I have had incredible opportunities to know and work with these types. I caught this thread and had to contribute. Thanks for the thread CyjackX ES
Is there evidence anyone consumes large percentages of liquidity on one side of the limit book in an instant?
The naked eye can pick up nuances and differences in how the level I data is flowing into the market. It’s a combination of pace, active volume (market orders), absorption of market orders (limit orders) and reactive orders (what comes in after large market orders come in). In addition to these factors, the actual refresh rate of the DOM you are watching will also come into play. Uptrends have tendencies, down trends have tendencies, and transitions from one to the other have tendencies. It takes some dedicated studying and no assumptions going in, but the futures market can be traded this way. I can’t speak for stocks.
In addition to the above, It helps to monitor two streams of t&s; for 1 lot size and another for larger contract sizes. Adding otr charts assists with this as well by monitoring ‘dwell’ of two-tick pairs which occur frequently at the three major turn types. It’s helpful to think of four types of traders (by size) and how their behavior is correlated to account size and size traded - 1’s, 10’s, 100’s and 1000’s lot sizes. They participate at different frequencies and price levels. The taxonomy of trader types (Trading & Exchanges pg199 Harris) further defines the various participants and motivations.
Another case of spoofing similar to the Navinder Sarao case: This time it appears to be gold futures on the CME. https://www.cftc.gov/PressRoom/PressReleases/pr7685-18 https://financefeeds.com/ex-ubs-trader-accused-spoofing-argues-us-govt-intervention-stay-case/
The days of making markets - buying bids and selling offers, has been extinct for a very long time. It makes no sense to "race" or fade electronic order book bias. It's a mirage. Kibuki theater. Most bigger orders that I'm aware of are "iceberg" - nobody outside the spread market (and some off market block trades) shows 10,000. If they're that motivated they will hit bids or lift offers. But most outright big orders get filled incrementally over time. They are not interested in spooking the market away from their preferred valuation level.
What's the difference between placing an order to buy, then cancelling it to place a sell order to get a better price, and placing an order to buy, then cancelling it to place a sell order because you changed your mind about which way the market was moving ? Objectively, I mean.
Haha I have no idea what the law reads, but I would think it would come down to your subjective intent, and whether it was reasonable. If there is just one trade and you said, "oh the market moved the other way, so I changed my mind and also went the other way", seems hard for them to prove. But if you have months or years of placing huge buy orders slightly below market, placing sell orders once your buy orders caused the market to move, then cancelling the buy orders, with the buy orders almost never getting filled but the sell orders regularly getting filled, or vice versa, I would guess a trier of fact could conclude that you were spoofing the market.
It's the subjective part I don't like. Ask it another way ... what's the difference between your automated trading platform placing buy orders then cancelling them and placing sell orders because it was trying to manipulate the price, and your automated trading platform placing buy orders then cancelling them and placing sell orders because it got new information and decided to trade the other side of the market ... 200 times in one day. I suppose at least in that case you have code and a record to prove that the algorithm did it for all the "right reasons". I wonder about the wisdom of trying to protect one set of traders from another set of traders, none of them is really providing any value added to anything in the market except that they add liquidity.