You got that right. When I first read about this case back in the day, I thought it was a joke at first. It still is a joke, I guess.
Commentary from 2010 on this case: http://www.amsterdamtrader.com/2010/09/timber-hill-is-too-slow.html
Let me see if I understand this correctly: A large brokerage firm develops a system to trade the markets using data that only they have access to, and effectively take money from their own customers by trading against them. A couple of guys figure out the brokerage firm's system, and use it to trade their own accounts, and take money from the same people the brokerage firm is taking it from. They are convicted of a crime for figuring out the system, saying that they manipulated the markets by using it, even though they were simply trading alongside the brokerage firm, and not using the proprietary data. The brokerage house, however, is free to continue using the same system that the two guys who were convicted of manipulation were using, to continue taking money from their own customers by trading against them. Does it sound like I got it right?? I think the judge made the right call by overturning the verdict.
Doesn't almost everyone want you to believe they don't trade against? And then, somehow, almost everyone effectively trades against even if the have to interpose another MM.
New article: http://www.theglobeandmail.com/globe-investor/day-traders-expose-algorithms-flaws/article2434717/ Meanwhile Mr. Larsen - and others - continue to beat algorithms. A few months ago he says that UBS failed to set a bottom limit on one of its trading algorithms and he picked up some stock at a discount. He estimates he made $14,000 in a few minutes.
How come all you see are shmucks hawking outdated , gay, trendline, market profile, and other voodoo that only makes money for the system seller, and no one offering anti bot systems?
"He found that he could bump up the price with very small trades and then sell with much larger trades for a profit. He was not the only trader who worked out this flaw, which he called “painfully obvious”. But he still made $50,000 (U.S.) in a few months." and some people claim edges don't exist! that's the key - to UNDERSTAND what's really going on and if possible to take advantage of the situation.. indicators, divergences, trend lines are better left to the brainless ones / if they ever win it's because of their money management approach as the entries are more or less random imo/ .. looking for an edge??? HERE IS AN OUTLINE OF ONE: "John Bates, chief technical officer at Progress Software, a U.S.-based company that provides algorithmic trading software, says that every time there is a big failure of an algorithm because of a “fat finger” or programming error, behind the scenes there are always “some traders making a lot of money”." Unfortunately for most / me included / brain work , probably lots of it is required..
"Brain work" plus constant observation. As stated in the article: In the meantime, traders contacted by the Financial Times say that their technique for beating algorithms is the same as beating any other trader: endless screen watching. This gives them a sense of how certain stocks behave, allowing them to spot quickly when something goes wrong. Often they do not know it is an algorithm they have beaten until after the event.