This page has been archived and commenting is disabled.

70% Of All Stock Market Trades Are Held for An Average of 11 SECONDS

George Washington's picture




 

Washington’s Blog

 

The Fourteenth Banker writes today:

 

In the stock market, program trading dominates volume. I heard recently that 70% of trade positions are held for an average of 11 seconds.

 

He's correct.

As the New York Times dealbook noted in May:

 

These are short-term bets. Very short. The founder of Tradebot, in Kansas City, Mo., told students in 2008 that his firm typically held stocks for 11 seconds. Tradebot, one of the biggest high-frequency traders around, had not had a losing day in four years, he said

 

Similarly, FT's Martin Wheatley pointed out last month:

 

I know of one HFT firm operated out of the west coast of the US that boasts its average holding period for US equities is 11 seconds

 

And market analyst Peter Cohan writes at AOL's Daily Finance:

 

70% of trading volume on the major exchanges is conducted by high-frequency traders who hold a stock for an average of 11 seconds.

 

The fact that the vast majority of stock market trades are held for 11 seconds shows that the stock market is not a real market with real traders governed by the law of supply and demand, and with no real price discovery.

 

But as Tyler Durden points out, alot can happen in 11 seconds when the players are high-powered computers:

 

07-29-10
BATS "Flag Repeater". 15,000 quotes in 11 seconds, dropping the ASK price 1 penny each quote from $9.36 to $8.58 and back up again.

 

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Sat, 10/23/2010 - 01:11 | 671462 Godisanhftbot
Godisanhftbot's picture

  I figured out long ago , long before hft became a fetish, that the markets had become one giant obscene arbitrage for the  select few.

  11 seconds because frontrunning &  rebate trading requires that you limit your time exposure to current supply/demand.  You can't hold too long or you hold the bag too often. You make the other guy hold all bags.  You skim.

 How else do you think they always win? 

 

 

Fri, 10/22/2010 - 23:53 | 671325 web bot
web bot's picture

I guess CAPM and all of those other theories need to be revised.

In fact, all we need to do is set up our computer monitors in front of our TV sets to watch CNBC... we don't need to sit there and listen any longer. Maybe we can get an electronic version of Mandy... or have an occasional power surge to simulate Haynes.

Oh well, as long as the masses believe in the standard mythology and the US form of capitalism (legalized rape and maniputation of the everyday person), it will continue... for now.

The most recent Web Bot data analysis (Asymmetrical Language Trending Analysis) suggests that you keep your eyes open between Nov 8th through to Nov 11th. For the record, I'm not associated with them.

Fri, 10/22/2010 - 23:02 | 671206 the grateful un...
the grateful unemployed's picture

what is that extinct species, that once roamed the internet, the day trader? yeah that's it, 11 seconds is about right for a day trader. picking up dimes in front of a bulldozer, because that one time the market gapped lower , it was on YOUR eleven seconds

Fri, 10/22/2010 - 22:54 | 671186 prophet
prophet's picture

Shutting these guys down is probably trivial.  Could be lots of collateral damage but down they would be. 

Try trading end of day pricing only and having to place your order before you know the price and without condition.  Its called a mutual fund.  Or perhaps just buying a set allocation at the end of the day you happen to get a paycheck or shortly thereafter depending on when the transaction gets transmitted.  Billions are getting milked there every year and no one has been caught yet.

-profd

Fri, 10/22/2010 - 22:38 | 671128 Downtoolong
Downtoolong's picture

At some point you have to question the meaning and purpose of a trading position that doesn’t last long enough for a human being to comprehend and react to it. Piracy, extortion, and manipulation are the only explanations that come to my mind.  Service to the investment community…. my ass.

 

Fri, 10/22/2010 - 22:27 | 671103 No More Bubbles
No More Bubbles's picture

Yeah, all in the name of "Price Discovery"

ROFLMAO!

Fri, 10/22/2010 - 22:27 | 671101 non-anon
non-anon's picture

I was talking to a bro who trades stocks and he has no clue.

Fri, 10/22/2010 - 21:48 | 670998 Cojones
Cojones's picture

I call it a day in FX the minute NY opens. I started doing that 4 months ago and I'm more profitable than ever.

Fri, 10/22/2010 - 22:20 | 671072 ToNYC
ToNYC's picture

 

You could call it a real day when you turned away from 120v and smartyphones and experienced real life on your own power.

Fri, 10/22/2010 - 21:36 | 670980 SheHunter
SheHunter's picture

The HFT patterns are most obvious on these no-volumn days.  I'll take a normally low volumn stock like BUCY and put in a limit order at the ask price just to watch the HFT's go bonko to add .001 to the ASK.  Hardly worth trading these days...altho FCX worked like a textbook today dropping to the exact penny of gap fill and then crawling back up the rest of the day.  I trade about 1/10 of what I did 3 years ago.  Sux.

Fri, 10/22/2010 - 20:39 | 670902 brewcity12802
brewcity12802's picture

Was the G20 the reason for such low volume? Stocks and indices with volumes 20% - 50% below average, you had to go back to december 24th 2009 to find a lower volume day for the Dow Jones.

 

 

 

Fri, 10/22/2010 - 23:15 | 671233 espirit
espirit's picture

Nah, most of the carbons kept their money on the table while the HFT's duked it out.  The shorts were ready on the way down is why they couldn't go there, that's why the market never went anywhere.

I hope they f*ing starve to death.

Fri, 10/22/2010 - 20:14 | 670865 DonutBoy
DonutBoy's picture

They were openly discussing the march out of equities on Bloomberg today.  They noted T-Rowe Price's funds under management had gone up $1.1B, and their bond fund deposits had gone up to $1.8B, with their equity funds coming down roughly $700M.  And there is no volume today.  Let's change subjects...

Then it came up on CNBC (I was too lazy to work this afternoon) - where one of the talking heads proposed people have left the market because they're not sure about their job, so they move to the safety of bonds.  Ha!  Right!  I am convinced that 5000 quotes/second ensures we have instant price discovery in an efficient market.  I believe 30% stock price moves in 7 seconds represents the changing economic value of the underlying business.  I have 100's of put contracts and hoard gold and ammo because of the risky job market. 

 

Fri, 10/22/2010 - 20:06 | 670848 f16hoser
f16hoser's picture

SEC, shame on you!!!!

Fri, 10/22/2010 - 20:05 | 670847 f16hoser
f16hoser's picture

Fuck me running! No wonder smart people are holding their money on the side lines waiting for the HFT'ers to devour each other before committing back-in

 

Hoser

Fri, 10/22/2010 - 19:02 | 670728 rosiescenario
rosiescenario's picture

"

These are short-term bets. Very short. The founder of Tradebot, in Kansas City, Mo., told students in 2008 that his firm typically held stocks for 11 seconds. Tradebot, one of the biggest high-frequency traders around, had not had a losing day in four years, he said"

...which makes me think of a black swan...or LTC's can't lose hedged trading strategy...all I know for certain is that when their losing day arrives due to a bolt from the blue (or stuxnet gone awry) that losing day is going to zero out all those prior profitable days, with some interest added on...

 

 

Fri, 10/22/2010 - 22:17 | 671067 ToNYC
ToNYC's picture

 

Zyklon B by Merck didn't have a losing day either, or Bernie Madoff for that matter.

Fri, 10/22/2010 - 19:19 | 670756 TheMonetaryRed
TheMonetaryRed's picture

 

That many winning trades in a row is prima facie evidence of a martingale of some kind - or outright collusion, but an inherent martingale is far more likely. 

The system will get increasingly profitable, popular and unstable and then will crash. 

 

Fri, 10/22/2010 - 19:00 | 670725 Garden Gnome
Garden Gnome's picture

HEADS up nasty rumours flying about in the DX this evening -trades to be cancelled etc etc. Another flash crash, or somebody positioning ahead of G-20. Know which i think is more likely!

Fri, 10/22/2010 - 22:49 | 671169 Dr o love
Dr o love's picture

It was after market.  DX lost around 3.2% in 1 minute on 332 contracts.  Made most of it back afterwards.  A flash crash of sorts.

Fri, 10/22/2010 - 18:33 | 670680 TheMonetaryRed
TheMonetaryRed's picture

FUNNY!

I love this stuff. 

Win or lose in 11 seconds. 

Ultra-Capitalism!!!!

Fri, 10/22/2010 - 18:05 | 670624 the grateful un...
the grateful unemployed's picture

Prechter says famously, that it only takes one bid and one ask to move a market, so if we are getting a thousands bids per second, we must be okay? 

Fri, 10/22/2010 - 18:31 | 670673 ZeroPower
ZeroPower's picture

Except Prechter knows exactly ZERO about market micro-structure. 

Fri, 10/22/2010 - 18:05 | 670623 onlooker
onlooker's picture

So a long term investment is an hour?

Fri, 10/22/2010 - 17:22 | 670536 downrodeo
downrodeo's picture

it's so pretty to look at...it's like art that you'd get if Jackson Pollock was reanimated into a cyborg or something 

Fri, 10/22/2010 - 17:39 | 670574 Herd Redirectio...
Herd Redirection Committee's picture

LOL LOL LOL

Fri, 10/22/2010 - 17:10 | 670505 putbuyer
putbuyer's picture

I see this shit all the time. My bid goes in at the current bid, then the bid pops up trying to get me to up the bid. I want the contracts so I bid up to the fuckers and it gets executed or I'm tricked again. I know the algos are playing me, but I want the contracts. I am at there mercy.

Fri, 10/22/2010 - 22:59 | 671202 the grateful un...
the grateful unemployed's picture

i used to be very good at watching the bids on the various exchanges, finding the one that hadn't moved yet, and positioning, then getting to the head of the line. none of it works because the options sellers crucify the highest OI the week of expiration. the problem was never putting on the trade at the best price, it was getting out of the casino with their money.

Fri, 10/22/2010 - 23:43 | 671310 ATG
ATG's picture

the problem was never putting on the trade at the best price, it was getting out of the casino with their money.

When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done, JM Keynes, General Theory of Employment, Interest and Money Ch 12, p142 in Google Book edition, Atlantic Publishers

Fri, 10/22/2010 - 22:15 | 671061 ToNYC
ToNYC's picture

 

Didn't your momma tell you about 3-card monte? She did if she didn't raise no fools.

Fri, 10/22/2010 - 17:22 | 670533 DaveyJones
DaveyJones's picture

cattle really

Fri, 10/22/2010 - 17:07 | 670499 DaveyJones
DaveyJones's picture

How DOES grandpa click his mouse that fast?

Fri, 10/22/2010 - 16:53 | 670480 wtlf555
wtlf555's picture

I'm curious about the mathmatics of HFT. If the HFT universe is profitable and if HFT does not affect the longterm price of an equity then by law retail/institutional traders are entering and exiting at worse execution right? I hear the claim that it provides liquidity but in a closed sysyem its a net loss for retail/institutional right? And it may only be a penny in and out on execution but its in the execution that we're paying for the profits of HFTs right?

Fri, 10/22/2010 - 22:13 | 671057 ToNYC
ToNYC's picture

 

In one word, wrong.

Fri, 10/22/2010 - 17:17 | 670527 Geronimo66
Geronimo66's picture

Seek for math on eg Copula, Paul Wilmott and you will be on your way.

Some inspiring music while you are seeking:

http://www.youtube.com/watch?v=px-WyBk7Dww

Fri, 10/22/2010 - 16:59 | 670488 Common_Cents22
Common_Cents22's picture

look up "flash crash" and you'll see the ugly afterMATH.

Fri, 10/22/2010 - 16:40 | 670467 Common_Cents22
Common_Cents22's picture

the next wall street sequel will be named "Gone in 11 seconds".   No humans in the movie, just R2D2, CP30, HAL 9000, and WOPR from war games duking it out, outdoing each other, billions, trillions, quadrillions of trades a second.

The conclusion after destroying the markets and economy?  WINNER:  None. Mutually Assured Destruction (MAD)  doesn't do anyone any good and should be avoided.

hmmm, a conspiracy theorist might question Jim Cramer's MAD Money show title........

Fri, 10/22/2010 - 22:13 | 671053 ToNYC
ToNYC's picture

 

Jim Cramer aspires to be Crazy Eddie.

Fri, 10/22/2010 - 18:54 | 670709 rosiescenario
rosiescenario's picture

...very good...Gone in 11 Seconds...perhaps a re-directed stuxnet virus would help solve our problem? With some minor mods, the one directed at Iran's nuke facility could be re-used...instead of reversing commands such as "open that valve" it could just reverse all the buy / sell commands?

Fri, 10/22/2010 - 17:12 | 670507 stewie
stewie's picture

WOPR:  Good morning professor Bernanke.  Shall we play a game? 

Ben:  Yeah, let's play "Global Currency War".

WOPR:  Wouldn't you prefer a nice game of chess?

Ben laughs:  Later, let's play "Global Currency War".

WOPR:  Fine.

Ben:  What is the primary goal?

WOPR:  You should know professor, you programmed me.

Ben:  Oh, come on.  What is the primary goal?

WOPR:  To fuck the little guy!

After QE1 and QE2...

Ben:  Is this a game .. or is it real?

WOPR:  What's the difference?

Ben:  Niiiiiiiice...  

WOPR:  A strange game.  The only winning move is not to play.

Tyler:  Told ya...

Stewie: Weeping....

Fri, 10/22/2010 - 16:27 | 670447 Cruel Aid
Cruel Aid's picture

To do a 7 second trade, you have your whole package plus all you can borrow on the line, in order to get your reward. I don't have the guts for that, in these times.

Fri, 10/22/2010 - 15:41 | 670382 williambanzai7
williambanzai7's picture

7 seconds is the average time it takes an SEC Branch chief to switch porn channels

Fri, 10/22/2010 - 19:45 | 670816 Everyman
Everyman's picture

How come they junked you?  Must be some SEC porn monkeys running out loose.

Sat, 10/23/2010 - 01:10 | 671458 williambanzai7
williambanzai7's picture

That's Charlie Munger and Warren following me around. Let them play ;-)

Fri, 10/22/2010 - 19:27 | 670770 Aristarchan
Aristarchan's picture

About the same amount of time a Fed Governor stays in the saddle before his personal QE interrupts.

Fri, 10/22/2010 - 16:24 | 670442 TwelfthVulture
TwelfthVulture's picture

From tranny porn to midget porn? 

Fri, 10/22/2010 - 16:22 | 670440 ebworthen
ebworthen's picture

77 seconds for insemination attempts upon the carpet fibers.

Fri, 10/22/2010 - 15:50 | 670398 George Washington
George Washington's picture

Touché ...

Fri, 10/22/2010 - 15:56 | 670404 williambanzai7
williambanzai7's picture

Unfortunately we are going to have to wait for the whole sewer to blow.

Do NOT follow this link or you will be banned from the site!