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Opinion
Matt Levine

High-Speed Traders Put a Bit Too Much Gravy on Their Meat

It can be hard to tell manipulative from non-manipulative strategies, but naming your strategies "Meat" and "Gravy" is a clue.

One good general rule is that it's harder than you think it is to figure out what's market manipulation and what isn't. Trading a lot, cancelling a lot of orders, putting in orders or doing trades on both sides of the market, trading a lot right before a close or fixing -- all of those things could be signs of nefarious manipulation, or just normal risk management. No single event or pattern proves manipulation. You often need to look for subtle clues to figure out whether a trade is actually manipulative

One subtle clue is, if you name your algorithms "Meat" and "Gravy," there is probably something wrong with you! And your trading, I mean. But also your aesthetic sensibilities. Here is a Securities and Exchange case against Athena Capital Research, which the SEC touts as "the first high frequency trading manipulation case." The SEC caught Athena "placing a large number of aggressive, rapid-fire trades in the final two seconds of almost every trading day during a six-month period to manipulate the closing prices of thousands of Nasdaq-listed stocks." That period was in late 2009, by the way.