Since you can't 'beat' market, why not 'cheat' market!!!
As the Wall Street Journal reported today, the cheating is done via a technique called 'layering'
Step 1 - Register the trading firm in tax-haven to avoid paying taxes in a 'legal' way ofcourse.
Step 2 - Get some high-speed computers and hire traders in far-flung parts of the world from China to Romania.
Step 3 - Make them work across the time zones aligning with New York / London / Tokyo
Step 4 - Play the game as follows:
a trader might buy a small number of shares at $ 10 and place an order
to sell them for $ 10.10 on an alternative trading venue, such as a dark
pool. He also places a series of large orders to buy this same stock on
an exchange for higher prices—$ 10.20, $ 10.30 and $ 10.40—“layering”
on orders that create an impression of strong demand.
When this apparent demand prompts other market participants to raise
their “buy” orders to $ 10.10, the trader’s “sell” order is executed and
he instantly cancels his large buy orders, pocketing a 10- cent-
a-share profit.
The trader also may do the opposite— placing a small buy order at $
9.90 and simultaneously several large sell orders at lower prices that
will draw the market price downward, the direction the trader now wants
it to go.
Step 5 - When caught, pay the fine without admitting or denying the charge after dragging it in courts for few months against regulators.
Step 6 - Disband the company and go back to Step 1 with another name.
Regards,
Pradeep Kabra
