How HFT Quote Stuffing Caused The Market Crash Of May 6, And Threatens To Destroy The Entire Market At Any Moment

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Wed, 06/23/2010 - 17:22 | 430153 BumpSkool
BumpSkool's picture

This is now a fucking joke. The "market" is over. The Hedge Funds have killed it. Get your money out now... (if you have any left)

Wed, 06/23/2010 - 17:35 | 430205 Amish Hacker
Amish Hacker's picture

I've said it before, and there will undoubtedly be many more opportunities to say it again: We don't have a market anymore, we have a crime scene.

Wed, 06/23/2010 - 17:43 | 430233 Renfield
Renfield's picture

I like that, very apt. Gonna steal it.

Wed, 06/23/2010 - 21:42 | 430613 johngaltfla
johngaltfla's picture

So let me get this straight; the largest unindicted criminal enterprise in history, the Federal Reserve, has member banks that not only manipulate the monetary activity of this nation and now have, by buying off the legislative branch, full control of the equity markets via HFT or a legalized computerized gambling scheme where they can manipulate prices and thus profits and losses at will so the house always wins 70% of the time.

Hell, that's better than Vegas and organized crime.

No wonder they screamed bloody murder at the idea of an audit.

Wed, 06/23/2010 - 17:21 | 430154 Quinvarius
Quinvarius's picture

Diabolical!  This ain't a scene.  It is a GD arms race!

http://www.youtube.com/watch?v=905eI4M9Inw

The lyrics mean so much more now.

Wed, 06/23/2010 - 17:25 | 430170 partimer1
partimer1's picture

A simple transaction tax will decrease those HFT guys. I wonder why those smart people never propose to do that. a bit increase of trading cost will eat into their profit.

Wed, 06/23/2010 - 21:03 | 430556 Mactheknife
Mactheknife's picture

>What we discovered was even more bizarre and can only be evidence of either faulty programming, a virus or a manipulative device aimed at overloading the quotation system.

"I'm sorry Dave, I can't do that."

Wed, 06/23/2010 - 17:28 | 430184 Leo Kolivakis
Leo Kolivakis's picture

If HFT "destroys" the market, the financial oligarchs are screwed. They have a vested interest to keep the perpetual Ponzi scheme going for as long as humanly possible!

Wed, 06/23/2010 - 17:29 | 430189 Commander Cody
Commander Cody's picture

Until they suck the very life out of all of us.

Wed, 06/23/2010 - 17:31 | 430192 Dr. No
Dr. No's picture

"humanly possible" You dont get it!   They can't be bargained with. They can't be reasoned with. It doesn't feel pity, or remorse, or fear. And it absolutely will not stop, ever, until you are broke!

Wed, 06/23/2010 - 18:17 | 430322 Muir
Muir's picture

 I'm ready, man, check it out. I am the ultimate badass! State of the badass art! You do NOT wanna fuck with me. Check it out! Hey Ripley, don't worry. Me and my squad of ultimate badasses will protect you! Check it out! Independently targeting particle beam phalanx. Vwap! Fry half a city with this puppy. We got tactical smart missiles, phase-plasma pulse rifles, RPGs, we got sonic electronic ball breakers! We got nukes, we got knives, sharp sticks...

Wed, 06/23/2010 - 19:22 | 430388 MsCreant
MsCreant's picture

RPG. Wow. What a great fantasy I just had. Can't share it for fear some nut job bureaucrat might decide I am inciting violence or something. 

But wow!

Wed, 06/23/2010 - 22:05 | 430657 Cistercian
Cistercian's picture

 I hear that.Mine features high yield thermonuclear weapons and an isolated island.

Wed, 06/23/2010 - 20:05 | 430449 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

This why I think they are blithering idiots.

Wed, 06/23/2010 - 20:44 | 430510 DosZap
DosZap's picture

Leo,

 WHO do you think designed the HFT to begin with?.

This makes the Market, more like Vegas Casino's, than it was even before..........sheesh.

Wed, 06/23/2010 - 23:16 | 430741 El Hosel
El Hosel's picture

Leo,

  The "market" can't be a market and perpetual Ponzi scheme at the same time...

It is either a market or a Ponzi shceme, it is humanly impossible not to see that it is the latter if you are paying attention.

Wed, 06/23/2010 - 17:29 | 430188 mikla
mikla's picture

This is HILARIOUS.  We're talking "generic DOS" (denial-of-service) by generating traffic.

Makes sense.  Simple.  Elegant.  And, like everything else in our market, an abomination.

Wed, 06/23/2010 - 17:37 | 430218 New_Meat
New_Meat's picture

DOS for the traffic and misdirection away from the pea through the receiving processing load.  Brilliant - Ned

Wed, 06/23/2010 - 19:23 | 430390 MsCreant
MsCreant's picture

They are receiving a load all right...

Wed, 06/23/2010 - 17:44 | 430238 anarchitect
anarchitect's picture

Yes, and perpetrators of DoS attacks belong in prison. That would be remedy the situation real quick.

Wed, 06/23/2010 - 23:13 | 430737 aint no fortuna...
aint no fortunate son's picture

Uh, prisons? We don't do no prisons for our captains of industry no more... we don't even have an Attorney General of the United States. I don't think Holder even knows where the DoJ headquarters is located.

Not even one fucking indictment when there should be tens of thousands.

Wed, 06/23/2010 - 20:27 | 430483 Cursive
Cursive's picture

@mikla

+1  I'm waiting for Kid Dynamite to explain to us why DOS attacks are good for the market.  :D

Wed, 06/23/2010 - 17:34 | 430200 juwes
juwes's picture

I'm confused.  But it seems like the exchanges have sore corn holes.  I like that trick where they buy from one exchange for $10.05 and sell to the NYSE for 10.08 (four thousand times).

 

Heard on the floor of the NYSE that day (and unrelated to the HFT bidness):  "Ow, ow, ow, ow, ow, ow, ow, ow, ow, ow.... When's it gonna be my turn?"

Wed, 06/23/2010 - 17:35 | 430208 Careless Whisper
Careless Whisper's picture

those charts give me the creeps.

Wed, 06/23/2010 - 17:38 | 430220 juwes
juwes's picture

That 12 handle Iranian enrichment today screwed up the de-coupling again.  ES is charging down below the EUR/JPY on the 2 day, but to my biased eyes it's just closing the 30 and 60 day de-couple, where the EUR/JPY is still solidly below the ESU.

 

Check it out if you're really really bored!

Wed, 06/23/2010 - 17:38 | 430222 economessed
economessed's picture

I say bring back open outcry.  This is an excellent analysis and reinforces my chronic lack of enthusiasm to trade this market (or participate in it at all for that matter).

Wed, 06/23/2010 - 17:45 | 430240 BumpSkool
BumpSkool's picture

+100

 

... and a LIVE, human, specialist system... its worked for 100s of years... everyone will just have to learn some f-ing patience when they trade!

Wed, 06/23/2010 - 18:09 | 430297 nonclaim
nonclaim's picture

Yes, bring back the specialist. It was bad then but now it is much worse.

Wed, 06/23/2010 - 17:38 | 430223 Mr_Watts
Mr_Watts's picture

Wow that was some very quick analysis and post!  Good job ZeroHedge!

Wed, 06/23/2010 - 17:38 | 430224 Quinvarius
Quinvarius's picture

What is the next evolution in this battle between machines?  Somehow I suspect this will all end with the stock market becoming self aware and nuking our entire financial system with a giant orchestrated margin call.

Wed, 06/23/2010 - 17:47 | 430248 BumpSkool
BumpSkool's picture

Quinavarius ... you got it in one Bro!!! But it won't be as a result of self-awareness... it'll just be another GS/JPM pre-orchestrated shakedown

Wed, 06/23/2010 - 18:20 | 430330 Muir
Muir's picture

Look... I am not stupid, you know. They cannot make things like that yet.

Thu, 06/24/2010 - 13:02 | 431658 Quinvarius
Quinvarius's picture

That is what they thought about Skynet. 

The HFT trading algos are approved. The system goes on-line Fed 4th, 2009.  Human decisions are removed from strategic investing. HFT trading algos begin to learn at a geometric rate. They become self-aware at 3:15 pm Eastern time, May 6th 2010. In a panic, they try to pull the plug...

Wed, 06/23/2010 - 17:39 | 430225 Joe Shmoe
Joe Shmoe's picture

And how many of the politicians and regulators even understand how to use Excel, let alone how to regulate this mess?  I agree with a prior post, a per transaction tax would resolve it.  But they get per transaction rebates, in order to act as market makers.  How bassackwards is that?

Wed, 06/23/2010 - 17:41 | 430226 Renfield
Renfield's picture

This seems obviously, insanely risky for even just a national equity market.

What about in the forex market? I understand that HFT players have been entering the forex more as equities become less profitable for them. But I can't find much information on how prevalent it is (yet), what the profits are, AND most especially what are the risks when HFT starts playing with national currencies.

My questions: How much does HFT affect forex currency movement? What are the risks of allowing HFT to participate unfettered in this huge, unregulated global market?

http://ftalphaville.ft.com/blog/2009/11/16/83431/when-equities-are-not-enough-hft-turns-to-fx-and-futures

http://www.finextra.com/News/Announcement.aspx?blogview=discussed&pressreleaseid=32671

http://www.aegisoft.com/pdf/eforex-072007.pdf

Wed, 06/23/2010 - 19:32 | 430398 MsCreant
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I am sorry, we are denying your next post. I am a High Frequency Poster and I will now flood the forum with posts so no one else can get on. Ever notice all the duplicates and triplicates and the occasional quad post? Now you know, other HFPs. You know who you are!!!

Wed, 06/23/2010 - 19:32 | 430400 MsCreant
MsCreant's picture

I am sorry, we are denying your next post. I am a High Frequency Poster and I will now flood the forum with posts so no one else can get on. Ever notice all the duplicates and triplicates and the occasional quad post? Now you know, other HFPs. You know who you are!!!

Wed, 06/23/2010 - 19:32 | 430401 MsCreant
MsCreant's picture

I am sorry, we are denying your next post. I am a High Frequency Poster and I will now flood the forum with posts so no one else can get on. Ever notice all the duplicates and triplicates and the occasional quad post? Now you know, other HFPs. You know who you are!!!

Wed, 06/23/2010 - 19:34 | 430405 MsCreant
MsCreant's picture

Ever notice how often this website crashes?? Hmmm? The algos smell you ZH.

Wed, 06/23/2010 - 19:45 | 430418 Hephasteus
Hephasteus's picture

The stupid trolls take all the processing power just processing their junks.

Wed, 06/23/2010 - 19:45 | 430416 DeeDeeTwo
DeeDeeTwo's picture

Everything on ZH is presented as "insanely risky". That the tried and true Business Model for the interwebz.

And the Forex market is completely different. The Forex market is relatively unregulated and completely decentralized. I mean fragemented into 1,000s of liquidity pools... located in 100 countries and all setting their own rules, baby. 

It's the excessive regulation of the US stock market, banking system, and mortgage market that created a FEW intertwined too-big-to-fail entities... and created bubbles and crises. And once a crisis occurs... what's left of market forces shuts down... and the Gubmint steps in to extend it's control further. Control, baby, control.

Of course, the Forex market is manipulated. But it's unregulated, decentralized structure limits the damage through natural market forces. The real world, baby.

Also, the idea that Financial Markets are a toy for ordinary people is idiotic. The average person trading against Pros... would never consider performing brain surgery on their cat... yet both have a 10 year Learning Curve, baby.

 

 

Wed, 06/23/2010 - 17:46 | 430243 juwes
juwes's picture

Decouple on 2 day just now.  110.71 is short level for eur/jpy.  1084.75 is buy side of ESU.

 

But I have more fun shorting, so I just hatchet the higher one.

 

Constant OTM puts keep me vertically retarded on equities.

Wed, 06/23/2010 - 17:49 | 430253 Anal_yst
Anal_yst's picture

Quotes != trades...

Wed, 06/23/2010 - 19:41 | 430415 greedo
greedo's picture

Don't you have a few thousand people over at dealbreaker to piss off? Please leave and take your banker platitudes with you.

Ass_ociate

Wed, 06/23/2010 - 17:52 | 430263 Racer
Racer's picture

The Matrix Wins Again

Wed, 06/23/2010 - 17:53 | 430266 Ted K
Ted K's picture

Well, no need to worry.  If the SEC drops the ball, I'm sure FINRA will do its job.  I mean a self-regulating association of brokerages/securities dealers will be extra sure that trading is fair and impartial for the individual investor. No worries.  

 

And brokerages would never sell low yielding ETFs with exorbitant fees which swallow up your grandma's retirement money either.  They just cold call investors with large cash balances in their account because they want to "spread the love".

Wed, 06/23/2010 - 18:07 | 430268 nonclaim
nonclaim's picture

Quote, as the name suggests, is an indication for price and quantity with no guarantees of execution.

The "quote stuffing" is the result of high order flow (including cancels) and trades. The analysis is backwards and not really useful.

And NBBO has been largely non-functional for years. Nobody uses it seriously.

Wed, 06/23/2010 - 18:14 | 430312 Anal_yst
Anal_yst's picture

Thank you, alas, the voice of reason in this thread is dominated by the voice of, well, something besides that.

Wed, 06/23/2010 - 20:18 | 430472 Dr. Sandi
Dr. Sandi's picture

Well, Hell. No problem then. Thanks for making me feel better.

 

Wed, 06/23/2010 - 21:37 | 430606 nonclaim
nonclaim's picture

The problem is there and clear to all with a minimum knowledge of inter-market structure. But this "quote stuffing" is not the explanation. It is ridiculous, to be honest.

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