It's alleged that Navinder Singh Sarao contributed to the flash crash by placing huge, fake, order for S&P Minis. Mr. Singh Sarao then cancelled the huge orders before they were filled. The spoofed orders created false impressions in the market which Mr. Singh then profited from.
Here's what I don't get...why weren't the fake orders filled, leaving him with a real position? Order execution is typically very fast so how was he able to show the fake order to the market then cancel it before it was executed? It seems like he was putting himself in a very risky position that the huge fake order might get executed.
Note: I realize spoofing is illegal and very risky in that sense. I'm trying to understand the positional financial risk aspect (not counting fines, legal fees, jail, etc.).
Answer
This FT Alphaville article confirms and has some discussion about your idea that Sarao was indeed taking a risk every time he created spoofing orders. But in short, yes: if you place a limit order and a large enough order hits the market your limit order can be filled without a possibility to cancel (unless the exchange is dodgy) and you will end up with a position.
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