The Hound of Hounslow: No $40m Wall Street wobbler

If you are trading an option series, when the underlying changes by 1 tick, half of your option prices change. You need to then pull the prices, and submit a load of new prices. It is in the nature of the game.

Feedback

Software systems that will change the markets they run in should get a feedback analysis; they should be looked at like some sort of servo system which can oscillate or (with positive feedback) wildy run away.

Position (price), Rate and Acceleration analysis should check for possible problems.

If only we could get back to markets being about real value...

..based on what the company makes, what debt it has and what assets it owns.

This algorithmic playing with values to make profit and loss has zero reality with the real world.

Finance is now just a game on computers.

Hypcorisy

"Can someone trading from his mum's house on the wrong side of the Atlantic tens of milliseconds away from the US equity exchanges involved (remember that the big boys pay huge amounts to get closer and closer to the exchange, even co-locating ("co-lo") in the same room, shaving precious microseconds off their latencies to trade) can have any effect at all except by accident, or by being allowed to?"

Exactly. The fact of the matter is, this single trader should have no effect on the markets. And, the other fact of the matter is, these HFT trading systems are well-known to be using exploits in the trading systems, so not only do they get lower latency than everyone else (by being closer), they actually use these exploits to view trades and FORCE their trades ahead of those other trades in the queue! They "provide liquidity" by forcing their trade in the middle, taking away profit from somebody else. In this respect, they are parasites, not a vital part of the market as some claim. They do of course have true trading strategies and so on, but a lot of the "arms race" among them is how to analyze these in-queue trades (that they by al rights should have no access to anyway), analyze those, and force themselves ahead of them in the queue, faster than the other HFT systems.

So, riddle me this -- if these systems are permitted to continue to use these exploits to take (some of) everybody else's money, why is this guy not allowed to use OTHER exploits to take a little of this money back from the HFT systems? It is pure hypocrisy.

A bridge too far

When I studied Civ Eng as a precursor for my subsequent career in IT nearly the first thing we were shown was the Tacoma Narrows bridge failure - it's an absolute classic. We were also told how soldiers (probably apocryphal) might break step when marching over a bridge. We had resonance explained in nauseating detail.

So they only seemed to have done wind tests, a slack handful of basic loading calcs, a static finite element analysis with pretty graphics and forgot rule 1(b). 1(a) is the wind is what'll shake it down, (b) is something else and there are lots of known somethings already and one of them is people - the primary purpose for a foot bridge!

This says it all

"Doesn't it strike you as odd that the US is blaming the one person involved who doesn't have a permanent legal team and has never ever made 'campaign contribution' to American politicians?"

pick on the poor sucker who can't fight back. Makes everyone look good and get closer to their Lawfirm Partnership and Corner Office.

This is akin to the US habit of suing not only the suppliers of a product but their suppliers (even in some cases the company that cleans the bogs) and their suppliers in product liability cases.

Make a 10/32 UNF Screw? better be prepeared to get sued by someone sueing someone who used that screw in something that was then used by someone else in something that might have gone wrong.

Their Legal System is a big part of what is wrong with the USA today.

Then they had the temetiry to send several hunred lawyers over here for the Magna Carta celebrations!!! It is a wonder that they managed to get there without a thousand class actions being filed.

Not sure who I hate more...

Lawyers or Bankers. Parasitic scum the lot of them.

Umm. Straw man?

Where has it been said that this guy was a HFT? Hasn't he been quoted as hating HFT's himself?

As i understand he's been charged with old fashioned spoofing - the equivalent of getting your mates to huddle around your market stall and loudly shout about how awesome your £50 hot water bottles are and how many they are going to buy - that's been around for as long as you had public order books.

It's illegal because it's not a genuine order and distorts 'real' interst. Doesn't need low latency either.