Spoofing

Trader Charged in ‘Flash Crash’ Case to Fight Extradition to U.S.,  the copy of the Times he was holding tight said, and Marquel, TPVs NYTimes One Man At A Time Section correspondent couldn’t believe it. It was his very own dream.

This single individual British bureaucrat living in his small rural English home was able to tumble the markets all over the world in any direction he chose, at the touch of a button. Was it even possible? It was more than that. He actually did it!

This Englishman caused the entire world financial system to crash for 15 minutes about five years ago just by pushing that button. Now they want to arrest him! That’s like arresting a man for taking a spin in a brand new red Ferrari left with the keys in it, running, in your own driveway.

Please.

Marquel spoke to the Englishman, Navinder Sarao, not an especially Middle English name of course, but his family seems to be less typically English as well. When bail was set at £5 million, his family paid it in cash. Marquel asked him what he did before trading.

“I trained dogs.” He said.

“To manipulate markets?” Asked Marquel.

“No, mostly to sit and stay.” He said.

“Where’d you learn to do that?” Marquel asked.

“Just picked it up on my own,” he explained.

“And how’d you learn to manipulate markets?” Marquel asked.

“It’s called spoofing. It’s been used since the Roman Forum. You make a bid and raise prices, when they rise, you cancel the sale, then you sell your holdings at a higher price.” He said.

“So a dog trainer could do this.” Marquel said.

“Actually you could train a dog to do it.” He said.

“You exaggerate,” I insisted.

“Only a bit. I could train you to do it though.” He said.

“So why do they leave the market open to this spoofing.” I asked.

“You mean why don’t they install protections against it?” He asked.

“Well sure.” I answered.

“It would slow down the market by about 50 microseconds.” He said.

“And?” I questioned.

“They like the speed because they make more money.” He said.

“Let me get this straight ” I said, “They willingly leave this vulnerability which made the market drop worldwide in 2010 a thousand points, so that they still have the ability of making faster profits?” I asked.

“Sure. It’s business. I made quite a lot spoofing. But I don’t consider it dishonesty or manipulation because it’s part of the system. It’s what they want. How can they complain about it?” He asked.

I thought I understood. We can have our greed but you can’t have yours.

“Do you like Ferraris?” I asked him.

“Oh my god, oh my god. My dream!” He exclaimed.

“What would you do if you saw one in your driveway, with the key in and motor running?” I asked.

He paused. “I guess I’d look for the owner and see if he’d give me a ride.” He said.

“You know what I’d do?” I asked, “I’d get in that car and drive it around the block. And I’d leave rubber up and down my street.” I said.

“It’s not your car. You can’t do that.” He said.

“Bet they wouldn’t extradite me.” I noted.

He suddenly looked preoccupied. “Bet they wouldn’t. That’s life.” He said.

I went home, keeping my eyes peeled for any abandoned Ferraris.

***

By MARQUEL: Spoofing