"Watch out for the Quants"

Discussion in 'Wall St. News' started by makloda, Feb 7, 2008.

  1. Robert Lenzner, 02.07.08, 6:00 AM ET

    The stock market belongs to the quants.

    Some 70% of all equity volume is driven by computer models that suddenly trigger a surge in buy or sell orders that are causing the fragmentation, volatility and use of hidden trading venues. Some 30% of all trades are being done in so-called "dark pools"--37 alternative trading systems that operate like private markets--or through "dark orders"--bids or offers that are never disclosed to the public before they are transacted.

    Arguably, this trading activity causes violent moves up and down in a single session that intimidates ordinary investors.

    Take Tuesday, Jan. 22, when the Dow opened down 463 points, or 7%, in the wake of plummeting stock prices in Asia and Europe. What looked to be a frightening rout was transformed suddenly and without the slightest advance warning into a huge rally as hundreds upon hundreds of gigantic buy orders, all 1 million shares or more in size, poured into electronic trading systems at Credit Suisse and several other major trading firms.

    Dan Mathisson, Credit Suisse managing director and head of advanced execution services, believes these massive orders were from quant hedge funds whose algorithms suddenly decided stocks were cheap and sent out huge buy orders, all over 1 million shares each. Mathisson terms this electronic surge a "stabilizing force."

    More: http://www.forbes.com/2008/02/06/cr...ols-oped-cz_rl_0207croesus.html?feed=rss_news
     
  2. Monkey see, monkey do, Mack. Similar to the August-2007 meltdown, too much money wants to do the same thing at the same time.
     
  3. They are blowing smoke.

    I figured out exactly how these programs operate long ago, and can reverse engineer any pattern with less than 5 lines of code.
     
  4. Care to expand on that at all?
     
  5. Code:
    IF (INSTRUMENT.ES.SELL_VOLUME = 5000 lot) THEN
           GO LONG INSTRUMENT.ES 10000 lot
    ENDIF
     
  6. More like:
    Code:
    IF (FOS=true) THEN
           POST ON ELITETRADER
    ENDIF
     
  7. pkts

    pkts

  8. No clue. Maybe they confused the Dow with ESTX50 (which was down 7%)?
     
  9. Digs

    Digs

    Jes, then this will make it interesting when they all say SELL together...CRASH will be very quick.
     
  10. LOL.
     
    #10     Feb 7, 2008