"It's Not A Market, It's An HFT 'Crop Circle' Crime Scene" - Further Evidence Of Quote Stuffing Manipulation By HFT

Tyler Durden's picture

Recently we posted a required reading analysis by Nanex in which the market trading analytics firm presented irrefutable evidence of quote stuffing by HFT algorithms in tens of stocks, in which thousands of cancelled quotes would reappear each second with a definitive periodicity and regularity, around the time of the May 6 flash crash. Aside from the fact that it is illegal to indicate a quote without a trade intent, this form of quote stuffing is in fact manipulative when conducted by HFT repeaters in specific "shapes" as it actually moves the NBBO actively higher or lower, in cases pushing the bid/offer range up to 10% higher without even one trade ever having occurred, simply by masking a big block order which other algos interpret as bid interest and pull all offers progressively or step function higher (or vice versa, although we have rarely if ever seen the walking down of a stock over the past 18 months). It is as if the HFT lobby has been given the green light by the powers that be that it is safe to activate merely the bid-size quote stuffing algorithms, and not worry: the fact that the market is so one sided in its quote stuffing patterns is sufficient reason to worry of a concerted effort to push stocks higher, initiated from the very top, and effected by not only the Primary Dealer community but by the end-market "liquidity providers." Today, courtesy of Nanex we demonstrate that this type of illegal stock manipulation continues rampant to this very day, and the SEC still fails to acknowledge that it is precisely the HFT market participants that persist in destabilizing stock prices, which have given up responding to fundamentals and merely move up or down based on quote stuffing interventions by those who plead innocence and claim to only be providing liquidity. Well take a look at the millions in fake, and thus illegal, bids demonstrated below and tell us just how any of this manipulation is "providing liquidity" - the second the patterns break, the algos responsible for the churn pattern disappear, thus eliminating numerous levels of so called bid liquidity below the NBBO: break enough patterns and you have another flash crash as the market once again goes bidless.

So while the SEC continues to pander merely to the interests of the market manipulation lobby, and is now doing it in more style than ever by refusing to answer to FOIA requests going forward, here is Nanex with yet more evidence that we no longer have a market, but merely a daily recurring crime scene.

In our original Flash Crash
Analysis report
, we dedicated a section to an observed phenomena we termed
"Quote
Stuffing
", in which bursts of quotes (at very high rates) with
extremely unusual characteristics were observed.

As we continue to monitor the markets for evidence of Quote Stuffing and
Strange Sequences (Crop Circles), we find that there are dozens if not
hundreds of examples to choose from on any given day. As such, this page will
be updated often with charts demonstrating this activity.

The common theme with the charts shown on this page is they are obviously all
generated in code and are algorithmic. Some demonstrate bizarre price or size
cycling, some demonstrate large burst of quotes in extremely short time frames
and some will demonstrate both. In most cases these sequences are from a single
exchange with no other exchange quoting in the same time frame.

And here, for your viewing pleasure, are the illegal market manipulative churn patterns conducted exclusively by various HFT algos:

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.

07-29-10
"The Crown". While not a large number of quotes, this NASDAQ/BATS
Bidsize sequence was just too unusual to bypass.

07-28-10
BATS "Batsicles". BATS price cycling through a large price range,
each intermittent with a stub quote, drop it down and start over.

07-27-10
NASDAQ "Blotter". One of the more unusual repeating Asksize
cycles.

07-23-10
BATS "Stubby Triangles". Drop the quote from a valid price to 0.001
and then back up to a lower price level. When the new price level hits 0.001 as
well, do it all over again at approx. 380 times a second.

07-23-10
NASDAQ "Flutter". 4000 quotes in 2 seconds, alternating the bid
price/size in 3 increments and effecting the Best Bid along the way.

07-23-10
BATS "Periscopes". 8000 quotes in 3 seconds, alternating the bid
price each quote. Pop the size up 1 every second or so.

07-22-10
NASDAQ "Double Dip". Symbol SH. 10,000 Quotes in 4 seconds, each
affecting the Best Bid.

07-19-10
NASDAQ "Racing Stripe". Symbol WYNN. 2000 Quotes in one second, each
affecting the Best Ask.

07-19-10
PACIFIC "Puzzle Pieces". Symbol IIC.

07-14-10
NASDAQ "Blue Bandsaw". Symbol SHG. (760 quotes in 1 second, taken
from a total sampling of 10,000 quotes in 12 seconds)

07-13-10
BATS "60-Step". Symbol SAH. Take sixty steps up (a penny at a time)
and one step down (0.60), reset and do it all over again (at approx. 700 times
per second).

07-12-10
NASDAQ "Ask Mountain". Symbol IAU. Over 56,000 quotes in 10 seconds,
all with same Ask Price and the Ask Size increasing or decreasing by 1 (to
almost 40,000!
).

h/t Dan


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Popo's picture

Ok, so who's going to jail?   Wait..no one?  Oh... I see...  Well apparently all these "laws" aren't really "laws" after all.  

Apparently, this is a giant free for all.  

So I guess the lesson here is:  Lie... Cheat... Steal...  Stop paying taxes.  Do whatever you like folks, because there are no cops!  The proof is right up there for everyone to see.

On a daily basis the SEC shows us that there are no repercussions, and will be no repercussions for breaking the law.  

 

Until we see 1000's (yes *thousands*) of bankers sentenced -- this will continue to be a complete and utter joke.

 

 

 

 

 

Bendromeda Strain's picture

Well now, in the first place this isn't real until a Gretchen Morgenson or an AEP runs with it. A Tyler Durden or a Matt Taibbi type can only serve as keen pointers for the guys (and gals) with shotguns. Of course, since ZH picked it up from a relatively obscure analytical source, it does demonstrate an information food chain in action. Deja vu. Did you just see that cat shudder twice?  

MayIMommaDogFace2theBananaPatch's picture

Two shudders and a hairball...

Look -- there's five-score monkeys over there reading ZH!

caconhma's picture

America loks more and more like Russia.

Yes, we got a black president but he is just an incompetent, lying, marxist puppet in the hands of his masters.   Our political landscape is becoming no different from Russia:
  • Terrible corruption here in America and there in Russia
  • Oligarchy is running country here and there
  • Russian president Medvedev is just Putin's puppet and Obama is just WallStreet banksters puppet
  • Russia has no democracy and America is losing it in a hurry (thanks to the staged 9/11 Patriot Act)
  • Russia cannot get by without a war ( Chechnya, Georgia, etc.,) and America cannot (Iraq, Afghanistan, Pakistan, Somalia, etc.,)
  • Russian secret police controls their Parliament and WallStreet Hebrew mafia controls our Congress
  Yes, we are in a deep shit!
drwells's picture

I don't buy the Hebrew bit but other than that, dead on. The country I grew up in is dead and gone.

New_Meat's picture

doc--+1 on the joo thingie, please yourself, but I'd say don't loose faith -- there are kids and old farts alike who have not been heard from.

or despair your ass off-your call.

- Ned

NOTaREALmerican's picture

Concentrate the loot in a few small piles and it makes the job of the smart amoral scumbags that much easier.   Centralize any organization - with lots of loot - and the sociopaths will run it.   We've been centralizing power in the US since before WW2 but, on a big scale - continuously after WW2.    No going back now though.   It's very easy for sociopaths to destroy a democracy (after all, our government has already destroyed a few in the name of "freedom").  

 

French Frog's picture

Is there really no politician left in America who is willing to take this on and at least get some sort of answer from the SEC?

scratch_and_sniff's picture

Not really. Its financial warfare-kill or be killed. I would love to see them take this shit into the forex markets.

NOTaREALmerican's picture

For the last 50+ years, the political system in the US is nothing but a sociopath vetting process.  The entry points into the system -  at the local level - is where new politicians prove they are sociopaths (will say anything and lie in exchange for campaign contributions, called bribes in most countries).    The owners of the combined Republicrat Party (there's two teams: a Blue Team and Red Team - our dumbass peasants are VERY easy to fool, the Party owners) allow the newbie politicians to advance if they don't threaten the nobility families that own the country.   Very simple system; has worked very well.  The nobility owns almost everything now.

Bringin It's picture

+100 

People talking about change in November are fooling themselves.  All the new faces I see, those who've been tasked with wrestling the Tea Partiers into line, talk tough about spending money. 

But when you look a little deeper, the Scot Brown-s, Michelle Bachman-s, Shara Palin have a big hard-on for Zionist causes and are more than willing to spend your money and shed blood to prove it.

LeBalance's picture

Oh there are cops all right, but you need to determine which side of the law you are on.  Do you have permission to conduct all of the activities that you do during the day?  If so and you continue in the good graces of your clan or master, then all is well.  One of your set might come to you one day and ask that you do a turn in stir to mollify the populace (Milkin, Madoff, etc), but no worries, you will just make more bones with the boss.

AnonymousAnarchist's picture

I've been gone for a week so I'm not sure if this was posted on ZH but I saw this a couple days ago on the ICYMI RSS Feed....

High-Frequency Programmers Revolt Over Pay

Pity the programmers toiling away at Wall Street's secretive high-frequency trading shops -- places like Goldman Sachs, Citadel and Getco. They wrote algorithms that take advantage of fleeting trading opportunities and bring in up to $100,000 a day. In return, they received a fraction of the pay doled out to their bosses. Now some programmers feel used and are instigating a revolt.

NOTaREALmerican's picture

Programmers revolting?  HA!   In their dreams maybe.   When it comes time to guard the re-education camps, the programmers and engineers will be the guards; probably the accountants too.

Oligarchs Gone Wild's picture

Last summer, a programmer named Sergey Aleynikov left Goldman Sachs for a newly formed Chicago trading company called Teza Technologies. In February U.S. prosecutors indicted Aleynikov for allegedly stealing hundreds of thousands of lines of source code from Goldman's high-speed trading platform as part of a move from a $400,000 job to a $1 million one.

God's code is God's code.   In the Ark of the Covenant the code must remain, only the high preists are able to ssh into "those" servers...

Ura Bonehead's picture

Yes, I enjoyed that irony.  Sort of like an accountant for the mob going to jail for shaving a few grand from the drug operations.

America is truly screwed.

Sunshine Down the Road's picture

This is what the 'new normal' looks like... Got to keep the top 20% happy or the house falls... Distract the remaining 80% and get reelected. It seems too easy.

Whatta's picture

"distract the remaining 80%"

 

You mean like terrorists are everywhere...no, we are bored with that...

you mean like global warming...no, we are bored with that...

You mean like...a big environmental disaster in the GOM...except now there is no oil to be found, and we are becoming bored with that...

SuperBull's picture

You mean Chelsea Clinton?

She has her mother's beautiful smile... Isn't she adorable!  **cute**

Almost Solvent's picture

Bethenny getting married wayyyyy better.
Plus she had a baby.
Love those Real Housewives of NYC!

Cathartes Aura's picture

how 'bout another World Cup?

those sport tourney's keep the team spirit alive - go RED, go BLUE, go NATIONS!

when's the next Super BAwl partay?

MrPalladium's picture

"Got to keep the top 20% happy or the house falls... Distract the remaining 80% and get reelected. It seems too easy."

A cryptic reference to Vilfredo Pareto's law of social control; to wit, the top half of one percent run the show and reap most the benefits, but they must keep the next 20% of the population happy (those with the skills to replace them), and the bottom 80% don't matter.

Thus keeping prices elevated without having to spend real money is the establishment's wet dream. In a manner of speaking they are providing "liquidity" in that it is easier and less painful to sell into higher prices than lower prices.

But it is a sop to the next 20% - the group that should know better but that still wants to believe in the system.

And as Tyler so eloquently notes, risk just keeps rising through it all.

lewy14's picture

Given these premis - I'd say personally that the critical "19.5%" is getting mighty fed up, and this is much more consequential than whatever the 80% is thinking.

Revolutions can and do occur within the elite.

In the context of Walter Russell Mead's taxonomy of American political classes, I'd call what's going on now a Hamiltonian civil war.

Coldish, for now, but heating up.

fThis's picture

By "Hamiltonian civil war," I hope the Jeffersonians win out...doubtful, yet hope worthy, imho.  But then again, "hope in one hand & spit in the other, see which hand fills faster."  The ever expanding coercive and compulsive power of the national government has its centralizing foundation with Hamilton & others. http://xroads.virginia.edu/~cap/ham/hampltcs.html

Politicians who make waves or attempt to actually do something about it are branded "moon-bats," to wit, Ron Paul.

Its every man for himself, so you better align yourself with the strongest gang if you want some measure of (political/economic) safety & security.  Sad, but (risk of redundancy) imho, true.

caconhma's picture

Back in 1920, Lenin had problems with his fellows Jewish member of his Bolshevik Party.

So, what did he do? Lenin expanded his Ruling Party Politburo with totally illiterate workers. Why? When one of them was asked whether they understand issues they are voting for, he gave a perfect reply: "No we don't understand  the issues we are voting on but we ALWAYS vote ways Lenin instructs us to vote."

 

Do the Congressmen read the financial reforms bill (or for this matter most of other bills)? The answer is "NO" but they are allowed to add something for themselves. This is how American politics works. It is that simple.

MacedonianGlory's picture

The same thing happens in Greece.

megatoxic's picture

Completely agree. 

We need to find a nice little coastal island somewhere and turn it into a prison isle for criminal bankers.  Barring that, it may be time for some vigilante justice, since the authorities clearly have no intention of stopping these crooks.

No, I'm not joking.

Cistercian's picture

I strongly disagree.We should throw them into a volcano.Katla demands a sacrifice!

 Yes, throw them into the lake of fire.....before it is too late!

scratch_and_sniff's picture

Strap the fuckers to the electric chair and let the algos determine the amplitute.

BurritoGas's picture

ampere**

 

Sorry. Couldn't resist.

New_Meat's picture

I like it, it is a way to bail out Iceland, they could charge (not too much either) for each event. - Ned

Noah Vail's picture

I am most fond of gullotines. It takes one to two minutes for the brain to die after the head is severed.

I wonder what they think about in the interim, LOL.

scratch_and_sniff's picture

Probably about how they could scam you in 2 minutes.

superman07's picture

High powered rifles are cheap. 338LM will end any bankers tyranny.

New_Meat's picture

you bet. misguided children think "one round-one target"

Line 'em up and knock 'em down.

- Ned

Ardent Spirits's picture

Like the Nazis did. One bullet can go thru four or five people when they're lined up.

breezer1's picture

a joke? whats wrong with you people? these machines are the only thing keeping the markets up. do you want a complete collapse? do you want chaos? the next thing would be a real estate crash, gdp would plummet, unemployment would be 20% instead of 9%.

wake up will ya , they are doing all this for us.

oh shit i gotta go , the president is on a talk show, gee he has such a nice smile. later.   

Bartanist's picture

Your questions are actually serious questions:

I do not want a collapse, but want a fair and real market and from there we can start to progress. If to get there, the current bag holders have to get a 70% haircut, well so be it.

No, I do not want chaos.

Unemployment is already at 20% and climbing. With real and trustworthy markets unemployment would 20% and declining.

Yeah, the Manchurian (err Kenyan) Candidate blew off a prior commitment with the Boy Scouts to be on "The View".

Rainman's picture

Barry will no doubt get wind of this particular ZH article. It is linked into from Huff Po, average readership IQ of 91. I'll be damned. 

Sisyphus's picture

As of 9:00 PM EST, Saturday, guess how many comments has this article generated on HF (41). Next, guess how many comments has Chelsea marrying Marc has generated (313). Now, do you have any reason to ask why 'they' have been able to pull it off? I don't.

 

We have seen the enemy and he is us.

 

Village Idiot's picture

"We have seen the enemy and he is us."

 

I just happened across this quote the other day - everything happens for a reason. bwahahaha.  Seriously, what a disgraceful commentary. Time to pull collective head out of ass.

Sisyphus's picture

 

VI, it is kinda strange to call you that. I have read your commentary and your moniker doesn't do you justice. You are much smarter than the most of us here. However, not knowing your real name, I guess I'll have to address you using your nom de plume.

Yes, I do agree, what a disgraceful commentary. You know what, it's much worse out there in the real world. I 'experiment' with my friends, colleagues and acquaintances and leave the encounter stunned, worried, saddened and concerned. I ask them the most basic question - 'what is money' - and am utterly stunned by their responses. These are the same people who are managers and directors at fortune 500 companies. I was in Chicago once and an executive from UBS happened to be sitting next to me at the hotel bar. And I asked him about his views on the economy. His response was, he doesn't know, he doesn't care, he doesn't think about it, and as long as he has a job it doesn't matter. The stock market is coming back and that's all that is important to him. Rest is inconsequential.

I am sure, most people in the U.S. would share his view. Revolution? What revolution? Keep the indexes rising and the rest will be forgotten by the masses.

Village Idiot's picture

Thank you for the compliment, Sisyphus. And the guy you refer to, was me.  Still safe, but not feeling secure.  Take care.

fThis's picture

Sarcasm noted, and appreciated. +11 to counter "junks."

merehuman's picture

i recognize sarcasm when i see it. Well done and never mind the junkers, they are impervious to sublety.

Gordon Freeman's picture

No, Popo, there are PLENTY of cops, lots and lots of cops, SWATs, soldiers, detectives, prosecutors, and so forth--this is a POLICE STATE, after all.

The problem is that all that enforcement we pay through the nose for is to keep the sheeple in line, particularly the upper middle-class, who have something to lose, thus are easy to terrorize, and holding a bit of coin to shake down at every opportunity.  Wall Street is off the hook, my friend.

Nothing will change until the system changes.

Boilermaker's picture

The upper middle class is the dangerous parties to the fraud.  They are typically educated, informed, and well read but, moreover, they are close enough to the elite to see and understand the fraud.  When they get the feeling that their comfortable yet less than opulent life is going into the shitter then they mobilize and organize.  That's the danger.  When I see my ability to provide for my family going the hell-in-a-handbasket and my kids future in jeopardy...I get a wee bit pissed.

 

Carl Marks's picture

Right you are. The UMC works for the Oligarchy. Like all workers, their loyalty is rented.Obama is gambling that the lower classes will coalesce around him while he fleeces the UMC, but my money says otherwise.