Guest Post: Deconstructing Algos, Part 2: Leveraging Chaos Into High-Frequency Arbitrage Opportunities

Tyler Durden's picture

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holdbuysell's picture

Control systems theory at its finest.

I never would have thought it would make its way to finance.

baby_BLYTHE's picture

and thanks to the manipulation via HFT, we are 'gifted' with a recession at least twice a decade.

Glass Steagall!

Shame Clinton wasn't asked about his roll in creating the ponzi when he was interviewed on CNBS yesterday. Of course, Slick Willie always weasels his himself away from any blame.

Yen Cross's picture

 Glass Stegall

Should  NEVER have been, Repealed. It created collusion with banks and insurance companies. ~   period.


Urban Roman's picture

Transaction tax. Every bid, whether canceled or not.


It would either pay off the national debt, or put a stop to this nonsense.

narapoiddyslexia's picture

Yes. This seems like the answer, does it not? But the regulators have been captured, so the solution has to start one step back - uncapture the regulators and then they would support a transaction tax. But wait, not even that is the answer, you have to go deeper - unprostitutionalize [is that a word?] Congress. No, no, wait. . . I think you may have to go deeper yet - undumb the populace so they don't vote for the prostitutes in Congress so they will in turn free the regulators. There, that's all you have to do.

Urban Roman's picture

Yeah, I know. It's a theoretical answer, like stopping burning fossil fuel (for several good reasons).

Not gonna happen.

Had my hopes up for prosecutions there, for a while. But it's obvious that they won't happen either, not until long after any possible benefit is gone. Same for Glass Steagall -- they'll re-enact it several years after the crash.

narapoiddyslexia's picture

There you have it. I didn't go far enough. First we have a total crash. That's what undumbs the populace. Then we take the whores out of Congress and subsequently free the regulators. Only then will we get reasonable regs. Until then we're fucked. Which is why today I leave the financial markets entirely. Goodby Ponzi. (was that a movie?)

JW n FL's picture

look all i want is the silicon plug in that the name brands have! code can be manipulated! I want silicon!

JW n FL's picture

why did i not get a response from our network guy here?


if you want to front run and pass it around to your friends..


what better way?


energy savings..

silicon is quicker than code..

and no cheating.

modifiable to only a certain extent.. or so it can be sold! LULZ!!!

slewie the pi-rat's picture

scalping for fractions of a penny, thousand of times a second.

this reminds slewie of a sales tax increase. 

luddite, BiCheZ!

Raymond K Hassel's picture

Completely OT - but WAPO has a story out that DSK charges will be reduced to possibly filing a misdemeanor.  Chambermaid recieved in excess of 100k to undisclosed accounts....from a 'drug dealer'.  Timing is impeccable.  

wandstrasse's picture

'drug dealer' is the worst camouflage/alias for 'banker' I can imagine. It is like a pro killer trying to hide behind the alias 'slayer'.

Oh regional Indian's picture

Nice Wands, the analogy is crystal clear.

Meanwhile, for anyone wonderign about how HFT's are doing in the rest of the world, particularly India, please see:


It seems the Indian market is not ripe for raping. Yet that is.

Please note though, that the systems are in place. Clever, eh?

In other news, inflation in India is OFF THE CHARTS. The core things are rising weekly. Food and Fuel, both up severely.


Robslob's picture

A prostitute has a bank account?

Jack Napier's picture

Reminds me of Office Space! Except that these guys don't have to worry about going to Federal "pound me in the ass" prison.

chump666's picture

Good one ZH, adaptation trading!

I made money on a biotech HFT 'freakout', we just followed the narrowing bid/ask, watched  the patten/liquidity and fixed puts below the price.  Like clockwork, it slammed down hard, then rebounded.

Usually charted on close price.

chump666's picture

As far as algo's and the market.  A system that magnifies chaos from the market then sends chaos back into the market is doomed concept.  But we will be waiting for the algo's to go bonkers over the EUR, JPY and USD

slewie the pi-rat's picture

the cops say:  the case is a mess!  Hahaha!  they want dsk to plead to a misdemeanor.  what?  going to the airport w/out his cell phone? 

i thought when it was first and anal on the two, the armoire got scrimmaged heavily into his back.  but that was when the refs had called him out of bounds.  now, the replay clearly shows he was toeing the fine line of legality.  cameltoe-ing! 

i love the shit about the 5 phone bills!  pablo escobar on intercom # 2.  someone wanting to help the nigerian prince pay his inheritance tax on line 3. 

the maid may also have lied to u.s. immigration!  about being circumcised.  none of this is funny, and i'm laughing mao...

Dental Floss Tycoon's picture


Strauss-Kahn Case Seen as in Jeopardy:

Of course it is in jeopardy.  Justice is not for Guinean housekeepers who might be involved in petty criminal activities.  It's for the good people involved in major criminal activities. 

Oh regional Indian's picture

Indeed DFT. In this case though, given all the shennanigans and duplicitious characters involved, I'm not sure about anything. This is cloak and dagger at it's best/worst.


Oh regional Indian's picture

Indeed DFT. In this case though, given all the shennanigans and duplicitious characters involved, I'm not sure about anything. This is cloak and dagger at it's best/worst.


Dental Floss Tycoon's picture


Yep.  Any time one of the masters of the universe gets their tit in a wringer it is safe to say there is more going on than meets the eye.  The best we will do is "uncover" one of the plausible conspiracy theories planted by those who's job it is to obfuscate what really happened.


10kby2k's picture

survival of the fittest

Zer0head's picture

never would have seen this coming

Strauss-Kahn’s Accuser Said to Lack Credibility

July 01, 2011, 5:32 AM EDT

JW n FL's picture

Polls had shown Strauss-Kahn as the potential candidate with the best chance of beating French President Nicolas Sarkozy in next May’s general election. Socialist Party hopefuls have until July 13 to register for their primary, which is scheduled for October.

zhandax's picture

Yet another OT, but here we sit with our pants down pre-open; PMs getting bashed and equities heading up.  OK, I get it.  The kleptos don't need no stinkin debt limit; the ESF can still pump this fucker off balance sheet past what we can short.  How do we take down that bitch (the ESF)?

virgule's picture

You could even better than arbitraging away:

Using the methods described above, you could use market quotes to send information to selected market participants via the quote stuffing data ("quote modulation" ;-), to allow them to both know in advance what is going to happen next, but also to synch their algo time-wise to be ready for the nice trade about to be sent through, positioning your bids to match exactly the needed position to capture the market.

mickeyman's picture

You could also elect to share your algo with dear friends so they can profit along with you in return for, say, political favours. If things don't work out you take them off the nnew-parameters mailing list.

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