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An Odd DoS Attack

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40hz:

So, I have a very hard time believing that any kind of manipulation there is "innocent" or "just testing the waters". If they are testing, I think it would be naive to assume that they're testing in the same way that we would test some software -- they're testing to see if they can move in for the kill.

But then again... I *might* be cynical...
-Renegade (October 09, 2012, 06:07 PM)
--- End quote ---

Maybe just a little bit?  ;)

I've done contract work for one of the biggest financials out there. One thing I've learned watching that industry is how amazingly closely orders, trades and other transactions are monitored for exactly that.

If somebody was deliberately trying to clog the pipes or introduce trading delays by rapidly submitting and then canceling orders, the regulators would be on them in a heartbeat or two. You really can't do that and get away with it. Trying to game the exchanges is illegal. You can even get your ass hauled in for giving what might be considered misleading information or comments to the press.

If you say "no problem" like Jamie Dimon of JP Morgan/Chase said during the "London Whale" debacle, you'd better be right. Or at least have a "very high up" somebody like Ina Drew to offer as a sacrificial victim when it finally hits the fan. Which is one reason why big financial institutions are notoriously tight-lipped. It's often less for strategic reasons than it is to avoid saying anything that turns out to be wrong later - and then be accused of trying to mislead investors when you made the comment.

The people running these institutions know that. So do the exchange and network cops.

Not to say these people are innocents. They're "the friendliest group of great white sharks you'll ever have the pleasure of swimming with" as one account manager put it. But nobody working for a financial institution is going to be stupid enough deliberately try to cause network delays for an exchange without covering their tracks very carefully before they even try it. It's simply too easy to get caught trying something that obvious and basic.

When these guys commit crime, they do it big, and they do it subtly. And they'll generally only "push the envelope" or stray into gray legal areas when they do. Outright violations of rules and regulations are very rare. Not because they're good guys at heart. It's because it always comes out. And there are just too many ways to legally abuse the system and make a fortune for it to be worth knowingly and deliberately breaking the law. The odds are stacked too much against you. And these guys understand odds.

Renegade:
^^ Are you saying that they understand the concept of "plausible deniability"? :P (Still cynical...)

40hz:
Not so much that as knowing (for the most part) how far things bend before they break.

As you noted earlier, they are very smart.

And deniability doesn't get you off the hook when a law is clearly broken. Don't know how it works where you are, but over here, not knowing the law is not accepted as a valid defense.

Also - most people directly involved in this field need to get a license from the SEC in order to sell financial products or offer investment advice. The tests mostly cover relevant securities laws. So if they ever do break the law, they can't argue they didn't know the rules.

About the only thing plausible deniability might accomplish is having some securities regulator decide not to pursue charges. Once you're charged with something, however, the law swings into action and the only form of deniability you're allowed after that is to enter a plea of "not guilty."

Stoic Joker:
I'm cynical, and going by what the article linked to said:“My guess is that the algo was testing the market, as high-frequency frequently does,” says Jon Najarian, co-founder of TradeMonster.com. “As soon as they add bandwidth, the HFT crowd sees how quickly they can top out to create latency.” (Read More: Unclear What Caused Kraft Spike: Nanex Founder.)-The article
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(emphasis mine)

Now that seems to rather clearly imply that this type of behavior is not uncommon ... So why all the hubbub about this particular instance?


It's nice to think that Criminals follow rules... but it doesn't really alter the fact that once one goes past a certain level of power. There really aren't enough folks around to watch/prevent one from stretching the rules out just enough to accommodate whatever little project(s) is/are deemed "necessary". Because fear (as always) does a fine job of keeping the underlings in line.

Renegade:
I'm cynical, and going by what the article linked to said:“My guess is that the algo was testing the market, as high-frequency frequently does,” says Jon Najarian, co-founder of TradeMonster.com. “As soon as they add bandwidth, the HFT crowd sees how quickly they can top out to create latency.” (Read More: Unclear What Caused Kraft Spike: Nanex Founder.)-The article
--- End quote ---
(emphasis mine)

Now that seems to rather clearly imply that this type of behavior is not uncommon ... So why all the hubbub about this particular instance?


It's nice to think that Criminals follow rules... but it doesn't really alter the fact that once one goes past a certain level of power. There really aren't enough folks around to watch/prevent one from stretching the rules out just enough to accommodate whatever little project(s) is/are deemed "necessary". Because fear (as always) does a fine job of keeping the underlings in line.
-Stoic Joker (October 10, 2012, 06:57 AM)
--- End quote ---

I think it was because it went on for an entire week and accounted for a massive percentage of the total trade order volume.

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