Quote Stuffing Disrupting Markets
Elise Fleischaker
Is the price you are seeing on your investment screen the current price? How do you really know? What if you are an algorithmic trader? Is that price and size really there? Quote stuffing is a messaging pattern designed to disrupt normal market operations by introducing latency and increasing bids and asks into an exchange. This method of market manipulation is intended to give other market participants a deceptive view of the market depth, liquidity, and range. Quote stuffing may
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Wash Trading isn’t Victimless
Elise Fleischaker
  Wash trading is defined by the Chicago Mercantile Exchange in rule 534 as trading where the trader knows that no change in beneficial ownership occurs. In wash trading there is no market risk, and no price discovery for the beneficial owner.  The Intercontinental Exchange (ICE) definition is very similar in their rule Exchange Rule 4.02(c). In 2014 CFTC Director of Enforcement Aitan Goelman stated: “Illegal wash trades may seem innocuous. They are not.  They provide misleading signals to the
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A Fool with a Tool is still a Fool
Elise Fleischaker
Machine Learning is getting a lot of buzz. I hear questions from our clients as we have successfully implemented it in our trading surveillance tool. We use machine learning to score the likelihood that trading activity is similar to known cases of spoofing, or layering. Did you catch that? We use Machine Learning for a specific business purpose. We all read Twitter feeds, blogs, and stories about other applications, tools, and techniques. These include discussions on BlockChain, Algorithmic Trading, Cloud
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Chicago aerial
Basel III Capital Requirements Affect You
Elise Fleischaker
The investor is beginning to feel the impacts of increased capital requirements under the Basel leverage ratio according to FIA President and CEO Walt Lukken in his testimony to the members of the U.S. House of Representatives. The capital requirements simply mean that the futures commission merchants (FCM), banks, and broker dealers (BD) must maintain more money to help cover the positions held on behalf of their clients. The goal is to protect our banking industry, and our end investors.
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Probe
CCOs at Brokers Require Probing Data Science
Elise Fleischaker
My first direct contact with compliance was confrontational. The team had just developed our first internet trading screens and we were excited to deploy them at some beta futures brokers. It was going to be the first time a retail person could actually trade the CME markets. A compliance person demanded that we identify the actual computer that a person was trading from so he could “go to that location and shut it down if needed.” Today that sounds crazy.
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Is Agile Dead?
Elise Fleischaker
In the course of the last week or so, I have been sent numerous links to "Agile is dead" posts. Two people texted me a link, and several posted via Facebook and LinkedIn. This seems to be a topic that struck a nerve so I thought I would have a bit of a think about it and pass on some comment. Much of the commentary needs to be read in context. One of the most popular posts seems to be
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Financial Markets Stability and the Future of Block Chain
Elise Fleischaker
The European Union stress test of clearing houses for derivatives will be published on April 29 according to Reuters. Our clearing houses serve the role of being a buyer to every seller and a seller to every buyer. This way if either the buyer or seller fail to meet their commitment then there is a financial guarantee that the transaction will be completed. The customers of the clearing house are the broker dealers. Broker dealers guarantee the accounts that they
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A Transforming World for Broker Dealers
Elise Fleischaker
US Regulators are seeking a “Culture of Compliance” among trading firms. Global regulators are increasing their scrutiny of market manipulation. New regulations are requiring broker dealers to know more about technology use among their clients than ever before.  Pre-Trade risk controls are actively being monitored. Capital requirements are growing. Market data charges are increasing. Vendor total cost of ownership is rising. More and more BDs are under pressure to cut costs, especially staff. This transformation doesn’t appear to be slowing
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Free Spirits & Agile
Elise Fleischaker
Here it is in spring break for the local school district, and a break between jobs for myself as I finish up one place and move on to a (very exciting) new company in early April. The high school jazz band is off to Savannah on a jazz playing trip and I am joining them, willingly choosing to sit on a coach for a day with teenage musicians. Which got me thinking about something an old colleague of mine from
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Can You Illegally Trade on an Exchange From Another Country?
Elise Fleischaker
Reuters reported that Navinder Sarao lost his first round fighting extradition to the US for illegally spoofing the US futures market. These markets are regulated by the CFTC. The judge had to decide if the trading actions would constitute a crime in the UK. This long-awaited decision highlights one of my earlierposts about international jurisdictions. We are seeing this sort of multi-national trading activity growing. Yet the national regulators and international treaties have not kept pace with the state of
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