ONE HFT algo made up 4% of all quote traffic last week.

Discussion in 'Wall St. News' started by Grandluxe, Oct 8, 2012.

  1. By John Melloy | CNBC – 2 hours 20 minutes ago

    A single mysterious computer program that placed orders - and then subsequently canceled them - made up 4 percent of all quote traffic in the U.S. stock market last week, according to the top tracker of high-frequency trading activity. The motive of the algorithm is still unclear.

    The program placed orders in 25-millisecond bursts involving about 500 stocks, according to Nanex, a market data firm. The algorithm never executed a single trade, and it abruptly ended at about 10:30 a.m. Friday.

    Hunsader's sonar picked up that this was a single high-frequency trader after seeing the program's pattern (200 fake quotes, then 400, then 1,000) repeated over and over. Also, it was being routed from the same place, the Nasdaq (COMP).

    "My guess is that the algo was testing the market, as high-frequency frequently does," says Jon Najarian, co-founder of "As soon as they add bandwidth, the HFT crowd sees how quickly they can top out to create latency."

    Translation: the ultimate goal of many of these programs is to gum up the system so it slows down the quote feed to others and allows the computer traders (with their co-located servers at the exchanges) to gain a money-making arbitrage opportunity.
  2. Tsing Tao

    Tsing Tao

    Totally criminal, and the regulators and exchanges are in on it.
  3. vicirek


    Illegal market activity under current securities laws - no enforcement so far.
  4. Bob111


    ----mysterious computer program that placed orders - ---

    so they charged some traders from china who do this f*** manually,but one,who made up 4% and never execute any trade remain mysterious? (along with that "trader" who bought "some" puts right before 9/11...FU SEC! FU gvt! they are clueless,where and when regulations are needed,but there is a f** abundance of laws,regulations and enforcement where it's least needed..

    Darwin's theory at work..they always jumps on weakest target,who have least probability of successfully defend and punish the little guy..but big boys? whhhooo..they can and will fight back..f** them..let's stick with teenagers,who pumps some low volume penny stocks on tweeter..yeah..double standards one again..america's best..
  5. it's called latency profiling. not illegal. also not remotely as nefarious as hunsader alleges.

    when you market your business as being able to send full market data feeds over the internet, you might have an agenda though too.

    not something you can really do anymore without excessive latency. gotta do something to keep your clients from leaving, though... hence "nanex research". what a dweeb.
  6. I thought the same thing. Nanex advertises to the public that they can send everything over the internet, so when some guy starts blasting data, maybe he notices the effect more seriously. No one ever asks this guy why he cares so much if his business is just pushing quotes out.
  7. Occam


    If Hunsader is correct and this did constitute such a huge number of useless quotes, then how would "latency profiling" (or any other non-trading activity for that matter) justify spamming the entire market that badly?

    One firm's testing process shouldn't impact so many others; if they need to test their systems, they should do so offline, or face significant penalties.

    Or, the SEC needs to implement a 1s minimum resting period for orders, which seems justified to me as 1s is already well below the threshold of human decision making when it comes to investments.
  8. vicirek


    Although I see many advantages of HFT, latency profiling by increasing latency thus interfering with market information dissemination is illegal. They have no intention to fill the posted order and some of that activity could be classified as market manipulation by inducing trading activity by others or interfering with trading by other market participants.

    I think that re-labelling certain activities to appear as legitimate is not the way of addressing HFT. It does not help HFT and honest discussion about it would help to stop bashing HFT.
  9. Bob111


    -----They have no intention to fill the posted order and some of that activity could be classified as market manipulation by inducing trading activity by others or interfering with trading by other market participants.--- can call it whatever fancy name..latency profiling..whatever..i call it-spoofing,spamming,bluffing,market manupulation,pump and dump is entirely possible that one "firm" can post quotes and other take care the trades. go outside and see any other auctions such as ebay or auto auctions etc for similar practices. i'm not buying this nonsense. it's should be illegal. if i do this on my retail account-they would ban me forever within 30 min. and if i made any money off it-SEC will be all over me.
  10. Anybody can have resting orders in place to catch algos trying to do this.
    #10     Oct 8, 2012