2 HFTs in a game of Chicken

Discussion in 'Automated Trading' started by laserwolf, Jan 5, 2011.

  1. It appears that at least some of the activity
    consists of algorithms that either 'play' with one another, or submit and cancel repeatedly
    in an apparent attempt to trigger an action on the part of another algorithm.

  2. probably a couple of rebate traders who neither want to pay to take liquidity is my guess.
  3. to quote
    <i>Panel A of Table 2 is an excerpt from the message file for ticker symbol ADCT
    on October 2, 2007 beginning at 09:51:57.849 and ending at 09:53:04.012 (roughly 66
    seconds). Over this period, there were 35 submissions (and 35 cancels) of orders to buy
    100 shares, and 32 submissions (and 32 cancels) of orders to buy 300 shares. The pricing
    of the orders caused the bid quote to rapidly oscillate between $20.04 and $20.05. The
    difference in order sizes and the brief intervals between cancelations and submissions
    suggest that the traffic is being generated by algorithms that seem to respond to each
  4. could just be one guy making the tightest spread
  5. rosy2


    i don't see where they play with each other. They are just trying to buy the bid. However, you dont have any info on whether these orders are part of a larger trade like basket or spread.
  6. mickmak


    1) One reason people have done this at the market is to allow their system to breath.

    I know of one Java based system that does this at various times of the day to allow GC to kick in for 1/10 a second. This allows the quote side thread to breath and ignore (although I don't think it is very safe) incoming prices.

    2) get a latency read on their line for their pending arbitrage orders - although I would think an off market cancel/replace would be more prudent.

    3) quote stuffing - simplying trying to push the other guy's algo engine.

    4) trigger - I am not certain on that.

    The one thing that makes me concerned with these cancel and replace is one firm and another can easily get together to move a market. Firm A sends a cancel replace in a particular sequence. Firm B sends back an ACK with cancel/replace in another sequence. This would be impossible for SEC/CFTC/FINRA etc to find. Shaiz... not just across firms. If some guy on the sells desk wants to move something and wants to tell his buddy on the prop desk, that would be the perfect way to communicate - without getting caught by gov or internal compliance.
  7. since they're cancelling orders so quickly after placing them (<10ms) it's obvious they're targeting non-humans (human reaction time is ~ 200 ms).
  8. if we allow this to continue that's all that will be trading :(
  9. 300 shares. Wow. Stop intimidating me, please. :eek: