14. The vast majority of Hold Brothers’ traders located overseas were associated with one of two “customers,” either Trade Alpha in 2009 or Demostrate in 2010 (hereinafter, collectively, “Demostrate” or the “Demostrate traders”). These traders traded Demostrate’s capital and were monitored for risk and compliance purposes by personnel of Hold Brothers and a Hold Brothers affiliate. As an owner, Steve Hold shared in the Demostrate trading profits. Unlike Hold Brothers’ proprietary traders, however, Hold Brothers did not consider the Demostrate traders to be associated with the firm, nor did any of these traders hold licenses from any self-regulatory organization.
15. Demostrate maintained a brokerage account at Hold Brothers. Demostrate’s managing member was Tobias. Demostrate was Hold Brothers’ largest “customer,” both in terms of the number of trades and revenues generated. All Demostrate trading occurred in a single account held at Hold Brothers. All of the persons who traded through Demostrate’s account were located outside the United States, primarily in China. Hold Brothers assisted Demostrate and its traders in accessing the securities markets by providing these foreign traders with access to front-end trading platforms and access to the U.S. securities markets.
Layering concerns the use of non-bona fide orders, or orders that the trader does
not intend to have executed, to induce others to buy or sell the security at a price not
representative of actual supply and demand. More specifically, a trader places a buy (or sell)
order that is intended to be executed, and then immediately enters numerous non-bona fide sell
(or buy) orders for the purpose of attracting interest to the bona fide order. These non-bona fide
orders are not intended to be executed. The nature of these orders is to induce, or trick, other
market participants to execute against the initial, bona fide order. Immediately after the
execution against the bona fide order, the trader cancels the open, non-bona fide orders, and
repeats this strategy on the opposite side of the market to close out the position.
i call this a big f*** BS for about a decade...and i still see it every single f** day and every second of trading session...(see my last 3000+ posts)
it 's illegal for them,but perfectly fine for others..but at least now we have a official name for it..layering..
11,000,000 shares a day executed that's good volume for hold brothers. i am trying to figure out did steve and tobias own that group or what the payout was. i am sure hold brothers made money on volume but what was the real setup.
The pattern of layering against algorithmic traders is illustrated by the activity of
a Demostrate trader who traded under the identifier “PEBC” in group P69 from Nanjing, China.
On June 4, 2010, the trader layered the stock of W.W. Grainger (NYSE: “GWW”) on NASDAQ
and the Boston Stock Exchange.
During this time, the inside ask declined from $101.37 to $101.31, and the trader bought all
1,000 GWW shares she offered to buy for $101.30 per share, completing the execution at
11:09:00.977.
