License to steal
Every single day the oil market is manipulated, it is easy
to see, right out in the open, and nobody does anything about it. It literally
is like having a license to rob banks right in front of everybody, including
the armed security guards.
Here is a technique that is used by large players to
manipulate price in either direction, and it needs to be banned, it is outright
cheating. So a trading Dom is an order entry price ladder which shows a
collection of bids on one side, a typical default setting would be 10 levels
deep. On the other side of the price ladder is 10 levels of asks, going from
nearest to farthest away from the current, or last traded price in oil.
For example, if oil is trading at $96.00, there will be asks
going from 96.01, 96.02…96.10 and conversely there will be bids going from
95.99, 95.98…95.90. The cheating technique is as follows: Let`s say oil is
trading at $96.00, and the bids and asks size on both sides of the ladder are
relatively all the same size, let`s say 30 contracts.
Who are the Culprits?
Well, large institutions, Hedge Funds anybody with a large
capital base will all the sudden at strategic points when they want to move
price in a certain direction, flash a 115 contract size order right beneath the
current price in the direction they want to move price. Say 115 contracts now
bid at the $95.98 price level.
Of course, these large flashing orders relative to other orders
stand out, and that is the purpose, to stand out in the market! Which in and of
itself would not be a problem if these were “legitimate” orders with the actual
intent to buy 115 oil contracts at $95.98 per this example. However, even a
casual observer can see that these are fake orders!
The Large Fake Orders will disappear before
touched
They have no intent on buying with these 115 contracts, as
they could just hit the bid or ask with their order. And if they really wanted
to buy at a good price they would do so with a hidden order or break up their
order so as not to move the market.
The sole purpose of these flashing large sized orders in
relation to all the other price bids and asks at the various levels is to
influence price, i.e., scare anybody from selling into their order, and invite
others to front run their fake order. In short, to move the market!
Needless to say the same firm who flashes the oversized 115
contracts is already positioned in the direction that they want to influence
price to go with these “fake orders”, these are not real orders, and will be
pulled the instant someone hits their order.
Move Price in Firm`s previously
positioned Direction
So the intention is never there to buy or sell these 115
contracts, it is merely for show to “help” move price in a given direction.
This is the reason for the huge size relative to all other orders on the price
ladder, to scare the market in the direction that the firm is already
positioned.
Strategy Works: That`s why it is
consistently used to move markets!
Moreover, it does work or else the firms wouldn`t continue
to use this type of flashing large fake orders strategy. It can also be
interpreted by other traders; this serves as a form of open collusion,
signaling to the entire market to go this way.
Maybe the CFTC needs a new leader!
This is blatant cheating, and it happens right out in the
open every single trading day. Where is the CFTC or the government for that
matter? All they have to do is monitor the oil markets for a week and they can
find hundreds of examples of this cheating technique used to move the markets
through artificial means.
It is about time some of these blatant cheating, and pure
market manipulation techniques used in the oil market are identified and
cleaned up by the regulatory bodies that have been asleep at the wheel. The
abuses that go on every day in the oil markets are a real failure on behalf of
the CFTC and the government to properly regulate these markets from price
manipulation. It is about time for Washington to investigate why the CFTC fails
to properly regulate the oil market.
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