Yes, that's where the creative part came in. His genious was in the creation of the algo and the back-testing. Essentially this was a counter-trend trading system and if you have studied with other trading system experts, you'll find that for intra-day trading, these are the most profitable systems. Keep in mind, he was just starting and stopping the system....this was all fully automated. He likely had parameters he could adjust like the # of ticks, etc. and whether or not his position employed a trailing stop or profit target or both.
We'll know the exact details when the government gets him to hand over his source code which I am guessing is going to be C# or C++. That's gonna be a "biggie" in this case.
What he did was massive, and game'd the system, which is NOT what the investing model is. Another fault, is this type of conduct was never factored into the business model, whether CME member (professional making markets) nor Speculator (individual investors). What he did, evidently was a perfect storm, as there were others of various size and depth participating in tandem, whether co-incidentally or by noticing patterns in the market and they spear fished and joined in. This case will be transformative. One thing is certain, the nay-sayers over on BMT got this case completely wrong, and seem to be on his side as supporters.
HFT do this same thing day in and day out on a much smaller scale. The only difference is he used noticeable/unignorable size. He's just causing front runners (whether they're bots or humans) to play into his resting orders on the other side which he then flips. Basic stuff and easily discernible by most experienced traders.
Easily preventable. In the one flash crash, the CME stopped trading for something like 5 minutes. Preventing spoofing: also easily remedied....charge for cancel orders, put a timer on orders, limit the # of cancels per hour, etc, etc. Why don't they do it is the big question.......
How Spoofing Works http://www.ritholtz.com/blog/2015/0...ampaign=Feed:+TheBigPicture+(The+Big+Picture)