High Frequency Computer Generated Trading

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High Frequency Computer Generated Trading

Postby Pixel8r » Fri May 07, 2010 10:04 pm

‘We’re Just Waiting For A Disaster,” says Mark Fisher

Lee Brodie | Thursday, 6 May 2010

Market chatter suggests computer generated trading sent Wall Street spiraling out of control on Thursday. And it’s got Mark Fisher of MBF worried, very worried.

Mark Fisher, founder and managing member of MBF Asset Management, rarely comes on TV but he felt Thursday's events were so important he agreed to an interview.

"I came on TV because as someone who's been doing this for over 35 years I think this is a warning," he says.

"I think what we saw on (Thursday) is just the tip of the iceberg," Fisher says. "There is no way this isn't going to happen again and again and again unless we can slow the process down.”

Fisher is hoping that in the wake of Thursday's plunge, lawmakers and the CFTC put together a group of traders and academics and create rules and regulations to slow everything down, especially in times of high distress.

"We're trading in micro-seconds," he says. "In the time it takes to tap your desk, a good trading shop can put out 10,000 orders. That just can't be allowed to continue."


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Re: High Frequency Computer Generated Trading

Postby Pixel8r » Fri May 07, 2010 10:10 pm

Jesse added more to this article today;

PLUNGE! 1987 Style Sudden Drop in US Stocks Driven by Program Trading and a Ponzi Market Structure

...Now we go into the Non-Farm Payrolls report. This is one broken market, and the plunge was no accident, but the consequence of corruption, neglect, and obscenely ineffective political governance and monetary policy. But we might see a bounce on Friday, and quite a bit of official reassurance over the weekend.

Bear in mind that there is a currency crisis on the horizon, and the IMF will be meeting to discuss it next week.

    "Sanity ruled on the Stock Exchange Friday in place of the hysteria of Thursday...In its place was a decidedly improved sentiment; the atmosphere had been cleared and a period of normalcy again reigned.

    Sentiment was extremely cautious. While most observers believed the worst of the sharp break was over , they did not look for any immediate recovery...It is the general view that nothing more than backing and filling movements can be expected. Then if conditions are favorable, the groundwork can be laid for a new advance later on."

    Wall Street Journal, Saturday, October 26, 1929

The pattern of that market dislocation was for an initial decline on Black Thursday (24th), a recovery on Friday (25th), an uneasy or blue Monday (28th), and then the Great Crash itself on Black Tuesday, October 29, 1929.

But even then, with the market down about 40%, it had a remarkable distance to go. The bottom in US equities was finally reached, down 90% from the September 1929 top, in July of 1932, the trough of the Great Depression.

I am not saying that this will happen again. It turned out very differently in 1987 thanks to a flood of liquidity from the Greenspan Fed. Can Bernanke do the same thing again? One great difference between now and 1929 is that a fiat currency can be devalued, and enormous amounts of liquidity added, with a few phone calls. The Fed is already under pressure to open new dollar swaplines with the ECB. Central banks have the mechanisms of monetizing each others debt, but would generally choose to do so quietly to maintain 'confidence' which is their stock in trade.

But it is good to remember that caution is advisable when investing - always, but especially when one decides to exercise their greed reflex.

    "Anyone who bought stocks in mid-1929 and held onto them saw most of his or her adult life pass by before getting back to even.”

    Richard M. Salsman
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Re: High Frequency Computer Generated Trading

Postby Pixel8r » Thu Jun 24, 2010 9:46 pm

How HFT Quote Stuffing Caused The Market Crash Of May 6, And Threatens To Destroy The Entire Market At Any Moment

Even as the idiots at the SEC mope about cluelessly, confirming they deserve not one cent of taxpayer money to fund their massively overbloated budget, and should all be summarily fired to collect tarballs in the Gulf of Mexico (and soon Maine), our friends at Nanex have conducted an exhaustive analysis (must read for everybody concerned about market structure), in which they identify the various parties responsible for the market crash, and, drumroll please, High Frequency Trading stands at the pinnacle of culprits for the 1,000 point Dow drop. From their findings: "While analyzing HFT (High Frequency Trading) quote counts, we were shocked to find cases where one exchange was sending an extremely high number of quotes for one stock in a single second: as high as 5,000 quotes in 1 second! During May 6, there were hundreds of times that a single stock had over 1,000 quotes from one exchange in a single second. Even more disturbing, there doesn't seem to be any economic justification for this. In many of the cases, the bid/offer is well outside the National Best Bid/Offer (NBBO). We decided to analyze a handful of these cases in detail and graphed the sequential bid/offers to better understand them. What we discovered was a manipulative device with destabilizing effect." In other words: enough with all the bullshit about HFT as a liquidity provider mechanism: in reality this is just a facade for the most insidious, computerized market manipulative device ever created. Nanex' conclusion: "What benefit could there be to whomever is generating these extremely high quote rates? After thoughtful analysis, we can only think of one. Competition between HFT systems today has reached the point where microseconds matter. Any edge one has to process information faster than a competitor makes all the difference in this game. If you could generate a large number of quotes that your competitors have to process, but you can ignore since you generated them, you gain valuable processing time. This is an extremely disturbing development, because as more HFT systems start doing this, it is only a matter of time before quote-stuffing shuts down the entire market from congestion. We think it played an active role in the final drop on 5/6/2010, and urge everyone involved to take a look at what is going on. Our recommendation for a simple 50ms quote expiration rule would eliminate quote-stuffing and level the playing field without impacting legitimate trading."

We present the Nanex' full report (please focus particularly on Part 4 and the provided evidence) and urge all readers, as we have many times before, to end all stock trading activities immediately (which at the macro level are nothing but a reflection of the EURJPY trade anyway) until such time as the SEC, CFTC, Finra, and every other corrupt and captured agency finally does something about the HFT menace. Doing nothing is merely inviting certain disaster yet again, and a guaranteed market crash, which next time wipe out the entire market permanently and destroy all confidence in US capital markets in perpetuity...
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Re: High Frequency Computer Generated Trading

Postby Pixel8r » Sat Jul 10, 2010 12:50 pm

Computerized stock trading leaves investors vulnerable

By Matt Krantz, USA TODAY

The time it takes to read this sentence is all it takes for nearly 2 million stock trades to flash through the stock market.

Most of those trades aren't coming from trigger-happy day traders and mutual fund managers with billions of dollars at their disposal. It's a flood of machine-gun speed fury coming from an army of computers programmed to obey complicated algorithms that are hyperactively buying and selling.

What does that mean to you, the individual investor? The next time you buy or sell a stock, forget the quaint idea that there is a living, breathing human being on the other side of the transaction. You're trading with a computer.

Not only are the markets completely computerized, more than half of the market's volume is churned by computers programmed to spot certain patterns in trading. These machines see stocks not as securities used by companies to raise money, but rather, symbols, numbers and bits that are traded, swapped and exchanged.

And now, traders say, humans are responding to machines rather than the other way around. Increasingly, too, the machines are reacting to each other, trying to second-guess what their next moves might be on how to take advantage of an edge that might be gone in milliseconds...
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Re: High Frequency Computer Generated Trading

Postby Pixel8r » Tue Jul 03, 2012 7:34 am

Joe Saluzzi: HFT Parasites are Killing the Market Host

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Re: High Frequency Computer Generated Trading

Postby Pixel8r » Fri Aug 10, 2012 8:14 am

Here's an interesting article which details how HFT trades affected the gold price on June 7 2012 and how they regularly effect the market these days.

A High Frequency Attack on Gold

By: Dimitri Speck | Thu, Aug 9, 2012

...High frequency programs which now account for a significant share of trading activity have rightly fallen into disrepute in recent times. They might be useful in some cases such as avoiding market impact while placing large orders. However, unequal access to the market is questionable as are highly technical efforts which are ultimately done only to pull money out of the pockets of slower market participants. At the very latest, limits of legality are touched when high frequency programs are used for front running or to manipulate prices. Such a price manipulation took place on June 7, 2012, at 9:21 PM and 20 seconds in form of a high frequency attack on gold. One second was enough to manipulate the price of gold down by more than one per cent for the duration of several hours. Although in the past central banks repeatedly intervened in the gold market, it is unlikely that this action was done by a central bank. In the field of high frequency trading, the technical complexity and the necessary level of experience and specialization are probably too high. Therefore, a private financial institution must have done the high frequency price manipulation to achieve a trading profit. This was a well-defined incident in thin trading, limited to a short time period and to a single market. These conditions make it ideal for a successful investigation by the regulatory authorities.
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Re: High Frequency Computer Generated Trading

Postby Pixel8r » Sun Oct 07, 2012 9:13 pm » Safari 6.0 Safari 6.0  Mac OS X Mac OS X  Screen Resolution: 1680 x 1050 1680 x 1050

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Re: High Frequency Computer Generated Trading

Postby Pixel8r » Sun Oct 07, 2012 9:18 pm » Safari 6.0 Safari 6.0  Mac OS X Mac OS X  Screen Resolution: 1680 x 1050 1680 x 1050

This from Chris Martenson's youtube channel.

Chris and Eric analyze a mini-crash in oil futures, where the price of oil (a huge market) dropped $3 within a single minute, at tremendous volume. The chart shows the price action in the USO ETF during that period for 1 millisecond (that's 1 one-thousandth of a second). Hear a tonal articulation of the trade volume for that period (each tone represents a trade, trades made at a lower price have a lower tone).


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Re: High Frequency Computer Generated Trading

Postby Pixel8r » Mon Oct 08, 2012 7:07 am » Safari 6.0 Safari 6.0  Mac OS X Mac OS X  Screen Resolution: 1680 x 1050 1680 x 1050

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Re: High Frequency Computer Generated Trading

Postby Pixel8r » Sun Feb 23, 2014 11:16 pm » Safari 7.0.1 Safari 7.0.1  Mac OS X Mac OS X  Screen Resolution: 1680 x 1050 1680 x 1050

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Re: High Frequency Computer Generated Trading

Postby Pixel8r » Mon Apr 14, 2014 8:24 am » Safari 7.0.3 Safari 7.0.3  Mac OS X Mac OS X  Screen Resolution: 1920 x 1200 1920 x 1200

CME Sued For Giving "High-Frequency Traders Peek At Market" Since 2007

...Sure enough, in a lawsuit that was just filed by lead plaintiff William Charles Braman, seeking class-action status, and filed on behalf of all users of real-time futures market data and futures contracts listed on the CBOT and CME from 2007 to now, the CME is allegd to have sold order information to high-frequency traders ahead of other market participants.

Specifically, from the lawsuit:
Throughout the Class Period, Defendants not only permitted the HFTs to see price and market data, including open orders, market orders before all other market participants and trader saw the price and market data, they permitted the HFTs to execute trades using this same non public data and order information before all other traders and market participants. In so doing, the Defendants engaged in a fraud on the marketplace, deceptive practice and failed to maintain a marketplace that is free from market disruption and market manipulation.

Throughout the Class Period, the Defendants concealed the fact that they were not providing a marketplace free of market manipulation because they were allowing the HFTs to trade based upon non-public information, specifically, the non-published and unexecuted orders of all other users of the CME and CBOT. In so doing, the Defendants failed to provide a marketplace that is free from market manipulation and established an unequal and two-tiered marketplace all the while inviting and soliciting the use of its financial trading instruments for profit.
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