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Demonstrating An HFT Algo Gone Apeshit
We have long claimed that the HFT ploy to stuff quotes in an attempt to game other algorithms in pushing the bid or ask side higher or lower would eventually end in tears either for individual stocks, or for the general market, as was the case on May 6. Well, today we just experienced another mini flash crash, after some algo went apeshit and decided to hit every bid on the way down, all the way to 0.0001 (gotta love that sub penny quoting just above zero). Below we show how this algorithm pushed the stock price of Core Molding from its normal price of $4.12 all the way down to $0.0001 in the span of one second, after an HFT program went ballistic, and would have kept on hitting the subpenny $0.0001 bid in perpetuity. It must have been swell to be a CMT holder: one second your stock is worth $4.12, the next, it is worth $0.0001 (and no, not $0.0000, how else will the computers game the NBBO in subpenny increments).
The insanity of computers, captured below in perpetuity for your viewing pleasure.
End result: in tried and true reactive fashion, the Nasdaq cancelled all trades between 14:19 and 14:20. And when this happens again to the entire market once again, in a repeat of the flash crash, the regulators will be hopeless but to cancel all trades yet again. And happen it will, because ABSOLUTELY Nothing has changed since market close on May 5. But at least we have all the fake liquidity we could ever ask for and then some... Even if 99.9% of it is concentrated in Apple, Citi and Amazon.
Looking forward to week 17 of Mutual Fund Outflows next week.
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flash crash bitches!!
http://www.youtube.com/watch?v=ppEJ8r7bQ2o
lol. "THIS IS WHAT HAPPENS TO THE BULLS".
shameless self-parody, or tylers spiritual cousin, you decide!
This is the BEST May 6th video I've ever seen. Check it out:
Market Crash – video with live S&P pits audiohttp://www.youtube.com/watch?v=WmpNTtQu8E4
The market has become a joke.
whoever did that in the last 10 minutes today flattened the stick save.
Are we not doing the dow 10,000 hats anymore?
No hats until the s&p is below 1040 as well... Then we can don the hats in celebration of skynet failure.
Warming up my S&P500 <1000 hat now.
Thinking about ordering a new S&P500 <750 hat.
I actually wrote it on my viking helmet, literally, part of an old halloween costume, Ragnarok. Get on theme.
Yahoo Finance has the daily range $0.00 - $4.31.
I'd love to buy a stock for free.
None of this is a surprise. It *is* funny, though. ;-)
HFTs provide volume, NOT liquidity. Further, HFTs do not "help" price discovery -- they inhibit it by increasing the amplitude of "noise" in the system (if something happens to be priced correctly, HFTs will quickly kick it *away* from that "correct" price).
HFTs going "Apeshit" is a very apt metaphor. From a mathematical (or engineering) standpoint, that's exactly what happened.
He looks like a real cuddler. Lol!
http://www.youtube.com/watch?v=RJYxttwgBs8
LOL!
We also know that even a chimpanzee can rip your face off.
http://news.spreadit.org/pics/Charla-Nash-After-Chimp-Attack-Photo-.jpg
The Congressionally supervised financial rape of US citizens has been going on for years. Why stop now?
...now that is funny...."Trading Places"
...now that is funny...."Trading Places"
What is the commission to buy a stock when it trades at zero?
Quote Media has it at a day low of 0.0001 with 5001 daily share volumn. I wonder how many shares traded at .0001? Quite a bargin!
I don't think the SEC understands what its job is.
On the contrary, I think they do.
It's to avoid embarrassing themselves too much as they follow national security orders and ignore the last gasp machinations of the Ponzi as it takes everyone and everything down with the ship.
http://www.businessweek.com/bwdaily/dnflash/may2006/nf20060523_2210.htm?campaign_id=rss_daily
Of course, I was just being facetious.
I know you were.
I just jumped at the chance to publish the link again showing one of the small published threads of the national security state orders that are supporting this insanity. Imagine what's really going on if "they" admit to allowing companies to cook their books.
http://www.businessweek.com/bwdaily/dnflash/may2006/nf20060523_2210.htm?campaign_id=rss_daily
BTW, too bad about that sub 10K close. <sarcasm>
I'm sure these days (post Bear Sterns) a lot more things qualify as a "national security" matter.
Agreed.
At this late stage in the self immolation process, nearly everything is a "national security" matter. Including all the subversives reading and commenting on Zero Hedge. Sadly I won't leave a smiley after that sentence because it ain't funny ha ha, just funny sad.
You'll love this:
Obama golfed with UBS President todayhttp://www.americablog.com/2009/08/obama-golfed-with-ubs-president-today...
IRS Says It May Withdraw UBS Case After Handover of Swiss Data
http://noir.bloomberg.com/apps/news?pid=20601087&sid=a5n8EazWYNlE&pos=7
http://www.panamalaw.org/obama_playing_golf_with_UBS_america_president_r...
A clear case of problem (UBS has problems) reaction (golfs with the President) and solution (problems disappear).
That's the establishment version of Personal Finance...
I bet these guys don't realize they're killing the universe!
Talk about power trips...
Quantum Politics: Crazy Speculations on the Physics of Decision
http://culturalengineer.blogspot.com/2010/08/quantum-politics-crazy-spec...
Cultural Engineer--given your name, I'm shocked you haven't considered the possibilty that Obama and his dark minions do in fact realize what they're doing, and have their foot firmly on the gas pedal.
I'm getting that sinking feeling that I'm about to find out first-hand what it was like to be Russian middle-class in 1917, Weimar Germany middle-class in 1922, Italian middle-class in 1925, Zimbabwean middle-class farmer in 1998, Argentinian middle-class in 1948/1990/2001, or that nice white middle-class guy who went to prison for a DUI in the HBO show "Oz."
I'm long on gold, food, and lube.
that nice white middle-class guy who went to prison for a DUI in the HBO show "Oz."
That was "Beecher". My favourite part was when some con tried to make Beecher blow him, and he bit the end of his cock off. An object lesson for us?
Lends a whole new meaning to "handicap".
At least the sun was shining today, and O got out of the cottage with M and the two girls and the one Parchesi game.
Everyone is happy. And the security on the bike path for their photo op was like a battalion. I thoght everyone loves them all.
- Ned
Bingo...the SEC is doing what it's always been doing. NADA!
(obligatory)
http://www.youtube.com/watch?v=UMRo5XCKddQ
They should stop canceling those trade that would teach them a leason, bring them to court if u have to and say I bought this stock at .00001 and it's MINE!
+.00001
Moral of the story is to go put a limit order in at $0.00001 for billions of shares of all the Dow Jones industrials and wait. Then ask yourself this question, what is more likely, that these orders will execute or that the SEC will fix the market structure?
What a great idea, R. but I think I'll only put in a GTC for 10million shares @ .00001 so as not to have to file a 13D when my order fills.
The algos will get it before you @ .0002
.000011
+1 (billion of course).
In all seriousness, on any position I take, I put out a good till canceled order why the hell deep in the money just in case of an HFT attack.
...er... I'm kinda new to this neighborhood. How come I can only trade at like 0.01 increments. Where did those other zeros come from?
- Ned
Do it right and you could own the whole company. Now that is an anti-hostile bid.
Ragnarok that is an interesting idea:
1. Open a small auxilliary account with a broker you don't usually utilize;
2. Put in .01 GTC buy orders on a few big fish of your choice.
3. Wait.
4. If you get a fill, sell it back when the price normalizes (a few seconds) and cash out before the exchange or the broker can reverse the trade.
5. Immediately empty the account - wire the money to yourself.
6. Let them try to come after you. You won't have any other accounts with xyz online broker so they can't reach in when they attempt to reverse the trade.
Exactly this.
How about the poor slobs who had market sell orders active? Wow. If that fired, there had to be some retail player on the other end shitting a brick.
Nobody should use a market sell (or a stop) on an issue that trades 6000 shares per day.
Exactly - but there is always one nut in every bunch. The look on someone's face when seeing an executed order here would be priceless.
No joke, where are the lawsuits? If some a-hole offers his asset for X price and you buy at X price, there is no valid defence in the claim that said a-hole had given over his trading to a room full of monkeys.
Somebody forgot to put another quarter into the coin slot of the HFT computer.
LOL....and HFT algo fell asleep....classic!
efficiency at its best
It is not the computers that are insane. They merely do what they are instructed to do. I don't believe that Skynet is self aware yet.
Someone at the PPT is getting fired tonight.
Uh-oh.
+1
For your from-the-future voyeurs, the market just closed below 10K in a heroic stick-save-MISS.
Yet another failure of regulation. Yet more demands for *more* regulation. Rinse. Repeat.
In an actual free market, a competitor to the major exchanges would emerge who managed to hire programmers who understand the nature of queue depth, latency, realtime streaming rates, etc., and whose platform would be robust to this.
Alas, today, NYSE and the other big boys are protected by the government as a cartel. So unlike the Internet where everyone was pressured to keep up or get out, it will be the young turks who will be forced out.
Eventually someone will wake up and realize that this isn't happening despite the best regulations; it is happening because of regulations.
I understand what you're saying Tyler and love your prose. But of course we learned decades ago that the computer is blameless, it's the programing and the programmer(s) that's causing the problems. Of course, if one were to let the mind wander into the somewhat barren landscape of "what if" land, what a great way to create a panic if you were trying to manage social change.
Never let a good crisis go to waste, remember?
CD nailed it--most if not all of this bullshit is on purpose. Gotta break some eggs to make a Socialist omelette. Wonder when Obama grows one of those obligatory moustaches (Lenin/Hitler/Mussolini/Evil Version of Spock)....
CD, and of course the cause of the crisis can be anything (we do some software for space-shuttle-rigorous applications, sometimes testing is for years). So, if the algo has a whoopsie moment, why, it might just trigger a crisis.
Then: Let The Games Begin. ('cuz this is pre-season).
- Ned
Such bullshit. Cancelled trades, what a crock of shit.
Zero accountability or responsibility - no just for politicians, but now for HFT's too!
Average volume on this stock is only 5,000 shares though. Wouldn't take long to hit that with any sort of 'high frequency' trading...?
The SEC is just a stepping stone to a "real paying " job....
The government needs to open the record of those that used to work in the SEC....thus going to "greener" pastures....all to "game" what is left of the market....
S ecure
E mployee
C ompensation
..............................
ONE SECOND MINIMUM
HFT SOLVED
THIS is "too complicated" for the likes of the "captured" SEC....
Precisely!
Precisely what I meant above, that is...
Instead of an actual market, the bureaucrat forms a notion of how things "ought" to be. Using the magic of a gun, he binds the market into a rigid inflexible state based on his notion. And it petrifies.
So one second, eh? And it would be illegal to do 0.999 seconds? So the difference between moral and immoral, evil and good, crime punishable by jail and profitable legal trade is 0.00001 second?
Where do you get 1 second? Is it (with all due respect) because you cannot conceive of any interval smaller?? Is it based on your expertise with high-speed computers like your old Commodore 64??
Is it based on your thesis that markets don't crash if trading i..s.. k...e...p...t ... s ....... l .............. o ..................w?
Sorry if I come across like I am attacking you, but you are proposing that the government brandish its guns against people based on nothing more than a wild hair.
And this idea, if set in stone by regulators, would add one additional distortion to what's left of our markets... and when the next failure occurs, everyone will sagely nod "yeah, people are greedy and free markets failed yet again" and someone will have another wild haired idea and THAT will be set in stone...
But would one second solve the problem, like he claims it would?
RP-whose one second? They'll go to 10k machines, each one on a 1 Hz cycle, why that is 10 kHz frequency times how many organizations? They (you know, them) will buy the hardware, clone the S/W, and have at it.
But the "Lucy Bids", those need to be traced and then maybe we don't want to know. Clancy had been a broker of some type, Jack Ryan solved the problem.
I do see the thought of early summer of taxing each transaction, maybe tax each stuffed bid and tax the canc on same. Wait, I'd bet, in the Chicago way, that that tax has already been levied and is being paid on a routine basis.
- Ned
Exactly.....
The marketplace itself needs to be changed....
Defragmentation
Short sale rules (limited by shares outstanding...via electronic tag)
Electronic surveillance (non SEC...neutral)
Public ¨RETAIL¨focus
Worldwide...BATS model
Information...wiki format
Size limitations
...................................
Orders ....my opinion would most closely resemble that of Peterfly´s (CSPAN) of IB....
There would be a time limitation....ie 1 sec...1/2 sec.......
.........................
Defragmentation means no dark pools or any sort of outside matching...
In the language and currency of choice...
.......................
What would make for a better marketplace....2 Billion RETAIL accounts able to go long or short with up to 10:1 margin....no account minimum....RETAIL pressing their own computer buttons....for let´s say no more than 20 cents per 100 units...or a handful of PIMCOs ....?
No uptick rule...first come first served....no locates....limited by outstanding shares....
All public securities ...any type...MUST trade on the exchange....
......................
Which makes for a better marketplace ....a handful of very large players....or 2 Billion RETAIL independents ...Chinese, American...anybody who wants in and has a computer....?????
Also...need to veer away from the ¨captured SEC¨¨ towards a more neutral domicile...ie Switzerland homebase...BATS model...
......................
Banks should be servicing what RETAIL wants to do....
....................
The large money manager types are not what the RETAIL MARKET players need....The market should be serving RETAIL in this INTERNET AGE....
....................
Banks only being allowed to service what ¨RETAIL¨ wants to do on their own computers is the future....and the best way to distribute wealth....
And this is just the beginning of the list.... that is if one wants a ¨REAL¨ securities exchange....
Presenting the Einstein Algorithm:
Three things are infinite: the universe, human stupidity and high frequency crashes
MB- Georg Cantor ranks human stupidity at a higher order than the others ;-O
- Ned
'
do you want to hear something (funny) ?!
on 3 different trading platforms I have as many eod quotes for quite a few big caps
Computer's Bitchez
Jay from Clerks asks.. What's up Bitchez, What's up sluts?
I got offered a job to develop HFT software .. I politely told them eat fucking shit and die a horrible death.
Whoa with the excitable language -- next time, just tell them to eat an egg and die a horrible death.
(Yes, I'm insinuating that the FDA is #2 in the Federal Government (right behind the SEC) when it comes to hours of porn watched during workdays.)
This whole egg thing is crap. Every carton of eggs has a salmonella warning on it. Every one says to cook eggs until yolks are firm. This is akin to a recall of chicken breasts because someone undercooked a piece and got sick.
What I find interesting is that Land'O'Lakes just settled in an egg-price fixing suit in June:
http://www.msnbc.msn.com/id/37577631/
And since the recall happened, wholesale egg prices are up 40%:
http://www.suntimes.com/lifestyles/food/2639696,CST-NWS-eggprices26.article
This reminds me of the US government ordering farmers to destroy their crops and livestock during the Depression in order to keep food prices stable. Now, they don't have to make those orders. They can just have the FDA issue a mandatory recall.
Well the problem with eggs is people think the shell is a barrier to things. It's not. But if you hard boil them then soak them in cold water. You know the trick to make them easier to peel. Well that attaches the real barrier the skin layer under the shell.
But yes. It's very staged and story tellish.
Older eggs are easier to peel no matter what method is used to boil/cool them.
It's the New Yorker in me.. I hate cheaters, liars, thieves..you get the picture. ;)
What also sucks about this is that it can trigger your stop-limit orders, making you sell below market price. At least one broker of mine triggers stops based on the current bid, making stop orders dangerous to use, especially on low volume issues.
We need to bring back the market makers on the floor of the NYSE with their little books of orders, quoting in 1/16s, and 1/8s, and 1/4s. Those were the days.
NYSE went half electronic because they were losing market share, everybody wanted sub second trades... I wonder how long it'll take to revert the bulk of trades back to specialists.
Bringing jobs back to the US of A-esp. in NYC where they have driven out the top 1/2 of taxpayers, leaving boomberg and patterson out with their tin cups.
- Ned
Must be bad if they want to bring back that POS Specialist for GE that we'd need to message 16 times to get filled on a better price in under 3 minutes.
Thanks, ZH, we'd never know about these individual flash crashes if it weren't for this site. I've never seen anyone else mention it - or very rarely. It's like they want everyone to forget that major event in May. Don't report the little ones and we'll all forget, right? Not with you guys on the job! Thanks!
We ought to be recording these events somewhere for posterity. (Even minor ones like CSCO getting halted a few weeks ago for a moment because $26.00 printed.) Using a wiki or something. In the aggregate they'd present a compelling picture.
And ZH needs a tag for this type of story.
Amazing article.
Ben B will have to bend over tommrow and shoot pallets of fiats out his back side into the crowd to really 'wow" them.
He really ought to resign effective immediately and take Larry Summers with him. Collectively they have no street cred but for losers.
Rosenberg on Fox
Shit, let's make some money -
Stick a GTC penny bid on every name in the Russell 2000.
Only $2000 in capital needed to cover all squares on the table with one round lot! $20,000 buys you a 1000 shares per...
...Stock subsequently bounces up a buck or two (and the SEC doesn't implement a 'do over')
...you do the math....
The way I see it is that they (The Street) attempts to kill any stock that trades below $5. They consider them all penny stocks. Because, most of the penny stocks are owned by retail there is no one to defend them from the constant Raping by Wall Street.
I do find it interesting that they chose a penny stock to scare the S*hit out of the Retail holders. But, in penny stock what do you expect it is only Retail Investors holding them.
Love those code chimps:
I don't like chimpanzees any more :(
So machines are allowed to run apeshit every day and screw people out of their money every day...it's only when they drive a stock down to .0001 that it becomes unacceptable and the trades are canceled. So if it had only knocked CMT down .50...okay? What about 1.00...okay? Would these have gone unnoticed and the trades allowed?
Can the SEC jump on defining more clearly what levels of HFT apeshit is acceptable and unacceptable?
When this happens to me, watch for more planes in the sky, SEC.
"Even if 99.9% of it is concentrated in Apple, Citi and Amazon."
Exactly.
Don't forget BAC & GE...LOL.
Where's them real fart smellers that were here the other night to splain it all...oops dyslexia ;-)
What? Isn't that the essence of the American economy, electronics, banking, and shopping?
Well, maybe Wall Street & DC think so. The rest of us do not.
"Never underestimate the degenerative power of equities within a manipulative unwind."
HFT terrorists
can someone give me a really quick explanation of the legal authority (and criteria/threshold) used to void these trades? i mean, am i legally allowed to sell AAPL for $100 or not?
if i fuck up and buy Rangers tickets on Stubhub for $100 more than the seat next to me do i get that voided?
Tom Clancy wrote a book that dealt with the resolution of a market crash by a corrpt algo in: Debt of Honor
http://en.wikipedia.org/wiki/Debt_of_Honor
Hey guys. Guess what. The government. Knowing it's going to get raped in Elections is trying to push cap and trade in our ass before the middle of september. Hoping they can keep enough goons inside the goon station to keep it from getting ripped out post election.
IB now alerts you when you place an order.
"market orders or stop orders 'may' not be executed if the price is unfair and not competitive"
unless of course you are timber hill.
I'm a .02 cent bid for size, what do you want to do?
Bring back capital punishment for financial crimes!
They are already being whipped beaten and made to write bad checks.
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