Norwegians convicted for outwitting Timber Hill (Interactive Brokers) trading system

Two Norwegian day traders have been handed suspended prison sentences for market manipulation after outwitting the automated trading system of a big US broker.

The two men worked out how the computerised system would react to certain trading patterns – allowing them to influence the price of low-volume stocks.

The case, involving Timber Hill, a unit of US-based Interactive Brokers, comes amid _growing scrutiny of automated trading systems after the so-called “flash crash” in May, when a single algorithm triggered a plunge in US stocks.

Svend Egil Larsen and Peder Veiby had won admiration from many Norwegians ahead of the court case for their apparent victory for man over machine.

Prosecutors said Mr Larsen and Mr Veiby “gave false and misleading signals about supply, demand and prices” by manipulating several Norwegian stocks through Timber Hill’s online trading platform.

http://www.ft.com/cms/s/0/f9d1a74a-d6f3-11df-aaab-00144feabdc0.html

False and misleading signals about supply, demand and prices. Really ? I have to send this article to Globex Control Center. Maybe the "operators" there will learn "some"thing...

 

And so it goes.

 

I would have expected Russians instead. :eek:

 

Thx for the post...

"Christian Stenberg, the Norwegian police attorney responsible for the case, said any admiration for the men was misplaced. “This is a new kind of manipulation but it is still at the expense of other investors in the market,” he said." from the ft article above...

I still don't get what they did wrong !? They took control of the behaviour of the algos !?

 

I thought ib does not trade against customer orders?

 

Do yourself a favor and order a TT or Patsystems demo version and compare price quotes in several futures instruments. You will find out "astonishing" issues with IB´s "price feed"....

 

You sure can tell where the corruption is from this story.

The guys in Norway are heros. I hope they win their appeal, get their money back and are free to trade.

Trading used to be pure mathematics and economics. Now it's mathematics, economics and computer science. There is nothing they did which rises to criminal conduct unless every HFT firm on the planet is guilty of the same thing.

Prices always will, and should, react to market conditions.

 

For lightly traded issues, one person can move the market significantly.

Use your favorite and search for "pump and dump scams."

 

The conviction was reversed on appeal (from May 2nd FT):

Supreme Court justice Bergljot Webster explained the not guilty verdict, saying that while the defendants did use the system to their advantage, they did so with full transparency which “would indicate that the ... actions should not be punished.”

The court said that it was swayed by some expert opinion arguing that their actions are considered generally accepted in the market.

The case involved Timber Hill, a unit of US-based Interactive Brokers. Prosecutors said Mr Larsen and Mr Veiby “gave false and misleading signals about supply, demand and prices” by manipulating several Norwegian stocks through Timber Hill’s online trading platform.

http://www.ft.com/intl/cms/s/0/e2f6...links/rss/home_uk/feed//product#axzz1tjcbvk00

 

Good verdict on appeal, it was an outrage that this prosecution was ever brought. It's the moral equivalent of criminalising skilful use of the bluff in poker.