Invisible Hand: How Mysterious Traders Arrange the Ups and Downs of Stock Markets

In our blogs on Habré and Hiktimes we write about investors and traders who willingly share their trading experience on the exchange. For example, we recently wrote about an American pensioner who opened his investment fund, and before that told the story of a programmer who managed to earn $ 500,000 from high-frequency trading using machine learning.

However, many large players, whose actions may affect the stability of financial markets, often prefer to act in silence. Today we will talk about a few examples of how such mysterious traders are taking off and falling on exchanges around the world.
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Stock market lord

A mysterious trader named “Dude” (“dude”) provoked real chaos on the Istanbul Stock Exchange. He makes large bets that increase the turnover of trades, and terrifies competitors.

It was first noticed in 2014, when within one day someone opened positions worth $ 450 million. As a result, the average daily turnover of trading on the Turkish stock exchange grew by 8%. And this at the time, as many European sites showed a negative trend.

Tracking "dude" has not yet succeeded. Although it happens in Turkey, where the system of control and accounting is debugged to the last screw. He regularly changes accounts and sources of transactions. Currently, "dude" operates through the company Yatirim Finansman, which in 2014 carried out 2% of all transactions on the Istanbul Stock Exchange, and now, it happens that it accounts for half of all transactions per day.

Some investors suspect a mysterious trader in the use of complex automated trading algorithms. For this reason, one of the large banks stopped for a while short-term operations with shares of Turkish companies, reports Business Insider. Other traders are also watching the actions of the "dude" with caution. He proved that his pockets are much more spacious than all the others, and he can move the market in any direction.

Not only istanbul

Conservative financiers are convinced that the widespread “robots” is responsible for the sharp collapses of markets. It is believed that automated trading systems are to blame for the global fall in stock indices in August 2015 and May 2010.

An investigation into the causes of Flash Crash 2010 showed that a trader from London was behind the collapse, which had remained elusive for regulators for a long time. Navinder Singh Sarao, in the opinion of the British and American authorities, “helped” the Dow Jones index to drop an incredible 1000 points. He manipulated markets for several years with the help of the software he created and earned $ 40 million. In May 2010, the actions of the trader created an imbalance in the derivatives market, which then spread to the stock market, which ultimately led to a general collapse.



Navinder Singh Sarao

Some time ago, a superhero appeared in Japan, responsible for the one-step take-off of SoftBank Corp shares on the Tokyo Stock Exchange in February last year. He wrote in detail about the publication of Bloomberg. On the Internet, this family man, father of three children and a comic book lover, is known by the nickname “CIS” (he still hasn’t revealed his real name). In one day, he made 140.6 million yen in revenue, being more attentive than his competitors. For the year, by his own admission, he managed to earn 6 billion in national currency. And although this case has little to do with algorithmic trading, the CIS itself can be called a robot in the flesh. According to him, the speed of reaction and composure was instilled in him by computer games.

At the beginning of this year, another mysterious trader made a massive purchase of offshore yuan (outside the mainland of China, all yuan offshore ), significantly raising his quotes, according to ZeroHedge Blog, “for no visible or reasonable reason, except to show George Soros who is here master". As a result, a gap appeared between the rates of the offshore and onshore yuan, which forced the Chinese authorities to direct about $ 50 billion to stabilize the exchange rate and foreign exchange interventions.

Similar stories happen not only abroad, but also in Russia. So in January 2016, the media wrote that an unknown trader, despite the lifting of sanctions on Iran and an avalanche of negative oil forecasts from investment banks, bought nearly 300,000 futures contracts for the Brent brand expired on March 1 on Monday January 18 ( BRH6).

A long position was opened (making a profit with an increase in price) for a total of about 6.6 billion rubles. After 3 days - on Thursday, January 21 - the oil market began to grow rapidly amid the absence of any significant news. In less than a week, quotes added about 30%, providing the mysterious trader with almost 2 billion rubles of profit. Almost a week later, on January 28, the head of the Ministry of Energy of the Russian Federation, Alexander Novak, shook the news feeds with a statement about the possibility of reducing production by 5% with OPEC.

How to deal with mysterious manipulators

The actions of mysterious traders can lead to serious fluctuations in financial markets. In particular, therefore, brokerage companies and other bidders tend to reduce the risk of financial losses in case of sudden movements or disruptions on stock exchanges.

Including the creation of specialized risk management systems that allow you to limit possible losses. Such a system, for example, is built into the SmartX trading terminal - with its help, users can control the maximum amount of an order or position on different instruments, as well as set the maximum account drawdown and protect positions with related orders and sliding feet - thus, with sharp fluctuations pricing system will automatically record profits or prevent losses.

Do not sit back and regulatory authorities. For example, to identify cases of insider trading, special algorithms are used that detect patterns of illegal transactions. In addition, to investigate one of the largest insider deals in history, FBI experts used the graph method .