Of course, honest traders change their minds all the time and cancel orders as economic conditions change. That’s not illegal. To demonstrate spoofing, prosecutors or regulators must show the trader entered orders he never intended to execute. That’s a high burden of proof in any market. One helpful fact is if most of a trader’s (canceled) orders were on one side (say to buy) when he was mostly actually trading on the other (selling). For instance Sarao allegedly put in huge orders to sell, so that he could buy a few contracts: All his trading was on one side, but most of his orders were on the other. Then he’d switch a little while later. That seems like a bad sign.
Category: Economics
Beware of the Liquidity Delusion
Martin Wolf on liquidity :
If relaxed regulatory requirements encourage banks to provide liquidity in good times, only to run away when unable to fund themselves, we end up in the worst of all worlds. Overconfidence in fair-weather liquidity should be discouraged. Investors ought to worry, instead, since the risk that nobody will be on the other side of their trades is a real one.
Bros Funding Bros : What’s Wrong with Venture Capital
A VC on VCs :
From the foundations and NGOs that are eradicating poverty and taking care of the world’s worst off, to companies like Facebook, Google and Apple that are inventing the future while looking after our best off, they have all explicitly decided to become less consensus driven and less homogeneous. They have found this increases creativity and drives business results. In turn, they are doing the ambitious, groundbreaking work that we used to do. And even though they have more work to do, when you compare the complexion of these leaders to the leaders within our industry, we look like total laggards.
Why Free Markets Make Fools of Us
Although investors were being phished, they “had no reason to be suspicious. They had been told of the wonders of free markets.” But free markets were not so wondrous, because they put the producers of the new, complex, risky securities at a big advantage over the producers of the older, simpler, safer ones. After all, the new securities promised higher returns while disguising the risk of default:
As long as a significant part of the bond-buying public was willing to swallow the myth whole, the investment bankers had an incentive to produce those rotten avocados, and to extract from the agencies the high ratings that would be the cover-up.
On modern advertising and one of my favorite, beloved Ogilvy’s ad :
Akerlof and Shiller think that the idea of phishing also helps to explain modern advertising, especially when we focus on the crucial role of narrative in human thinking. Clever marketers offer simple, attractive stories about their products, and get those stories to stick in the human mind. Consider a famous advertisement for Rolls-Royce, displaying an elegant young mother in the driver’s seat, turned slightly toward her elegant children, who are walking toward the car from outside the entrance to an elegant grocery store. The headline of the copy: “At 60 miles an hour the loudest noise in this new Rolls-Royce comes from the electric clock.” Advertisements of this kind tell an appealing story about what life would be like with the product.
The Fall Of King Coal
Even as Massey polluted the environment and exploited its employees, Blankenship cast himself as the true savior of West Virginia workers, who he claimed were being stifled by radical environmentalists perpetuating the hoax of climate change and by government bureaucrats imposing job-killing regulations. Increasingly he entered the political fray, spending millions to promote his anti-government philosophy.
Above is the one-time mountaintop estate of this gangster.
