- Wealth PMS (50L+)
Michael Corsia, a High Frequency Fund trader, was fined $903,176 by the UK regulator for “manipulating” Oil futures by putting in large orders just to cancel them immediately.
The way he did it, using an algorithm (From Dealbreaker):
This is bad, to the other algos, the regulator has decided. However, it’s not just bad, it’s largely stupid, as Dealbreaker points out:
Why go after Panther and not all the other algorithmic traders cancelling all their orders? The answer appears to be that Panther, and its sole owner Michael Coscia, were completely nuts; as Paul Murphypoints out, Panther would bid for $100 million of oil in order to make $340 on its actual trades. It’s not entirely clear what Panther would have done if it’d been hit on its $100 million of fake bids but that sort of risk/reward ratio suggests the answer is “nothing good”; from a market stability perspective it’s probably for the best that they were canceled. Also from a market stability perspective it’s probably for the best that the CFTC and FCA shut this guy down.
Yes, the guy actually made just a profit of $279,920 (FT) from all that trading, and for his average $100 million dollar worth order, just $340. He was incredible lucky to not have Darwined himself out of existance – just one large move would have wiped him out. And he was, like FT said, half the oil market.
But this cancelling business happens all the time, even in India. If you have a terminal you can see the constant cancellations happening with prices being moved by algos. Retail traders are most affected (but largely these algos are also stupid, in that they can be gamed manually)
How would you prevent this?
The current method, of fining small and inconsequential people, will do nothing.
Meanwhile, Goldman Sachs has cornered a large chunk of the aluminium market in the US and it seems, is moving the aluminium from one warehouse to another and holding it off from the market in order to earn more rental income.
Oh, you can quite happily manipulate aluminium buyers, because obviously Goldman is too big to fail.