White Collar & Securities

Disruptive Trading and Spoofing

The recent turbulence in the financial system has heightened the need for a much stronger understanding of the financial system, its environment, and the risk measures applied in the industry to quantify risk it in its multiple hierarchies. The effective management of operational risk and regulatory compliance has become increasingly dependent upon inputs and decisions informed by quantitative methods. Without an array of quantitative tools, statistical techniques, and database skills, it is impossible to successfully manage risk. In the face of rising supervisory expectations and global market volatility, firms need a partner with the appropriate technical skills and domain expertise of risk management and regulation.

Spoofing is one of many disruptive trading practices employed by traders to outpace other market participants and to manipulate markets. Spoofers create an illusion of false optimism or exchange pessimism for the underlying security through orders placed in bad faith to induce a specific reaction from other market participants. The spoofer can profit from this manipulation by timing his benefitting buy or sell order(s). Under the 2010 Dodd-Frank Act, spoofing is defined as “the illegal practice of bidding or offering with the intent to cancel before execution.”

Ankura’s professionals have extensive industry experience in financial regulation having worked for the Commodity Futures Trading Commission (CFTC), National Futures Associations (NFA), brokerage houses, and hedge funds.

Our professionals offer the following solutions:

  • Develop customized algorithms to review and perform analyses on compliance programs and data to detect patterns of disruptive trading activity
  • Advise on market manipulation, spoofing, wash trades, and other disruptive market behavior
  • Perform statistical analysis on market depth data, exchange data, and audit trail logs
  • Develop price impact models
  • Develop tools to monitor for disruptive or manipulative trading strategies
  • Calculate profit and loss
  • Conduct damages calculation
Get in Touch
Jeff Nielsen
Jeff Nielsen
Senior Managing Director
Steven E. Richards
Senior Managing Director