Skip to comments.One Algorithm Made Up 4% Of All Trading Last Week, And No One Knows Where It Came From
Posted on 10/08/2012 2:26:11 PM PDT by blam
One Algorithm Made Up 4% Of All Trading Last Week, And No One Knows Where It Came From
October 8, 2012
No one knows where it came from, or what it was meant to do, but 4% of all trading in the U.S. stock market last week was executed by one algorithm, CNBC reports.
Nanex, a market data firm, told CNBC that the algorithm was placing orders once every 25 milliseconds and then canceling them. The orders went out in bursts of 200, then 400, and then 1,000 orders.
Then suddenly, around 10:30 AM on Friday, the algorithm stopped entirely.
Nanex has the animation that helped them zoom into the mysterious algorithm posted here.
So why would someone put out fake orders like this?
A trader explained to us that this is a high frequency trading firm's way of baiting buyers interested in purchasing a specific stock and forcing them to reveal their positions. Once the potential buyer has put out their bid, the HFT cancels the order and the buyer is left out in the open. Usually, its a set-up for another trading strategy the HFT is about to execute.
(Excerpt) Read more at businessinsider.com ...
It is corrupt to the core, and run by psychopaths.
How professional time travelers build a stash preparatory to their arrival.
So the Russians/al Qaeda/Iran staged a dry run?
Karl Denninger wants the exchanges to require any order placed to remain valid for two seconds. That would instantly stop this nonsense - but some powerful people would be inconvenienced.
Put a one penny tax on every trade. Just one penny. Mom ‘n Pop investors can afford to pay one cent when they cash out of their investments easily. Just one cent.
Agree 100%. This is precisely why I got out of the market forever in very early 2008. Haven’t looked back.
There’s lots of other ways to make money.
This is excellent strategy.
If I was offered a system in which I was allowed to place orders, have the system tell me how many and at what price my orders would be filled by others, and then cancel them milliseconds later, I would do exactly what these programmers did.
It’s like playing poker with the ability to look at the other guys’ hands. Who wouldn’t do that?
What has to happen is the trading systems have to disallow the withdrawal of orders. Otherwise, you just get this: gaming. If you let poker players to place mirrors around the room to look at the other guys’ hands, don’t be all surprised when they do exactly that!
Well I have to disagree with this article. If the orders were put out and then cancelled before executed then there was no trading. Until they are executed they are just orders. How can non executed trades be 4% of the market? Doesn’t make sense.
Ask the author, Linette Lopez that question.
I have no answers.
I'm 100% for this. I'd also institute a per share penalty fee for orders placed and then withdrawn. Doesn't need to be much but it would eliminate fake orders placed to shape the market.
China’s our financier; I don’t think they want us broke. We owe them too much
Somebody knows who placed them
Let's here them.
It stands to reason that the trading system must account for all trade activity, whether executed or cancelled. Whoever hired the math wizards that put this together is trying to influence the market and/or profit from another computer's reaction to their feint.
If you figure out what all this means, let me know : )
I may be mistaken, but I believe what was involved in the 1987 crash was simple automated computer trading...the decline levels exceeded the parameters of the programs, and since they had no floors or stops included they just kept selling and fed into the downward spiral.
High-frequency trading that effectively games the exchanges is a comparatively recent phenomenon, within the last few years.
I understand. I was referring to autonomous computers for trading in general. I remember a year or two ago Goldman went after some Russian national who had designed and patented one of their systems. It incorporated multiple telephone switches. The guy ran off with the schematics and copies of the software. They caught him and he was indicted. But the story gave a glimpse of how these systems could issue then cancel orders in a millisecond.
“Agree 100%. This is precisely why I got out of the market forever in very early 2008. Havent looked back.”
Let’s talk after a post-Romney victory.... You might miss the biggest jump since WWII. And I mean that!
Seems to me that event was what brought HFT to light in the first place.