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Dear CFTC: Presenting Today's E-Mini Market Manipulating "Spoofing"

Tyler Durden's picture




 

Dear CFTC commissioners:

Following yesterday's first in a long series of articles showcasing the ongoing manipulation in the S&P courtesy of E-mini spoofing, we are delighted to inform you that even though you heroically used a whistleblower's tip to capture the sole Flash Crash mastermind, Nav Sarao, five years after a flash crash which your peers at the SEC incorrectly claimed was the work of a small Kansas City-based mutual fund, the manipulation - as you called it - of the S&P 500 continues.

While we are confident you are intimately familiar with the details of the whistleblower's, pardon, your own case against Sarao, we will remind you how the FBI summarized his transgressions:

Sarao implemented a strategy to manipulate the E-Mini market. Based on my conversations with representatives of the Consulting Group, as well as my review of documents, I know that, among other activity, SARAO used a "dynamic layering" technique, placing, repeatedly modifying, and ultimately canceling multiple 200-, 250-, 300-, 400-, 500-, 550-, 600-, and 900-lot sell orders (whereas the average market size order, based on a sample analyzed by the Consulting Group, was 7 lots).

Sure enough, while a quick look at the market in the 60 minutes between 11:00 am and noon reveals that the most prevalent ES order size today (unlike yesterday) is in the single digits as it should be, what one can see quite clearly are the tens of thousands of E-mini orders placed, and then immediately canceled, made up of either ~30 or ~50 contract blocks.

And while we are confident that if Nanex can see this, so can you, here is the buy side:

And the spoofing on the sell side:

 

But wait, there's more.

As the following two charts show, the spoofing that has been going on in the S&P daily for years, is just as prevalent in Europe, where the EuroStoxx (ESX) is a veritable spoofer's utopia.

Here are the EuroStoxx buys in during a 140 minute block recorded earlier today courtesy of Nanex:

And sales:

 

Then again, we are certain that you have all this data already and are already preparing the case against the perpetrator(s): after all you are the CFTC - you know "everything" that happens in the futures market. As such we are confident you are already actively investigating the ongoing spoofing in both the US and Europe... unless of course, your interest is only awakened on days when the market drops.

That, and instead of focusing on the Virtus, the Citadels, and the KCGs of the world and their armies of predatory algorithms, you insist on finding the next manipulation mastermind in a basement in a suburb of London.

 

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Thu, 04/23/2015 - 16:33 | 6023633 Bastiat
Bastiat's picture

Hah!  That little prick in England is still on the loose.

Thu, 04/23/2015 - 16:40 | 6023666 pods
pods's picture

Fucking indians!

Oh wait, those were only buyside spoofs?  Good job boys. Bottle of Bollinger.

pods

Thu, 04/23/2015 - 16:57 | 6023734 Four chan
Four chan's picture

the markets are rigged.

Thu, 04/23/2015 - 17:10 | 6023778 macholatte
macholatte's picture

 

Let me see if I get this right……

 

Say a contract is currently selling at 100 and I buy 1 at that price (long)

I then tell my computer to place a gazillion requests to buy at 101 and cancel said requests immediately and this will cause the price to go up. Conversely, I could short that contract at 100, have the computer place a gazillion requests to sell at 99 and cancel said requests immediately and this will cause the price to go down. The key to all of it is to get the exchange to recognize all the transactions before it executes any of them. Maybe the requests are place by an account that has no money so all the requests will fail no matter what.

And that's it? It's that simple?

 

 

Thu, 04/23/2015 - 17:48 | 6023901 LawsofPhysics
LawsofPhysics's picture

Yes, now get in there and arrest those machines!

Thu, 04/23/2015 - 17:55 | 6023923 kliguy38
kliguy38's picture

FINE those "banks".....send the banks to bank jail

Thu, 04/23/2015 - 18:32 | 6024026 Manthong
Manthong's picture

WTF..

 

Do any of you worrying people out there think that we have anyone left in PRUDENTIAL REGULATION  that has anything near the virtue of the

The Hon. Mary Schapiro - Promontory Financial Group

.or a stalwart champion of honesty like

http://en.wikipedia.org/wiki/Bart_Chilton

 

Give it up.

All hope is lost.

 

Thu, 04/23/2015 - 18:51 | 6024080 SoilMyselfRotten
SoilMyselfRotten's picture

Likely the weapon of choice they employ controlling gold and silver as well

Thu, 04/23/2015 - 19:04 | 6024118 Manthong
Manthong's picture

Of course, they do it with paper now.

The bankers will try to confiscate the real stuff again.

The question is whether the Tree of Liberty will flourish or wither then.

Thu, 04/23/2015 - 20:47 | 6024452 cnmcdee
cnmcdee's picture

I don't know about you guys but I see a huge amount of potential to make money off *their* spoofing with limit orders positioned like high hanging hooks to capture their market bumping for a quick buck? Think it would work?

Fri, 04/24/2015 - 00:41 | 6024982 Cliff Claven Cheers
Cliff Claven Cheers's picture

You missed the point:  the little guys go to jail for making money doing this.  It is called two sets of laws.

Thu, 04/23/2015 - 18:00 | 6023939 Kaervek
Kaervek's picture

It's allowed to cancel transactions without any fee.

As a HFT firm you can pay to get better lines to the exchanges, but most exchanges already allow HFT servers inside their buildings anyways. The closer to the exchange, the better they can frontrun your orders, and everyone elses for that matter. This amounts to billions per year, lost to some seemingly invisible force.

 

Thu, 04/23/2015 - 19:22 | 6024167 Squid-puppets a...
Squid-puppets a-go-go's picture

well theres your easiest of solutions. charge to cancel

Thu, 04/23/2015 - 19:36 | 6024210 Joe Sichs Pach
Joe Sichs Pach's picture

Better yet, let's get a Kickstarter campaign going to start ZHFT - our own HFT firm. We'll need access to the exchange backbone, right? Lasers too? Let's get our guys on it. Commence Op. Mayhem. Take the whole damn thing down and watch wtf happens next.

Thu, 04/23/2015 - 18:47 | 6024073 Fun Facts
Fun Facts's picture

The CFTC is part of the problem.

Fri, 04/24/2015 - 00:50 | 6024997 Cliff Claven Cheers
Cliff Claven Cheers's picture

seems to me if they really wanted spoofing stopped they could disallow cancelling orders.  Why is a "cancel function" even an option?  Should be pretty simple, either you intend to sell or you intend to buy, there should be no middle ground which I call financial fuckery TM.

Thu, 04/23/2015 - 17:27 | 6023837 williambanzai7
williambanzai7's picture

Thu, 04/23/2015 - 16:34 | 6023639 Rainman
Rainman's picture

Just for that , Durden, we'll go up 200 tomorrow !

Thu, 04/23/2015 - 16:38 | 6023662 McMolotov
McMolotov's picture

This is like when I corrected my English teacher's grammar in high school. She was a mega-bitch after that, but it was worth it.

Thu, 04/23/2015 - 16:46 | 6023692 BeaverCream
BeaverCream's picture

Oh I bet you corrected her grammar reaaaaaal good.

Thu, 04/23/2015 - 18:51 | 6024072 Manthong
Manthong's picture

Wow.

I have a tower just like that in my backyard, too.

..but mine has fast acting gimbels and 9 gigatwats in a focused beam only a millimeter wide.

(twats, not Watts).

Thu, 04/23/2015 - 17:07 | 6023719 NotApplicable
NotApplicable's picture

I'm an expert in picking out ambiguity in poorly worded questions, at such a level that many times the teachers themselves did not understand said ambiguity since they already knew the answer they wanted. Thus only one interpretation (theirs) made any sense to them.

The best part was that they would then give me no insight into my questions as they were afraid it would be giving me an unfair hint as to what the answer was.

Eventually, I could see their mood sour during tests when I approached the desk.

Thu, 04/23/2015 - 18:52 | 6024086 Manthong
Manthong's picture

I give.. Kafka?

Thu, 04/23/2015 - 16:56 | 6023727 Stoploss
Stoploss's picture

CTFC IS the manipulator...

Why else would they remain silent?

In these scenario's, silence always indicates guilt.

So who's the HFT scapegoat gonna be???

Thu, 04/23/2015 - 17:30 | 6023845 williambanzai7
williambanzai7's picture

Thu, 04/23/2015 - 16:36 | 6023652 ronron
ronron's picture

ha. tylers trying to help.

Thu, 04/23/2015 - 17:00 | 6023737 knukles
knukles's picture

So next action will be charging Tyler Durden in abstentia as the Real Tyler Durden could not be found.  Acting on "solid information form an anonymous credible source" the Feds issued a wanted poster with a pic of Ed Norton. 
(Not the one from the Honeymooners)

Thu, 04/23/2015 - 17:02 | 6023754 tradingdaze
tradingdaze's picture

Hay Ralphie...

Thu, 04/23/2015 - 17:20 | 6023809 r00t61
r00t61's picture

To the moon, Alice! 

To the moon!

Thu, 04/23/2015 - 16:36 | 6023654 Yen Cross
Yen Cross's picture

  Lots of liquidity being provided... Annnd it's gone.

Thu, 04/23/2015 - 16:38 | 6023661 walküre
walküre's picture

You mean it's not real?

Thu, 04/23/2015 - 16:39 | 6023663 Al Capowned
Al Capowned's picture

lol. Epic CFTC trolling :) keep it coming

Thu, 04/23/2015 - 16:41 | 6023668 Weaponized Innocense
Weaponized Innocense's picture

Intense... On a glance it looks like forcing a market higher while having more sells into the momentum...... which means getting higher prices while cashing out!

Thu, 04/23/2015 - 16:41 | 6023671 Max Damage
Max Damage's picture

When does this site suddenly get an FBi symbol only as its front page!!!! thieving fuckers

Thu, 04/23/2015 - 17:08 | 6023726 NotApplicable
NotApplicable's picture

The day this gets enough traction to hit Drudge, perhaps?

Edit: Well, I just did a news search, and see nothing but typical MSM propaganda. So...

never mind

Thu, 04/23/2015 - 17:31 | 6023835 Arnold
Arnold's picture

You'll have to look 5 years into the future for any redemption, IMO.

Tylers did promise this as a daily feature.

Much like the Ball scores on the Sports page, in what we used to know as Newspapers.

 

Has a Pulitzer ever been awarded to interweb reporting?

Thu, 04/23/2015 - 16:41 | 6023672 Al Capowned
Al Capowned's picture

One day in the future when we have the Nuremberg style courts for bankster criminals.

Zerohedge will be the go to evidence source

Thu, 04/23/2015 - 16:48 | 6023702 besnook
besnook's picture

a trial is too tedious a process. the justice department said that was the reason they did not prosecute nyone on wall street.

 

banksters need mob justice to give them the taste of the law of rulers(the people) they thought they were.

Thu, 04/23/2015 - 16:57 | 6023732 Renfield
Renfield's picture

Al, you nailed it. It is always fun trolling the banksters, sure, but this is EVIDENCE. I am filing every article in this series, in case anything 'happens' to the internet record. This is a long-forgotten Tyler Durden who I have missed.

PS: Tyler, I hope someday you are awarded the journalism prize you deserve for this, and the HFT series, and a few other out-of-the-park investigative financial articles. And I hope they have a ceremony, so you can boycott it.

Thu, 04/23/2015 - 17:09 | 6023782 NotApplicable
NotApplicable's picture

More importantly, he needs to live in a country without extradition agreements with The Beast.

Thu, 04/23/2015 - 16:44 | 6023684 Sutton
Sutton's picture

Maybe the CFTC will discover how Virtu only had  one losing trading day in the past six years and how that is , like, impossible without cheating.

Thu, 04/23/2015 - 16:45 | 6023687 besnook
besnook's picture

those indians are out of control! they must be stopped from manipulating the market. it is a conspiracy to take over the usa financial market and run it from bangalore.

Thu, 04/23/2015 - 16:48 | 6023703 booboo
booboo's picture

this was a rogue trader run amoke, the "lone wolf" Der Fatherland Security has been warning our children about! Charts don't matter.

Thu, 04/23/2015 - 16:52 | 6023711 Bay of Pigs
Bay of Pigs's picture

ZH poking the fraud ridden and corrupt US govt right in the eye....

The toothless CFTC is nothing but a cover for the outfits named above running hog wild.

Thu, 04/23/2015 - 16:53 | 6023712 km4
km4's picture

Speaking of spoofing 'Hillary most corrupt secretary of state' http://www.presstv.ir/Detail/2015/04/23/407754/Hillary-most-corrupt-secr... and  “is basing her presidential campaign on the unlimited stupidity of the American voters,” Bovard said.

Thu, 04/23/2015 - 16:55 | 6023724 NotApplicable
NotApplicable's picture

Sounds like she's a shoe-in!

Thu, 04/23/2015 - 17:04 | 6023746 Renfield
Renfield's picture

Oh for God's sake. Save it for the Hillary threads. Not everyone here gives a shit about the USian red-blue war criminal celebritards and their stupid campaigns; and they don't have to derail EVERY thread. This is about CFTC fail. Frankly I was enjoying a thread without the stink of sulphur on it for a change.

Thu, 04/23/2015 - 16:57 | 6023736 buzzsaw99
buzzsaw99's picture

you know damn well they don't care what happens on up days

i see nothing. [/sgt schultz]

Thu, 04/23/2015 - 18:52 | 6024085 Soul Glow
Soul Glow's picture

Dude everything is fine!  They Fed's regulatory team, the SEC, and the CFTC's bands of merry assholes busted the bad guy.  Move along!

Thu, 04/23/2015 - 17:00 | 6023750 Soul Glow
Soul Glow's picture

Yeah but Gary Gensler is a "Wall Street Cop" who was an uber-regulator - say the MSM.

Thu, 04/23/2015 - 17:07 | 6023768 madbraz
madbraz's picture

They can't go after the NY Fed and the BoE, can they?

Thu, 04/23/2015 - 18:52 | 6024088 Soul Glow
Soul Glow's picture

They are the Fed.

Thu, 04/23/2015 - 17:08 | 6023777 semperfi
semperfi's picture

Dear CFTC,

You've been caught with your panties hanging down around your ankles whackin your 2 inch ding-dong in front of your PC which is streaming your favorite cornholin' porn movie.

What do you have to say for yourself ?

Thu, 04/23/2015 - 17:09 | 6023781 jifhuf
jifhuf's picture

love the site TD for the sake of what is all good and those CFTC asswipes, please please please give the names of the HFT d*ckheads giving the long hard one to all the investors out there.  Lord knows they will never investigate the worthless smucks anywho!!

Thu, 04/23/2015 - 17:20 | 6023811 Conax
Conax's picture

Our vaunted and highly paid regulators at the CFTC have got to enjoy their dirty laundry being hung out in broad daylight like this.

Hopefully every day.

HA!   Good job!

Thu, 04/23/2015 - 17:23 | 6023821 juggalo1
juggalo1's picture

Is "everyone else was doing it, and continues to do it" a valid defense against such prosecution?  I don't think that would work legally, but at least it could point out the hypocrisy.  Would a judge disallow the evidence and line of questioning as irrelevant?

Thu, 04/23/2015 - 17:27 | 6023839 Freebird
Freebird's picture

CFTC watching too many Hollywood movies where the Brits are the popular bad guys...simpletons

Thu, 04/23/2015 - 17:29 | 6023844 matagorda
matagorda's picture

OK, so Tyler, does the moscow exchange (MOEX.ME) allow this crap to go on?  (I tried to look up the russian equivalent of the SEC and wikipedia gave FCSM -- see oligarchs.)

Thu, 04/23/2015 - 17:33 | 6023852 Bear
Bear's picture

What's with the 34 / 36 contract orders?

Thu, 04/23/2015 - 17:36 | 6023859 williambanzai7
williambanzai7's picture

The Law demands that we atone

When we take things that we don't own;

But leaves the lords and ladies fine

Who take things that are yours and mine...

Anonymous, circa 1764

Thu, 04/23/2015 - 17:44 | 6023887 Tursas
Tursas's picture

Lovely!

Thu, 04/23/2015 - 17:58 | 6023934 Spungo
Spungo's picture

There's probably some central bank contract killer looking through phone books to find a guy named Tyler Durden.

Thu, 04/23/2015 - 19:37 | 6024217 mijev
mijev's picture

I think they outsource contract kills to the Vatican.

Thu, 04/23/2015 - 18:16 | 6023982 pig lipstick
pig lipstick's picture

WRITE THE ATTORNEY GENERAL OF THE UNITED STATES!!!! I DID.

Take the 5 minutes and write an email.  This is completely absurd and the there is no reason whatsoever that the Attorney Gneral should not be invesigating each and every financial institution for fraud.  It is so obvious beyond belief.  The ONLY way to have a 365/365 track record on trading is to cheat.  All of them belong in PRISON.

Thu, 04/23/2015 - 18:21 | 6023994 spekulatn
spekulatn's picture

Retail get back in the pool. The market is now safe and free again.

That is all.

Thu, 04/23/2015 - 18:21 | 6023995 orangegeek
orangegeek's picture

The CFTC is useless.  Much like the SEC is useless.  These agencies are tools for attack for political purpose - like the kid who is now responsible for the 2010 flash crash - well done ass-clowns.

 

To end this quote stuffing fraud, the CME group has to make the change - they own the /es.  The CME finally ended HFT last September (ICE followed in January).  Not hard to do - take the HFT servers off your raised floor.

 

Stopping quote stuffing is more likely a software change in the router.  Not exactly rocket science.

 

 

 

 

 

 

Thu, 04/23/2015 - 18:42 | 6024056 WTFUD
WTFUD's picture

Poor Pension Funds! Who else is getting stung and is oblivious?

Thu, 04/23/2015 - 18:46 | 6024068 lexluthor19
lexluthor19's picture

Such a hard on for this story, they are all criminals, if this guy is an unfair scapegoat, well, so be it 

Thu, 04/23/2015 - 18:55 | 6024095 Dre4dwolf
Dre4dwolf's picture

Is this gona become a daily thing, where you just tell the regulatory agencies the crimes of the day and see if they do anything about it? lol

Thu, 04/23/2015 - 19:42 | 6024235 Racer
Racer's picture

Looking forward to Nanex and ZH update for tomorrow  :)

Thu, 04/23/2015 - 20:12 | 6024337 Mr. Bones
Mr. Bones's picture

Introduce a random 0 - .5 second delay in every trade and this would stop in not more than an hour's time.

Thu, 04/23/2015 - 20:22 | 6024379 El Hosel
El Hosel's picture

.... "and Justice for all", except those outside "the club".

Fri, 04/24/2015 - 07:02 | 6025280 stewie
stewie's picture

Tyler, please keep it coming till the poor schmuck is let go.  This is so outrageous, something has to be done.  Maybe we should start a petition or something?

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