Frank, we may be looking at the matter through different windows.
What I see is emergent technology which frequently acts in unpredictable ways. In parallel (and equally important) the regulatory agencies responsible for orderly markets and trading have been emasculated over decades - and contrary to popular opinion - have not been restored to full functionality by Dodd-Frank.
At present, the SEC is underfunded, cannot meet its obligations, and is fighting for the means to investigate numerous important matters, of which HFT is one.
"Capitol Hill is buzzing with anti-reform sentiment." Message 27459602
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Understood, there are different views on this matter. However, it's fair to say the following factors can work together with potential disastrous effects:
[1] Intentional and continued weakening of regulatory oversight
[2] Poorly understood cause and effect in HFT with numerous ongoing crashes
[3] Notwithstanding [2], accelerating growth and use of HFT and ETFs, not only domestically but internationally
[4] The fact that US markets are - by intention - the keystone of international trading.
If this were a bridge, inadequately inspected, poorly understood and designed, with fast-growing traffic and a tendency to fail for unknown reasons there'd be hell to pay. Because it's the financial sector and high-tech, common-sense standards are fought: by traders whose profits are threatened, by exchanges, by companies whose profits depend on the technology. Ordinary people are intimidated by the closed circle of high-tech shamans saying "Trust us!" In my opinion, the greater good is being sacrificed. Worse, it's being exposed to increased and unnecessary risk.
Jim
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nanex.net
Research: 07-14-2011 Strange Days TLT rockets from $96.63 to $97.90 and then dropped back down in less than 1 second.
07-14-2011 Strange Days ASIA trades from $15.72 to $12.60 in one second and then quickly recovers. During the time a massive size algo was running.
07-12-2011 Strange Days BF.A trades from $69.28 to $16.64 in one second.
07-12-2011 Strange Days The 'Preferred' Algos.
07-11-2011 Strange Days The Legal Limit Algo.
07-07-2011 Strange Days What appears to be a massive arbitrage algorithm involving the NYMEX Crude Oil futures (CL) and ETF symbols USO, UCO, and SCO.
07-07-2011 Continued CQS Saturation
CQS increases capacity...a simulated look at the prior capacity one day earlier.
07-06-2011 Continued CQS Saturation
CQS increases capacity to 1 Million quotes/sec, saturates on first day.
06-30-2011 OPRA Quote Saturation Chicago's PMI News Release uncovers significant delays in OPRA.
06-21-2011 Strange Days Unexplained trading cycles in CNTY take the stock up over 100% and back down.
06-16-2011 EMini Research The eMini 9:54:58 Event.
06-13-2011 Strange Days The RETF Algo.
06-08-2011 Strange Days The NatGas Algo.
06-07-2011 Strange Days AT&T - Stub Quoting still occurs in broad daylight.
06-03-2011 Strange Days XEL.PR.G From $90.5 to $102.25 and back down again in approx. 30 seconds...with some curious activity.
06-03-2011 Strange Days BITA - From $6.9 to $0.09 in two seconds before quickly recovering.
05-26-2011 Strange Days STBC - From $12.51 to $10.28 (an approx. 17% drop) in three seconds before quickly recovering.
05-24-2011 Strange Days ACOR - Approx. 11% lost in under 5 seconds before recovering.
05-19-2011 Strange Days NKSH - $24.07 to $3.50 in under one second.
05-18-2011 Strange Days BEE.PR.C - $28.8 to $2600.0 in two seconds.
05-17-2011 CQS Delays Our latest research into delays on CQS - There is overwhelming evidence that significant saturation is frequently occurring (hundreds of times each trading day).
05-16-2011 Strange Days Price Discovery?
05-13-2011 Strange Days ESGR - From $102.00 to $0.01 (a penny) within 5 seconds.
05-12-2011 Strange Days Citigroup and Dead Robots. A look at pre and post split trading and quoting activity.
05-11-2011 Strange Days RLJ - From $17.25 to $0.0001 on it's first trading day.
05-10-2011 Equity Quote Saturation
Equity Quote Saturation
05-03-2011 Strange Days AMBO - From $6.74 to $1.59 within a single second.
05-02-2011 Strange Days 50+ Stocks mispriced.
04-28-2011 Strange Days Russell 2000 and related issues.
04-25-2011 Strange Days 84 Stocks mispriced.
03-29-2011 Strange Days Unusual quote burst activity.
11-29-2010 Flash Equity Failures We have analyzed all listed equities for 2006, 2007, 2008, 2009 and 2010 for potential "mini crashes" in individual stocks. We were surprised at the number of incidents we found.
10-14-2010 Our Final Conclusion Our analysis of the Waddell & Reed e-Mini trades led us to an unexpected break-through. By process of elimination, and with the SEC report for context, we finally have a crystal clear understanding what caused the May 6, 2010 flash crash.
10-13-2010 SEC Report Response An inspection of several key items included or omitted from the SEC's Final Flash Crash Report.
10-08-2010 Analysis of the Waddell and Reed trade executions on May 6, 2010.
We have obtained the Waddell & Reed (W&R) May 6, 2010 trade executions from the executing broker in the June 2010 eMini futures contract.
09-27-2010 Nanex Flash Crash Summary Report
Our latest analysis and report of the Flash Crash. Published Sept. 27, 2010.
09-20-2010 The Mini Flash Crash
of 04-28-2010 Our latest analysis uncovers the Mini Flash Crash of 04/28/2010, just one week prior to the Flash Crash of 05/06/2010.
09-15-2010 BATS Improvement: CancelBot is Dead It appears the BATS exchange has done due diligence, ferreted out this algo and put a stop to it.
09-15-2010 Recovery of the Flash Crash - Supply and Demand
Analysis showing the recovery occurred not due to strong demand, but rather because there were few sellers left.
09-09-2010 Stub Quoting Did Not Cause The Flash Crash Analysis of when and were trades were made on stub quotes and the dollar value lost.
09-08-2010 Did Quote Stuffing Cause the Flash Crash?
Analysis of the 50 millisecond rule.
08-23-2010 Latency on Demand How delays seem to be created on the NYSE.
08-18-2010 The NBBO is Broken Further ramifications of our analysis.
08-10-2010 Cisco Systems
07/29/2010 What Happened to Cisco Systems on 07/29/2010, how to trip a circuit breaker on demand.
8-06-2010 PSA
07/22/2010 Video clip of high quote rates for PSA on 7-22-2010.
07-25-2010 Quote Rate Data Data showing overall yearly trade and quote rates since 2004. Published July 8, 2010.
07-16-2010 07-16-2010
Strange Days
Pre Market HFT Quoting Observed.
06-18-2010 Original Flash Crash Report Our original analysis and report of the Flash Crash. Published June 18, 2010.
Recent
News: 07-08-2011 Micro flash crash hit US oil futures Thursday Reuters, July 8, 2011
(public Sharenet Link)
07-07-2011 New Way High-Speed Traders Get Edge on Investors CNBC, July 7, 2011
05-16-2011 Mini flash crashes worry traders USA Today, May 16, 2011
04-02-2011 Robots Rattle Data Guru, Jim McTague reports the market behavior observed by Eric Hunsader
Barrons, April 02, 2011
03-28-2011 TEDxConcordia - Yan Ohayon - The Impact of Algorithmic Trading. (Video)
EDxConcordia, March 28, 2011
03-16-2011 Money and Speed: Inside the Black Box iPad App
VPro Backlight News, March 16, 2011
03-02-2011 Money and Speed: Inside the Black Box trailer for iPad App
VPro Backlight News, March 2, 2011
02-17-2011 Reuters Interview Reuter's Insider, Feb. 17, 2011
01-31-2011 Money and Speed - Inside the Black Box (Trailer)
VPro Backlight News, Jan. 31, 2011(full show coming soon)
10-21-2010 Flash Crash Report Points Finger at Wrong Source of Big Trade That Went Bad
AI5000, Oct. 21 2010
10-18-2010 Maybe the Flash Crash Wasn't Caused by 1 Dumb Trade
The Atlantic, Oct 18 2010
10-14-2010 The Saga Continues: Flash Crash Controversy
AI5000, Oct. 14 2010
10-11-2010 Illinois data firm points finger toward high-frequency traders in May 6 flash crash
Kansas City Star, Oct. 11, 2010
10-11-2010 High Frequency Trading: What You Missed on ‘60 Minutes’
Wall Street Journal, Oct. 11, 2010
10-11-2010 Flash Report Is Put to Test
Wall Street Journal, Oct. 11, 2010
10-08-2010 Waddell not the culprit for May U.S. stocks flash crash
Reuters, Oct. 8, 2010
10-08-2010 Casting Doubt on Single-Trade Spark in Flash Crash
New York Times, Oct. 8, 2010
10-08-2010 Refuting The SEC's Lies At The Core Of The "Flash Crash" Analysis
Zero Hedge, Oct. 8, 2010
10-01-2010 The 5 Dumbest Things on Wall Street
TheStreet, Oct. 1 2010
09-27-2010 Data Wonks Debut Dizzying Diagram of Flash Crash
Wall Street Journal, Sept. 27 2010
09-27-2010 Troubling Trades Found Ahead of Flash Crash
New York Times, Sept. 27 2010
09-27-2010 Stock "flash crash" sparked by orders, sales
Reuters, Sept. 27 2010
09-27-2010 The Most Detailed Forensic Analysis Of The Flash Crash To Date (And Likely Ever)
Zero Hedge, Sept. 27, 2010
09-03-2010 Fox News Video "Quote Stuffing" Credited to Nanex and Explained on FOX News.
09-02-2010 CNBC Video Nanex's Eric Hunsader talks to CNBC on 9-2-2010.
09-02-2010 'Quote stuffing' a focus in flash crash probe CFTC commissioner Scott O'Malia talks to Reuters about the ongoing investigation and how Nanex databases are being used to assist in the investigation. Reuters, Sept. 2, 2010
09-02-2010 SEC Probes
Canceled Trades
Wall Street Journal, Sept. 2, 2010
08-29-2010 The Flash Crash
ABC Radio National interview with Eric Hunsader and discussion of the Flash Crash. Transcript also available.
08-24-2010 NYSE confirms Nanex Findings.
Our "Flash Crash" Analysis was correct and confirmed in this article in The Atlantic and Asset International. Article courtesy of Joe Flood, Asset International Magazine, and The Atlantic. |
