Trading Firms Beware: Those That House Spoofers Can Be Held Strictly Liable
Jay Biondo
In US tort law there is a rigid legal doctrine known as 'strict liability' which is frequently used by consumers to hold manufacturers of defective products legally responsible for any harm caused by their products.  Consumers who bought and used the product and were injured are able to file suit against the manufacturer and seek damages without having to prove that the manufacturer had reckless, negligent, or bad faith intent in producing the product (hence, the rigidity of the doctrine).
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Neurensic Partners with Vine Street Trading to Provide Compliance and Surveillance Capabilities
Neurensic
CHICAGO, September 16, 2016 -- Neurensic, a fintech artificial intelligence (AI) startup, today announced that its CORE™ product has been selected by Vine Street Trading for its market surveillance and compliance capabilities. Vine Street Trading is a Chicago-based, principal trading group that has focused primarily on electronic futures markets throughout its 10 year existence. “We are proud to partner with an established market maker with complex futures trading strategies in Vine Street Trading,” said David Widerhorn, founder and CEO of
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CME Rule 432: General Offenses
Neurensic
It shall be an offense: A. to have an interest in, operate or knowingly act on behalf of a bucket-shop, or knowingly make any transaction with a bucket-shop; B. 1. to engage in fraud or bad faith; 2. to engage in conduct or proceedings inconsistent with just and equitable principles of trade; C. to engage in dishonest conduct; D. to create or report a false or fictitious trade; E. to extort or attempt extortion; F. to buy or sell any
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Momentum Ignition: Arson for Financial Markets
Neurensic
ESMA has defined momentum ignition as a case of prohibited market manipulation. ICE Canada considers this to be disruptive, and so does the CME Group. One UK government report stated that momentum ignition will “induce algorithms to compete with other algorithms, can push prices away from fundamental values.”* This leads us to the question - what exactly is momentum ignition? And how do we detect that is has occurred so that compliance teams can surveill for this prohibited activity? An
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Why Front Running Traders Hurt Fair & Open Markets
Neurensic
Front Running (a.k.a. Trading Ahead) is the unethical practice of a trading based on information about a pending order or trade that someone else needs to make or will soon make.  Using this private information a front runner places an order in advance of another client for personal unwarranted profit. Typically this also disadvantages the person placing the other order. Recently Jon Ruggles was banned from trading on the CME Group exchanges and was fined $300,000.   Front Runner Scorecard
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Quote Stuffing Disrupting Markets
Neurensic
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
Neurensic
  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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New CFTC trading rule is ‘extreme overkill’
Neurensic
The former CFTC commissioner Bart Chilton went on record with CNBC saying that the Source Code requirements in Regulation Algorithmic Trading (REG-AT) is extreme overkill and a very slippery slope. Many in the listed derivatives trading industry strongly believe that ideas and methods that are expressed in our Source Code is critically important and extremely sensitive. It is our proprietary information. As such it should be provided with the utmost the highest level of legal (and governmental) protection. Requiring the
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Integrity & Character Still Matter
Neurensic
Normally I post on something happening in Compliance, Fintech, Machine Learning, or Technology in the Trading & Investment industry. Today's post is no exception, however it takes a more personal approach. Last night was the super bowl. Many of you saw it.  Yesterday I had an opportunity to see Don Beebe, who has played in many super bowl games, speak at The Well in Geneva Illinois (http://cometothewell.org/). He reminded me of the fact that integrity and character still matter. In
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Individual Accountability in HFT
Neurensic
The UK's FCA is championing the need for individual accountability in HFT. Since individuals profit shouldn't those same individuals be held accountable? In any mature organization, one should expect to see divisions of labor. This includes making sure there is: Someone watching the Algos and HFT Someone else who is writing the Algos Someone else who is setting pre-trade and position limits Someone else who is managing the team. Someone else who audits the team and their adherence to approved
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