p*u
发帖数: 2454 | 1 Before he gained notoriety, Igor Oystacher was known as 990.
Spoofing
That was the identification code assigned to the firm where he worked in
2004, when the head trader at Chicago-based Kingstree Trading LLC noticed
something he’d never seen before in the Standard & Poor’s 500 futures
market. He watched again and again as 990 ran over everyone in what he
called an unprecedented display of market manipulation. The head trader
alerted an executive at the firm to the practice, according to both men, who
asked not to be identified by name for fear of reprisal.
By the end of that year, 990 was being cursed all over Chicago. Angry
traders took to Internet message boards to rant. They petitioned the Chicago
Mercantile Exchange to stop whomever it was. Word spread that the tag
belonged to Gelber Group LLC, a proprietary-trading shop that had hired a
Russian whiz kid who dropped out of Northwestern University.
This week, 11 years after that rude introduction, the U.S. Commodity Futures
Trading Commission filed a civil complaint against Oystacher and his
current firm 3Red Trading LLC for cheating on some of the world’s biggest
futures exchanges, the latest attempt to stamp out a form of price
manipulation known as spoofing.
The CFTC accused Oystacher and 3Red of creating “the appearance of false
market depth” to benefit their own interests “while harming other market
participants,” according to a statement on the agency’s website. The
spoofing allegedly occurred on the Chicago Mercantile Exchange, the New York
Mercantile Exchange, the Commodity Exchange and the Chicago Board Options
Exchange, the CFTC said. The complaint didn’t include any of Oystacher’s
activities while at Gelber.
Flash Crash
The action is the third high-profile case brought by U.S. authorities in the
past year as they crack down on a type of trading only defined and outlawed
in 2010. Navinder Singh Sarao was indicted in August for alleged spoofing
that helped spark the May 2010 flash crash, which temporarily wiped out
almost $1 trillion from the value of U.S. equities.
“The charges are completely without merit,” said Greg O’Connor, chief
compliance officer of 3Red. “The CFTC has oversimplified complex trading
and is now trying to classify legitimate trading and risk management as a
market infraction. We stand behind the trading at issue as it does not
contradict available guidance nor violate the law. Our firm cooperated with
the CFTC throughout its four-year review with the belief that a fair
evaluation of the facts would convince the commission that no charges should
be filed. We now look forward to presenting our case before the court.”
Thomas Becker, a spokesman for Oystacher, said the allegations relating to
Gelber from 2004 were false. Gelber co-founder Brian Gelber didn’t return
phone calls or respond to an e-mailed list of questions. Lawyers for Sarao,
who lives near London, have said his actions weren’t a crime in the U.K.
and are fighting his extradition to the U.S.
Canceling Orders
Spoofers attempt to profit from moving prices by placing orders they never
intend to fill and then canceling them. There’s nothing wrong with
canceling orders; what’s illegal in the U.S. is placing them with the
intention of doing so. With most trading now computerized, the sanctity of
the order book -- whether the numbers on traders’ screens in London or
Chicago or Tokyo are valid -- is of paramount importance. That’s why
regulators and prosecutors have zeroed in on spoofing.
“The notion of the market is that all activity should represent bona fide
supply and demand,” said Geoffrey Aronow, a former head of enforcement at
the CFTC who’s now a partner at Sidley Austin LLP in Washington. “If you
have activity that’s not reflecting true bids and offers, that’s going to
skew that equilibrium.”
Because the legal definition of manipulation is convoluted, the CFTC had
scored only one court victory from its creation in 1974 to 2010. Then, as
part of the Dodd-Frank Act, it was able to get a broader category of
disruptive trading defined as illegal. Spoofing falls into that new category.
Oystacher, 33, has made millions of dollars in a career that began in 2003,
when he dropped out of Northwestern and began trading at Gelber. He left the
Chicago firm in 2010 to start his own company, 3Red, where he racked up
more than $660,000 in spoofing fines from three of the largest futures
exchanges in the world, drew the scrutiny of federal prosecutors in Chicago
and became ensnared in a legal fight with a business partner. His LinkedIn
profile bears the tag “clinical observer of human carnival.”
Chess Prodigy
Born in Moscow and now a dual U.S. and Russian citizen, Oystacher excelled
at chess as a child, according to a person who knows him well. He dated a
granddaughter of former Soviet President Mikhail Gorbachev and emigrated to
the U.S. in his teens to live with relatives in Michigan, the person said.
While at Northwestern, Oystacher got an internship at Gelber, which started
in 1982 as a floor brokerage on the Chicago Board of Trade and became one of
the biggest traders of S&P 500 futures. Coming to work every day in the
same clothes with a disjointed air about him led traders at the firm to
think he wouldn’t last a week, the person said. In fact, Oystacher became
one of the best traders in Gelber’s history.
By 2004, Oystacher was making waves, buying from and selling to himself in
an early version of what came to be known as spoofing, according to the two
people familiar with the matter. While spoofing hadn’t been explicitly
outlawed at the time, it was recognized as a form of manipulation.
It didn’t take long for people at Kingstree to connect the dots. Because
the codes of trading firms were disclosed at the time to counterparties
after transactions were completed, the head trader knew he was up against
someone from Gelber, the people said. While he couldn’t be sure which
Gelber trader, he knew Oystacher was the firm’s specialist in S&P 500
futures, the same derivatives he traded.
Wash Trading
Here’s what the Kingstree trader said he observed: 990 would place a large
order to sell futures, presumably to entice others to join the selling. He
would then turn around with an even bigger buy order to sweep all the
contracts for sale, including his own.
Intentionally taking both sides of a trade so there’s no change in
ownership, a practice known as wash trading, is illegal. Honest traders,
having sold in a rising market, would need to buy back contracts at a loss.
The Kingstree trader started videotaping his computer monitors while all
this was going on. It got so bad that one day, after he lost $300,000 to 990
, his colleagues had to talk him out of going to Gelber’s office to beat up
Oystacher, he said.
In 2005, Oystacher hired Jimmy Chiu, a friend from Northwestern. Together,
they wrote a software program that figured out how to bait a computerized
trading strategy at Citadel LLC, according to two people with knowledge of
the matter.
Oystacher Payday
Oystacher said he was paid $10 million by Gelber in 2006, his cut of the
profits from the Citadel trade and others, according to the person who knows
him. A rule of thumb for firms such as Gelber is that they take 25 percent
to 50 percent of the profits, meaning Oystacher and Chiu may have made
between $20 million and $40 million for the firm that year, the second
person said. Zia Ahmed, a Citadel spokesman, declined to comment. Oystacher
’s spokesman said the numbers are “false.”
Oystacher was riding high. He would fly to Las Vegas with only a computer
and no other luggage, and then proceed to buy new clothes and toiletries
there, the person who knows him said. He once parked his Mercedes-Benz SL5 -
- a $150,000 car -- at a friend’s house and left it there for nine months
while he was in New York, the person said.
Chiu, who left Gelber in 2007 to join Jump Trading LLC, was fined $155,000
in 2010 by exchange operator CME Group Inc. and suspended from trading for
two months for spoofing. He neither admitted nor denied the findings as part
of the settlement.
“Mr. Chiu strongly denies the allegations at issue,” Christian Kemnitz, a
lawyer for Chiu, said in response to a list of e-mailed questions about Chiu
’s work with Oystacher.
Spoofing Fines
Gelber was fined $750,000 by the CFTC for the actions of an unnamed
proprietary trader who spoofed in Nasdaq index futures between August 2009
and February 2010, the agency announced in early 2013. That followed a CME
fine of $75,000 against Gelber for spoofing Nasdaq futures during the same
period, allegations Gelber neither admitted nor denied.
Oystacher left Gelber in late 2010 and partnered with Edwin Johnson, another
trader at the firm, to start 3Red.
The CFTC said in its complaint that Oystacher and 3Red spoofed in futures
markets based on copper, natural gas, the S&P 500 equity index and an
options volatility index. Oystacher is accused of using a feature of the
trading software known as “avoid orders that cross,” the CFTC said. He
would place a large resting order on one side of the market to trick others
into thinking prices were about to rise or fall, according to the CFTC. Then
, because the “avoid orders that cross” function was in use, the small
order he’d place on the other side of the market would cancel the large
resting order within 5 milliseconds.
The CFTC investigation started two years after 3Red got off the ground,
according to court documents filed in an unrelated civil lawsuit. After the
regulator subpoenaed Oystacher, Johnson and 3Red, the company agreed to hand
over trading records, according to the documents. Executives were
interviewed in 2012 and 2013 by the CFTC’s enforcement division. Johnson
wasn’t named as a defendant in the agency’s complaint this week. Anthony
Pinelli, a lawyer for Johnson, who has since left the firm, declined to
comment.
In addition to the CFTC inquiry, a federal grand jury has heard testimony in
Chicago about Oystacher’s trading practices, a person with knowledge of
the matter said last month. Prosecutors are investigating Oystacher for
spoofing and will watch how the CFTC case unfolds to see how to focus their
efforts, two people familiar with the probe said. Oystacher’s spokesman
declined to comment on that inquiry.
Zen Room
3Red, now located a few blocks from the Chicago Board of Trade and the
Federal Reserve in the city’s financial district, trades commodities,
equities, futures, options and interest-rate products, according to its
website. It also offers its workers on-site table tennis and catered meals,
a Zen room and Friday cocktails, the website says.
Oystacher reached settlements in the past year with the two largest U.S.
futures markets, CME Group and Intercontinental Exchange Inc., which
together included payment of $275,000. CME, which looked into trading in
futures based on crude oil and metals, barred Oystacher from trading for a
month. ICE, which accused him of placing fake orders in an effort to sway
futures on the Russell 2000 Index, told him to stop the practice. Oystacher
settled without admitting or denying wrongdoing.
While Oystacher was under investigation by the CFTC, Europe’s largest
futures market in May banned a trader it referred to as “Mr. A.” for 30
days. Mr. A is Oystacher, according to a person familiar with the matter.
Eurex took the step after fining the trader twice last year for spoofing --
90,000 euros ($102,000) in June and 250,000 euros, the maximum, in July.
“Mr. A. has persistently and notoriously continued his twice-sanctioned
trading strategy, albeit in an altered form,” the Eurex sanctions committee
wrote in its May 20 decision. Mr. A has appealed the 2014 rulings in
Frankfurt administrative court, Eurex said. “A fair-minded trader could
have been expected to suspend the censured trading strategy at least until a
final legal verdict had been reached.”
Vassilis Vergotis, head of Eurex’s U.S. office in Chicago, declined to
comment on the enforcement action. Becker, Oystacher’s spokesman, also
declined to comment.
‘Significant Hurdles’
Still, establishing intent may require sifting through millions of orders or
finding incriminating e-mails as prosecutors say they have done in the
Sarao case.
“The history of CFTC litigation of manipulation claims under the pre-Dodd-
Frank provisions demonstrates that proving intent can be very difficult for
the government in trading cases,” said Aronow, the former CFTC enforcement
chief. “While the spoofing provisions have yet to be tested through
litigation, that history suggests that the government may face significant
hurdles to success in litigated proceedings.”
http://www.bloomberg.com/news/articles/2015-10-19/before-u-s-ca | h****e
发帖数: 2125 | 2 那个什么head trader一天亏了30万还想去打人家，他不应该先被炒掉吗？
who
【在 p*u 的大作中提到】
: Before he gained notoriety, Igor Oystacher was known as 990.
: Spoofing
: That was the identification code assigned to the firm where he worked in
: 2004, when the head trader at Chicago-based Kingstree Trading LLC noticed
: something he’d never seen before in the Standard & Poor’s 500 futures
: market. He watched again and again as 990 ran over everyone in what he
: called an unprecedented display of market manipulation. The head trader
: alerted an executive at the firm to the practice, according to both men, who
: asked not to be identified by name for fear of reprisal.
: By the end of that year, 990 was being cursed all over Chicago. Angry
|
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