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BATS Fishing: Value Added From The Latest Publicly-Traded Exchange

Tyler Durden's picture




 

Last week we learned that the BATS, the third- largest U.S. stock exchange operator, filed for an initial public offering as it seeks cash to compete amid the busiest period for industry takeovers. In other words, in the great scramble for consolidation in a market place fragmented beyond repair, BATS suddenly realized it is woefully behind, and needs cash to compete with such HY-funded LBOs as the now off-the-table Nasdaq acquisition of NYSE. Which in turn makes BATS itself a possible acquisition target. As such, once again courtesy of Nanex, we decided to take a quick look at typical value added provided by the exchange and its constituent robots. As the trading chart of TJX companies below shows, it is none other than some BATSy algo that enjoys testing the stupidity of other robots by sending out a bid about 10% from the NBBO. What is impressive is that at least one other algo really was stupid enough to fall for this bottom fishing strategy, and as the white dot indicates, hit the bid at $50.22. And that is true price discovery. Ironically, perhaps we need many more such BATS algos to push prices to real fair market value.

Naturally, this trade was promptly terminated 40 minutes later, after the trade was cancelled. But luckily, we have such bottom fishing algos running around adding exchange "value."

From Time and Sales we see the quotes from BATY fluttering (shaded):

From Time and Sales we see the single trade (shaded):

Approx 40 minutes later the trade was cancelled:

;tc|NxTime|Symbol|Listed Exg|CorrectionType|OrgSeq|OrgCond|OrgPrice|OrgSize|
12:48:16|eTJX|NYSE|Cancel;Busted;|529223|95|50.22000|100|
 

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Tue, 05/17/2011 - 09:26 | 1282576 bigwavedave
bigwavedave's picture

Tyler:

The machines do just what the humans do. They throw out bids and offers looking for your site readership's market orders. That is all. Nothing new normal in that.

Tue, 05/17/2011 - 09:28 | 1282587 FOC 1183
FOC 1183's picture

When the frequency of busted trades at prices 15 std. dev. from last price is 10x what it was 5 years ago (and the 100 yrs before that).....the math is self evident

Wed, 05/18/2011 - 06:18 | 1286361 ZeroPower
ZeroPower's picture

Proof?

Tue, 05/17/2011 - 09:56 | 1282672 NoLongerABagHolder
NoLongerABagHolder's picture

I'm all for true price discovery.

Kind of like we are seeing in Silver by margin hikes taking place as we now understand all the frothy run was not based on fundamentals, but instead a bubble of speculators thinking it was different this time.

Tue, 05/17/2011 - 09:30 | 1282590 Mercury
Mercury's picture

Consolidation would be nice.  I think we've seen enough of the benefits of "competition" in equity market structure.

Tue, 05/17/2011 - 09:29 | 1282592 firstdivision
firstdivision's picture

Is there an app for that on my Andorid phone?  Is it BATY BATS in the marketplace?

Tue, 05/17/2011 - 09:36 | 1282597 firstdivision
firstdivision's picture

*edit dup*

Tue, 05/17/2011 - 09:29 | 1282600 firstdivision
firstdivision's picture

*duplicate, guess my posting algo went BATY*

Tue, 05/17/2011 - 09:36 | 1282608 firstdivision
firstdivision's picture

{PostMultipleTimes

if postCount<10

    then copyPost

postCount+1 = postCount}

Tue, 05/17/2011 - 09:32 | 1282614 topcallingtroll
topcallingtroll's picture

Limit orders 7.50 even over the phone at Vanguard.

They will also qualify anyone for level one options trading, buying puts and selling covered calls. Good way to get experience so you can qualify later for unlimited option privileges on margin.

Mon, 07/25/2011 - 08:29 | 1490138 mediaprizm
mediaprizm's picture

Wonderful and nice post of "BATS Fishing: Value Added From The Latest Publicly-Traded Exchange".
Ketchikan Fishing Trips

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