the trading games against the timed leverage of higher capital manipulators. Do not conclude however that your personal inability to manipulate markets means that nobody else actually does. Opportunity must be perceived.

Like the post Paul

Paul, it doesn't matter who tries to manipulate the market, the market/economy always wins, as the ECB and other blinkered socialists are finding out.

Capitalization is more often a burden than a benefit. There are enormous multitudes of opportunities that are too small for anyone of size to really bother with.

Sure, the big guys can spend a $100m on a faster link to somewhere to compensate for their inability to generate alpha, but it's not going to increase the bid and ask size.

Play to your strengths instead of blaming someone else for your losses. It's blaming others that allowed these socialists to step in and steal everyone's wealth in the first place.

The Wall Street Code was released in Nov. 2013. It is an “old” documentary I revisited yesterday. And, it is still relevant. For anyone saying that markets are not rigged, they should be able to answer all the questions raised in this documentary, or find contradicting justifications to what is being said.

The Wall Street Code

.

https://www.youtube.com/watch?v=kFQJNeQDDHA

And if you want to answer even more interesting questions, then answer those raised by the following:

.

https://www.youtube.com/watch?v=aq1Ln1UCoEU

Enjoy.

Central bankers across the GLOBE are "rigging" the markets to do their bidding. OK, so we've known this for years. Trade what you see. It's doable folks; if you have the correct algos.

Hi Guy, I agree we need to be wary of regulations that is biased specifically toward a type of market participant. The worst would be the order type issue raised by Hiam, next would be the maker-taker rule, both of which are only available to those with DMA and registered as market-makers.

I believe that any order than cannot be generally provided to participants should not be offered. As for maker taker, if it is not make available to anyone providing liquidity then it should also be canned.

A diverse market is a resilient market and the bias towards HFT created fragility by reducing the diversity of participants.

Here in Hong Kong (and we're not alone) we have Stamp Duty, which as a transaction tax acts as a double taxation because it kills liquidity and widens spreads heaping more costs on top of the Stamp. For this reason I have proposed a day trading exemption for Stamp Duty - for ALL participants trading intraday (not just Market-Makers).

The markets can be "rigged" in a sense that anybody who can control the information and have enough leverage can affect the markets.

But any market action, even your sell, buy, bid, offer, short, long can and does affect the markets too. It does it to a lesser extent than EBRD or US Central Bank but it does nevertheless.

So what you have to realise is that anything and anyone can and does "rig" the market, what you have to do is come up with a method to predict the market movement and "rig" it to your advantage or take advantage of someone else's "rigging".

If you use Direct Market Access, ie send in the orders to a liquidity bridge aggregating from 15-20 LP´s, you would not need to worry about this.

https://www.linkedin.com/groups/54971/54971-6149708648600915968

If you use Direct Market Access, ie send in the orders to a liquidity bridge aggregating from 15-20 LP´s, you would not need to worry about this.

https://www.linkedin.com/pulse/using-direct-market-access-fx-trading-s%C3%B8ren-lanng?trk=prof-post

@Soren - there is no such thing for the futures markets

There are certain objective metrics that can be used to quantify the ability of market participants to 'rig' an asset's price. If an asset has low trading volume (and high bid-ask spread), it is more common to witness greater price movements.

Other metrics like 'insider information' will be more readily classified as factors manifesting a 'rigged' system.

There is research work on these metrics. But 'rigged markets' is too subjective a term for analysis.

@Samit - the term was purposely vague because the concept itself is vague. What constitutes "rigged" in the first place? One thought - someone often sees a market as rigged if they don't have an advantage that some other trader does.

Do we as algorithmic traders have an unfair advantage over those traders who can't write algorithms and in fact, do we?

Great point. Algorithmic traders have an advantage over non-algorithmic traders, but may have shortcomings as well. What I was saying was that for quantitative appraisal, one needs to move beyond subjective labels to more objective metrics.

Hello,

Many financial markets have been and will continue to be manipulated . Do not be naive.

Vividly recall the Hunt Brothers manipulating Silver futures markets in the early 1980's (convicted) . Then there was manipulation of LIBOR. What do you think the Federal Reserve does every day? It is a fact of life. Pure randomness is a fiction!

JPOZ

The terms "market" and "rigged" are very broad. It depends on which market you are referring to, what you mean by "rigged". As an independent trader, I trade through a broker. A few years ago I noticed my stop losses being taken out even though the "market" price never came down to my stop loss level. But according the charts provided by the broker, there was a huge downward spike at about 4:00 am when the NYSE was closed. I could only conclude that the broker was running an scan and taking out all orders with a stop loss. I stopped trading through that broker.

To me there are many markets and each market has its own opportunities and risks. The main thing is to know your market, and know your risks. As the saying goes, "Know what you trade, trade what you know. "

Theres no doubt that larger participants deliberately pump the tape (higher or lower) to trigger stops and create a frenzy of activity which gives them easy money profits and more depth to clear larger positions into.....

Doesn't all this still beg the question? If you know someone is pushing prices looking for stops, why not trade with them if you think price has further to go, trade against them if you think the majority of stops in reasonable proximity have been triggered and if you aren't sure, just get out of the way.

If one were to read the CME matching engine specifications in great detail and write a few thousand lines of code you can make those determinations for yourself. I recognize not everyone has the time and skills required to do that but the option of getting out of the way is almost always available.

Regarding stop runs by a broker, it is your responsibility to know your broker's rules regarding triggering a stop. For some brokers, it is the inside order book price, not an actual trade that can trigger a stop.

I'm rather new to the group and the field, what exactly do people mean when they say "rigged"?

is pushing price higher with a large buy order rigging? Then selling 1/4 the position to then buy it back to push price even higher? Is that rigging or momentum trading? What is the real difference? The buyer is attempting to control the market moving it higher. It happens every day in the futures markets, Sometimes sccessfully sometimes not. If you recognize it for what it is either stand aside , or go with the move early, but fighting is stupid until a high is made, no matter how absurd you think the action is. Hard to call this rigging but it is like manipulation. Why bother getting upset just see it for what it is.

It's not rigged, but you are long the ATM straddle every time and they pin the strike. Ignorance is bliss. Not bitching but if you don't know the game, no chance you win.

Greg, are you saying the derivatives tail wags the dog?

Scott Boulette, that is why as a broker, exchange, matching venue, etc, you have a minimum fill ratios per connected user. Just like a physical market, you dont want someonw walking up to the checkout with a bunch of stuff and then not paying for it (over and over again). Loitering detracts from other legitimate buyers and vendors trying to conduct honest transactions.

If you dont have minimum fill quotas, you leave open the door to abuse.

"... If a futures price changes in a way that isn't to your liking you would pull your orders or if in a position, exit it. I do exactly the same thing. So how would I know why you pulled an order to the extent I could judge whether to complain or not? It all comes down to your intent.... "

Most brokers are rigged. It takes a lot of time before we adjust our software to the broker. Of course, if you earn, the broker also adjusts the conditions of the game to your strategy. Also, you need to test a large number of brokers to choose the one that meets your requirements. And if the market is rigged? I also think so. But that should not concern us when we have good software and strategies.

@Jon, there is a fundamental problem with minimum fill quotas, they increase the risk of those making the market and hence create wider spreads.

Consider a market with 10 venues (there are an order of magnitude more) where you are only pricing the front of the book. Each time the price moves at one venue then you will want to cancel and replace in every other venue to adjust.

If we assume there is one lead venue each time, each price movement generates 20 cancel replaces just on our front of the book orders. Now, multiply that through the entire book on all instruments including their options and you'll start to see how ill conceived some of these ideas are.

Even if I'm trading the index, I many want to adjust my spread basis my stock and option feed.

I'm all for regulation, but unintended consequences should always be considered and it should always be seen as fallible subject to a probation period.

Several of the comments sound like they are referring to FX brokers and in that case I would say just take a significant other or good friend out to a lavish dinner with your money rather than have it bleed away trading via a bucket shop FX broker.

To the best of my knowledge, US futures brokers can't nor have any incentive to game your strategies. Stop hunting is an art form and it still shocks me where you see retail traders put their stops.

Who would think to hunt for stops at nice big round numbers? Would you put your house key under the obviously out of place and fake rock by your front door?

The minimum fill ratio can be small. Like 0.5% You can make exceptions for bona fide market makers...perhaps give them a smaller fill ratio. If the limit is exceeded, an additional fee can be levied per ticket. But just like a physical store, paying customers and bonafide vendors exhibit similar qualities. There is rarely a need to produce unnecessary load on the exchange/ECN server unless you NEVER INTENDED to order in the first place. You get a free (or paid) price feed, order book info, etc; looking is mostly FREE. You can keep orders in-house anyway....sending them only as market or limit orders as needed. Chasing loiters away (likely they are really spoofers, front runners, etc) does the other market participants a favor).

FX broker you should aim for Prime Broker (very difficult without +10MM) or Prime of Prime or a broker you can verify is connected to PoP. I acknowledge the high amount of sharks in the Fx Brokerage industry that are trading against their clients.

Being a trader myself, I strongly feel that the markets cannot be rigged. Markets nowadays are matured to encounter any of that things. Let's assume they were rigged- all you had to do was figure out how they are rigged and you could also start making money.

@ Trevor Neil MSTA MCSI

".......Unless you are actually trading at tick level, these shinanigans do not affect you. Supply and demand prevail unless you choose to join the noise at tick level...."

Well said sir.

Jon Grah, The simple example I gave was just a light example. If you then consider someone making a full book market in all the option strikes around the underlying and also the need to hedge that if hit you have an enormous amount of prices needing constant adjustment.

Also, as the exchange gives time precedence you can't just wait for a trigger to send your order. You need to be at the front of the queue whenever possible.

So, Fill Ratio is completely dependent on the strategy employed. It's bad enough that the exchange charge a premium for "non-displayed data" as a ploy to rip off algo traders. This is direct discrimination against a particular participant because of the way they are using the data. To me this is unfair and should not be allowed, just like the different fees charged by banks for businesses. I am a capitalist, but to me same services should have same prices.

As for a charge on cancellations - sure. Processing is cheap, but not free.

The market itself is not rigged but parts of it can be manipulated at times. Low volume times are ripe. Events are also ripe (mainly because gamblers come in and place bets using stops that are too tight for the event itself.) Lastly, one has to watch the $index as it itself can be traded which instead of filling it's function to index the $ against the basket of crosses, at times the $index 'strays' while a market maker is trying to get a move happening in a significant pair. Takes large amounts to shift a trend but much smaller amounts to cause a squeeze, etc.

no doubt that boundaries of trading ranges are rigged by the public and the explosion set off by experts. that's not rigging - that's exploiting. i would love to show anyone how it's executed with their own account :)

The only people with the ability to in any way rig markets are central bankers, they can sit on offers and bids at times to execute government/central bank policy. But then that is not rigging, that's economic policy.

when you're short calls and you want to buy them back at the quote you see and they back off the quote being unabled. you can fish out an order to buy a large number of contracts at a lower price than was previously quoted with a plan to cancel them as you get your fill on the ones you wanted to buy back at your original price.

previously what i stated that the public stacks or rigs the boundaries of ranges, i was eluding to the fact the public unwittingly will place their risk and entries at breakout levels which are just above recent highs and lows. large traders know these orders are there stacked and with deep pockets you can wipe them all out in one big whipsaw. Reversion to the mean it's for real. lol

@Everyone - I have known Mark for a long time, he knows what he is talking about; do yourself a favor and listen to him.

lol? running stops is the market equivalent to cow-tipping; a bit of red-neck fun.

The Problem it seems is that the CME has banned open-outcry futures trading, which system maintained stable market-places for over 400 years, in order that the CME can cannibalize it's own seats/traders/customers by way of the electronic markets, thus earn ALL the commissions, simply in order to maintain their stock price. The result is a 100% increase in volatility and an oligopolistic handful (e.g. CITADEL) of market makers that control the marketplace... (I.e. are able to walk away from Bid/Ask quotes At-will based upon their far superior tech and lack of oversight=NO PIT-BOSSES)(F/k/a Spoofing, if you retain the right law firm)... , while most agricultural producers/processors (honest little farmers) can no longer effectively hedge/manage their family businesses...lol...it might seem FREE to you but someone pays the price; futures are zero-sum.

Plant a garden, you may soon be eating from it.

@Patrick - In my experience, the farmers you mention are busy with their farms and don't have much interest in the bid/ask spread in the CME futures markets under normal conditions.

99.99% of all people I have heard complain about the demise of open-outcry did so because they traded there or owned a seat. You may remember that one guy (Ben) who had those shoes with the 12 inch soles (so he could be better seen on the floor); I guess he might not be pleased that he doesn't have much use for them any longer.

@Patrick, I used to love trading the big S&P at US$500 per point (later at US$250) and trading in 0.1 increments. The e-mini just seemed like it would be a disaster. I'd have to pay 5 times the brokerage for the same exposure and my minimum tick was 0.25, so my minimum slip was 0.25.

After I started trading the e-mini though I found that my savings in slippage far outweighed the additional brokerage cost. The only downside was on the big moves the electronic system wasn't smart enough to keep its hands in its pockets as my floor broker would, so I had to learn to manage the slightly different volatility. I adapted.

Years later as etrading proliferated I noticed another phenomenon. The cost of trading equities had come down so much it was now viable for me to trade equities with my short-term futures algos.

Bottom-line, electronic trading has been an enormous benefit to the savvy trader, but we're not fighting with knives anymore Patrick. Remember to bring your gun :-) Best

The farmers are fighting with guns, the algos are fighting with automatic weapons...neither of you has addressed the spike in volatility, which, I would wager, is a function of the remaining floor locals, the options market-makers, inability to fluidly quote options because they cannot accurately lay the risk off on the futures....what? options volume is down....well CME is quickly closing the options pits, too. The pool is shrinking...more like fish in a barrel.

S&P has always been a rigged game, thanks to plunge protection, inflation, etc. Keep in mind, the Live Cattle, Milk, Lumber, etc. were always pretty thin to begin with; now you see Soybeans getting pushed from $9 to $12 and then back in a three month period. I highly suspect that the USDA, via the Fed's CME accounts, has been dabbling in certain Ag markets to support prices for farmers. Seems noble enough but I doubt that it is virtuous, particularly since they have eliminated most objective players...the locals.

@Patrick, we are in a period of increasing volatility in a deflationary recession, brought on by excess tax and regulation that Central Bankers are desperately trying to prop up by printing money when what we need is what governments can't afford - lower taxes. That is just an economic cycle, not an conspiracy. Markets change as people and society changes. To quote Gunny Highway from Heartbreak Ridge - "You adapt. You overcome. You improvise.".

You need to stop tilting at windmills, manipulated markets are typically EASIER to trader, not more difficult. The manipulations are far more predictable the normal market behaviour, just like when markets panic, (eg. BREXIT) they become easier to trade.

@Patrick, You are correct about the options. Large tick values mean option writers have to overprice. Problem is the exchanges are loathe to collapse tick values as it increase server load and the click traders who don't understand the math lobby against it like the Luddites they are.

One of my pet projects has been educating the Exchanges about who's worth listening to and who isn't as they often find they are confused by market feedback.

yea option writers, sell em what they want when they will pay the most for it.

In my opinion, yes, the markets are rigged. This is especially noticeable when you work on system development. The investment banks and hedge funds need liquidity and they can only get that if you're taking the opposite side to them.

I also think the level of manipulation is quite advanced now so that trading algorithms based on, lets say, typical and sound logic are manipulated into taking opposite positions to hedge funds. e.g they will purposely create a short signal so it triggers algorithms to sell but then they will very carefully buy so as to not create a buy or exit signal.

@Mark, yes we improvise, we adapt and we overcome. If I want to sell a large position in a bank stock, I may buy the whole sector to create to create the buyers I'm looking for and then sell back the banks I don't want. There is no free lunch. If we want to make money, it has to be someone else's loss (derivatives) or opportunity cost (equities & fixed income).