Zero Hedge
0
All posts from Zero Hedge
Zero Hedge in Zero Hedge,

Dear Regulators: Do you Really Want to Stop Manipulation? Subpoena the Programmers

Why Do Silver and Gold Get Spoofed Lower? Because That's Where the Stops Are.

via Soren K. Group for Marketslant.com

If you really want to root out manipulation, you must find intent. Intent is encoded in the algorithms themselves. The algos embody the conditions, tactics, and goals of the trader who designed them. They are his intent downloaded into a program. Do you really want to stop manipulation by predatory Algos? Then subpoena the programmers.

VBL EDIT- The  interview below with Daniela Cambone is merely one person's opinion. But in a world where facts are the final arbiter of truth yet those facts are impossible to obtain, one must survive on his wits. That means using inductive means to asses a trading situation. We traders can only see the market's behavior, not the intent behind it. Thus we trader types must decide to oppose, surf, or get out of the way of the market behavior we see. Professionals generally accept that and adapt. But the public is punished and taxed daily because of it.

When someone asks me WHY the market does what it does, that puts me in the position of guessing at intent of "Them". Markets are manipulated constantly. That does not mean that the Bullion dealers were "repressing Gold" or on a bearish mission. It just means that they, and the algorithms that succeeded them were finding the lower lying fruit in stops below the market, as opposed to above. Manipulation is agnostic directionally. And in a market like Silver where the shorts are better capitalized than the longs, then the stops closest are on the downside. The problem is as it always has been, poor market structure is exploited by those with the means to do so.

If you really want to root out manipulation, you must find intent. In the past INTENT was almost impossible to prove as it resided in the head of the trader spoofing the market. But now intent is very easy to prove.

Intent is encoded in the algorithms themselves. The algos embody the conditions, tactics, and goals of the trader who designed them. They are his intent downloaded into a program. Do you really want to stop manipulation by predatory Algos? Then subpoena the programmers. That is how they got Mike Coscia. Why would they not go after the bigger violators using this clear approach? You know why..

Subpoena the programmers and you lawyer types will get the 3rd leg of that "legal stool" you need to convict. But you have to want to first. Do you want to? I do not think so. And so the pricing mechanisms of our markets will shrink in importance. But that is just my opinion.

My first post on manipulation covering Warren Buffet's 1997 Silver Squeeze was anonymous posted on zerohedge for fear of retribution by "them".  How messed  up is that? Maybe justice will be done someday

Here are some choice quotes from the interview:

  • the silver and gold market have the majority of their stops lower, not higher – and that’s why the market goes lower.
  •  it’s an algorithm, it’s not bullish or bearish  it’s just looking for the stops
  • I’m going to come down firmly on the side that it is manipulation and it is unethical and it should stop   
  • here’s the problem… the algorithms are now faster than the exchange’s ability to freshen up where its bids are
  • it aint just Gold and Silver. The thinner the market, the bigger the spoof


When markets quickly move lower or experience a flash crash, the media is quick to point to a ‘fat finger.’ But, to veteran trader Vince Lanci, the problem is rooted in the technology running markets. ‘Manipulation does happen but what’s happening now is not a fat finger; that’s just a good headline,’ he told Kitco News. ‘It’s a combination of algorithm trading, institutional money and stop losses.’ To Lanci, algorithms are the real issue. ‘It’s an algorithm. It’s not bullish or bearish, it’s just looking for the stops,’ he said. ‘The silver and gold markets have the majority of their stops lower, not higher – and that’s why the market goes lower.’ Lanci, who tracks big market moves often as a contributor on Marketslant.com, said this type of price action can happen in any market. ‘I’m going to come down firmly on the side that it is manipulation, it is unethical and it should stop,’ he said. ‘But here’s the problem -- the algorithms are now faster than an exchange’s ability to freshen up where its bids are.’

 About Vince:

Vince Lanci has 27 years’ experience trading Commodity Derivatives. Retired from active trading in 2008, Vince now manages personal investments through his Echobay entity. He advises natural resource firms on market risk. Over the years, his expertise and testimony have been requested in energy, precious metals, and derivative fraud cases. Lanci is known for his passion in identifying unfairness in market structure and uneven playing fields. He is a frequent contributor to Zerohedge and Marketslant on such topics. Vince contributes to Bloomberg and Reuters finance articles as well. He continues to lead the Soren K. Group of writers on Marketslant.

vlanci@echobay.com

Mobile: (212) 223-1000

Read more by Soren K.Group