"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


Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Johnny G.'s picture

I know it's not what you're looking for.  But how about this bumper sticker:

"There's a village in Kenya that's missing its idiot"

i.knoknot's picture

who junked that? that thar is some funny chit.

i say 'maobama' (that's funny chit too) and i get junked...

i think someone in here just looks for obama slights and junks 'em... jest cuz.

thin skin... too bad - clever is clever...

buzlightening's picture

Cover your paper ASSets?  Just now starting to wake up!!??  My last paper ponzi market shuffle was June 13th, 2008!!  Been accumulating real monetary stores of value since then!!  It's 100% possession being the law among the lawless gangster banksters!! What else the other 80% goon-a do when the econophiles pull the plug!!  Food stamps worthless; free lunch welfare minions will be societies children as skelators leaning against mailboxes for checks which never come; and  nothing but sorry Charlie for DIMMS, (dumb ignorant mental midget sheeple), trying to exchange paper ponzi fiat script for a can of tuna!!  History repeats and all false premise economies get blown away in the face of self evident truth and what has real lasting value!!  If you don't understand real monetary stores of value now you've already been fleeced by gangster bangsters!!

Oligarchs Gone Wild's picture

Oligarchs: A thousand blade servers of the Blankfein empire descend upon you. Our trades will blot out the sun!
ZeroHedge: Then we will fight in the shade.

 

 

 

chancee's picture

SPY!  SPY!  SPY!  I've been screaming about this for months. These are some of the exact patterns found in SPY, and how the market is pushed up 80% of the time.  Just watch a 500 tick chart for SPY on some of these mysterious up days and you'll see the bids constantly jumping over the ask price 'pulling' the stock up, and the whole market with it. (triggering multiple short squeezes in the process.) 

The sad thing is it looks to be done with relative ease whenever there is a critical support level in danger of breaking.  That's why I think all of the price action we see has been choreographed long before it happens.  Maybe not tick for tick but, the support levels for this decline we're probably 'chosen' back in the Spring.  Another reason why the Fed probably doesn't want an audit.  By the time the one audit that was approvied takes place, expect the paper trail leading to any such revelations long since shredded.

Hunch Trader's picture

We wouldn't have any of this if every order had a forced minimum validity time of 10 seconds for example. There is no business on earth where the circumstances change any quicker than that. Allows plenty time even for slower humans to react.

 

The market would only benefit when high speed churners and paranoid scaredycats stayed away. The market doesn't need their deleterious presence at all.

New_Meat's picture

Jesse Livermore is smiling from his grave.  His techniques all shiny and high-techy and all. - Ned

thesapein's picture

Didn't he get suicided? Can't see him smiling after that.

RockyRacoon's picture

I'm posting this at the bottom of the comments so as not to hijack space.

The topic is gov't control (or attempt at same) of markets.

Let's look at gov't control of the internet, what's so far-fetched?

Glenn Greenwald from Salon.com explains it:

  •  

      Throughout, we assume a well-motivated government that aims to eliminate conspiracy theories, or draw their poison, if and only if social welfare is improved by doing so.

  • Sunstein advocates that the Government's stealth infiltration should be accomplished by sending covert agents into "chat rooms, online social networks, or even real-space groups." He also proposes that the Government make secret payments to so-called "independent" credible voices to bolster the Government's messaging (on the ground that those who don't believe government sources will be more inclined to listen to those who appear independent while secretly acting on behalf of the Government). This program would target those advocating false "conspiracy theories," which they define to mean: "an attempt to explain an event or practice by reference to the machinations of powerful people, who have also managed to conceal their role."

    […]

    Sunstein's response to these criticisms is . . . as telling as the proposal itself. He acknowledges that some "conspiracy theories" previously dismissed as insane and fringe have turned out to be entirely true (his examples: the CIA really did secretly administer LSD in "mind control" experiments; the DOD really did plot the commission of terrorist acts inside the U.S. with the intent to blame Castro; the Nixon White House really did bug the DNC headquarters). Given that history, how could it possibly be justified for the U.S. Government to institute covert programs designed to undermine anti-government "conspiracy theories," discredit government critics, and increase faith and trust in government pronouncements? Because, says Sunstein, such powers are warranted only when wielded by truly well-intentioned government officials who want to spread The Truth and Do Good -- i.e., when used by people like Cass Sunstein and Barack Obama:

But it's precisely because the Government is so often not "well-motivated" that such powers are so dangerous. Advocating them on the ground that "we will use them well" is every authoritarian's claim. More than anything else, this is the toxic mentality that consumes our political culture: when our side does X, X is Good, because we're Good and are working for Good outcomes. That was what led hordes of Bush followers to endorse the same large-government surveillance programs they long claimed to oppose, and what leads so many Obama supporters now to justify actions that they spent the last eight years opposing.

http://www.caseyresearch.com/displayCdd.php

Misean's picture

Been happening for quite a while now.

Ardent Spirits's picture

The Russians invented & perfected this game during the cold war. The term is disinformation & I'm sure our government learned from the masters & plays the game well. The trick is to discern who is wearing the white hats.

thesapein's picture

We, as in Americans, also seem to forget that internet censorship is only censorship when we like what is being taken away. We don't like abuse of minors, properly so, and have no problem taking down servers that provide such content. Free stuff is also bad, so seize those servers, too. In fact, this is exactly how our government systematically shuts down anything that provides unrestricted access. All they do is claim that the the open server has links to bad things, send the raid squad, business closed. Done. Next.

So, yeah, a good heads-up but also nothing new to those who have been watching this happen.

i.knoknot's picture

so, nothing new to what, 38 people? heh

seriously, so few of my mid-tier professional college-ed associates have any idea what's going on here. send-em links, etc. no chance.

i was glad to hear that they did hear something about an oil spill recently...

exxon vald...

:^)

 

thesapein's picture

yeah, good point.

Please, keep up with the good work!

New_Meat's picture

I'd bet a talented racoon could sniff out that kind of infiltration and knock over the garbage can. - Ned

Misean's picture

Even Vegas doesn't let you bring a computer to the Blackjack table.

litoralkey's picture

Off topic post ...

 

Jane Austen's Fight Club  

 

http://www.youtube.com/watch?v=r2PM0om2El8

rogersails's picture

Can they stuff a pipe so full it slows down, and use their own pipes to race orders to their execution point - in effect, frontrunning ?

New_Meat's picture

Roger--get Ethernet up above 40% traffic and the retries on the packets will collapse that part of the network.  So would have to blanket all paths.  40% traffic on gigabit is a lot.

To force their fraudulent "orders" to be filled, would have to perform above blanket skootched in front of the canc after the order was issued.

That could be fun.

- Ned

Oligarchs Gone Wild's picture

An open suggestion to ZH.   Arrange an open public voting poll for your favorite HFT pattern.  The winning pattern will be displayed at the top of the site in all it's glory.  Maybe we use it as the background for a new bumper sticker with the ZH logo.  What about the background wallpaper on the site for the next "little people" news worthy flash trading event.   You know when the nightly covers it or Matt Drudge posts a picture of the DJIA crashing at the top of his site.

I mean, does anyone not see the immence beauty here?  Like peering through Hubble telescope to see God's eye?   Of Oligarch super computers immitating nature in the artwork of fractals elegantly ripping people off from dark pools and quad core systems in server racks while their masters summer away in the hamptons?

I'm kind of torn between "the crown" because I immediately think of certain oligarchs and "blotter" because you have to be on acid to continue to think that this game is going to last.

 

 

Village Idiot's picture

An open suggestion to ZH.   Arrange an open public voting poll for your favorite HFT pattern.  The winning pattern will be displayed at the top of the site in all it's glory.  Maybe we use it as the background for a new bumper sticker with the ZH logo

 

After reading through this thread I realize that we need billboards - lots of them.  Starts with bumper stickers, segway to billboards.  That would be a sight, wouldn't it?  Anyway, some great posts around here.  I should have been a trader - could have seen the invention of the car lead to the advent of the rocket ship.  I dig the "deep" trader talk around here. (sarcasm off)

 

Hey, here's a question: This site has a slightly bearish lean - if this site (or others like it) was/were around leading up to 2008, was there the sureness of a market collapse like there is now?  I only ask because I know that there were people calling for it, in some case for years, but was the crescendo as loud as now?

And if the answer is "louder" and nothing fundamental has really changed, well, shouldn't someone be doing something?  And wouldn't that also imply that, history is going to repeat itself?

Well f**k me, what is going to wake me up to this realization?   That is the question. 

I apologize for stating the obvious.  I know this point has been made on this site before. Many times.

 

 

macktheknife's picture

 

VI:   I like what you are trying to do -  create a visual cue in everyday surroundings - that you are aware of the problems we face - a very nice antidote to the annoyingly fake wearing of flag lapel pins.   My first idea would actually be to take your stack of bumper stickers, soak them in a hardening substance, and launch them with mortar shells - at all governement buildings.  This would attract attention to the cause.    

II think the symbol you are looking for has to be "cool and somewhat macho"   The name Teabager fails that test horribly.     I think that displaying a racoon tail - on your attenae, or a small one on your hat or shirt -  would actually look cool - harken back to Davy CroceTT.   A remember the alamo kind of spirit.   They would have to be synthetic raccoon  tails-  no reason for the racoons to suffer.   I think that would work as a good symbol - and it would be hard for any of the Teabagger types to be upset about it.  Only PETA would be unhappy.  

When Teabaggers greet eachother- they say something lame like "How's the bag hanging?"          The Crocketeers could simpy say, "Nice Piece of Tail". That is value added to any day. "Is THAT a Crockett in your pocket, or are you just happy to create anarchy?"

 

RockyRacoon's picture

The Crocketeers could simpy say, "Nice Piece of Tail".

Look out now.  Davey had good taste in hats.

One of them was probably a distant relative.

macktheknife's picture

Sorry-RR.  If I recall the words to your theme song - they go like this:

And now Rocky Raccoon he fell back in his room

Only to find Gideon's bible
Gideon checked out and he left it no doubt
To help with good Rocky's revival, ah

Oh yeah, yeah

No hard feelings, and, remember, in the end, you rearrange your markings, and you are a skunk.  Maybe your avatar could be born again as Pepe Le Pew?  

RockyRacoon's picture

I try to cover all bases.  One can't have too many friends -- or literary references.

Cathartes Aura's picture

while I understand the reliance on porn-style bonding words, maybe you also understand how some people are put off by such base-ick thinking that devalues their humanity. . .

'course, if you're going for pulling in the masses. . . porn is the common language, yeah.

palmereldritch's picture

"...the second the patterns break, the algos responsible for the churn pattern disappear..."

Reminds me of the term used to describe water clarity as the result of suspended particulates: turbidity.

Tho in this case it's probably closer to turdbidity

laughing_swordfish's picture

With all the comments on the impunity of the banksters;

OF COURSE they are going to get off with "wrist taps" , including no admission of wrongdoing, etc. etc. etc.

The PTB don't mind the wrist taps, as they court they fear most is The Court Of Public Opinion.

You see, from TCOPO there is no appeal, no redress - no alternative but facing millions of well-armed proles with pitchforks, torches, tar, feathers, guillotines and rope.

That's why the biggest thing in the Financial Reform bill was the exemption of the SEC from compliance with the Freedom Of Information Act.

Now, unless bloggers or whistleblowers go public. we'll never know...

 

 

DoChenRollingBearing's picture

Reposting, picking up on Village Idiot's call to arms:


Let's pick a day and make this easy for everyone.  How about Thursday, August 12?

EVERYONE goes to their ATM (early enough during the day) and pulls out the max you can.  When the machine runs out of money, go into the bank and ask for $1000 (sort of a fine on them for not having enough money in the machine).

I pick Thurs, Aug 12 because it gives a little time to organize and get the word out.  Then Thursday's and Friday's market action would be REAL INTERESTING, hmm?

I'm ready, let's do it.  Thanks again VI for your call to action yesterday.

 

EDIT: I think I am going to repost this a few times in similar upcoming threads.  Alternative ideas welcome (as VI has said).  Oh, and buy some gold too.

trav7777's picture

You just don't get it, do you?

If everyone tried that, they would lock the banks and prevent you from taking your money out.  The bank would default on its loan to you which is what your bank account is.

And they'd lock up all of you as financial terrorists.

If the HFT wants to run the market up to a million, just GO LONG.

WTF is the obession with "real value" here?  There is no such thing as it anymore.  We live in a fucking fishbowl.  How else can an ordinary chap get a smoking hot 20 yr old from the 3rd world?  It's because we live in the American Dream...a fantasy world.  Where richness and opulance is guaranteed and all of that.

Hell, strippers were getting rich brokering mortgages!  That's all anyone wants is that type of hustle casino.  I'm kicking myself for not staying in IT on W/S...I'd have my HFT algos writing out a big middle finger w/ TF letters.

Don't fight the system; you can't.  It'll collapse when it does, but trying to drag 300M ppl out of their self-induced slumber will just make them angry at you.

The Matrix analogy was BULLSHIT.  Cipher had it RIGHT.  Of what fucking value is TRUTH to anyone?  Stop being so rational and expecting the rest of the world to be rational too.  They're not.  Read Keirsey or study MBTI about this.  At most 10% of the population can even hold a logical thought.

DoChenRollingBearing's picture

trav7x4, system is going to go down anyway.  And drag everything down with it.

Buy some gold, maybe get money out before Aug 12.

And, um, I still do not follow all of the Matrix analogies (I did see 2 of the movies though).

It is the HFTs who are really the financial terrorists.  Since the SEC itself seems to be in on the game, it is up to us to punish.  Yeah, pulling a lot of dough out of the banks is a blunt instrument, but, VI is right.  We have to do something.

OF COURSE I am open to other ideas too!

DoChenRollingBearing's picture

Oh, and send the SEC / HFTrs / banksters / politicians, etc. for a quick trial in Iceland, put 'em all in dump trucks, and throw them into Katla.

B9K9's picture

Travis, I think War of the Worlds provides a much better analogy to express the points you are making.

The founders of the USA had around 25-33% of the colonial population behind them. In our present circumstances, that number might be around 2%.

Since this is the case, one simply cannot mount an effective challenge. Therefore, there is nothing one can do except wait & see if the enemy destroys themselves.

That's why WotW is so apt. Humans were on course of being wiped out; yet one day, it was all over. Not of their own doing, but by the monsters being poisoned by the very life giving environment.

The power-elite either blow another bubble, in which case it's party time once again, or they don't. They know the historical outcome when they fail - it's why they have that pleasant little second home in the ME.

Our task is to simply (a) understand what is occurring; and (b) be prepared to act accordingly in response to the respective potential outcomes.

If there's another bubble, then it's securitization time all over again. If not, then it would behoove one to sure as hell (re)locate to a city/region/state where you share the same race/ethnicity/education/political viewpoints as your neighbors.

The one place you DON'T want to be when a 2 or 3 way (assuming it's white-black-brown) civil war breaks out are contested regions where minorities in majority areas are massacred & driven out. Oh Regional Indian can probably tell us all about the '47 Partition if anyone happens to be interested.

Cathartes Aura's picture

Deepa Mehta's film "Earth" is highly recommended, as well.

http://en.wikipedia.org/wiki/Earth_%281998_film%29

Marla And Me's picture

B9K9,

I have to take exception with one thing; not all TPTB are heading to the ME when TSHTF.  The Dulles, duPont, Bush, Rockerfellers, Morgans, etc. are not heading to the ME when the time comes.  Sure, plenty others will, and they will pay the price for letting religious settlers set the tone for their agenda (they will overextend them too), but it isn't like what's told in the protocols.  They only reason I take exception is because, the times being what they are, I like to know who's dinner table I am welcomed at, being a human being and all...

PatsPal's picture

Wrong. Its cowards that are afraid of government. In the big picture it is the government that is afraid of the people and not the other way around.  They have you so scared and brain washed that you take no action. I hear this cry over and over, "there is nothing you can do about it" . That is what they want you to believe. So, let them close the banks on that day and throw millions in jail for acting on a freedom that is given in the bill of rights.  What is the charge sir? I can close my account and stop doing business whenever I want. It just so happenned that I picked this day your honor. I didn't know anything about this movement. Please, let them close the doors and keep them closed. If what you described as what would happen then that would be a huge victory. It would go mainstream and every person in the country will be withdrawing money the very next day. They can't stop us once it gets growing.

dcb's picture

i program my trades before hand in the s&P. in the old days yesterday would have gapped down and continued with human traders. but you have to understand the futures. How can the thing not be manipulated when the open on almost every day fits exactly in my trend line.

it is a joke. if there were more people trading, it would be different. the less people the more the algo's can take over. so when there is less and less volume the patterns become much more predictable. then it becomes easier to manipulate the market ever upwards.

 

Restcase's picture

To paraphrase an old hippy cliche:

If bots run free, why can't we?

(Great post, BTW)

Ardent Spirits's picture

It's now obvious that technology has run rampant. Do you have to have a computer on the floor to do this stuff? Some obvious observations. It won't take long to bankrupt or run off all the widows & orphans. You can kiss retail stock action goodbye. And what about the country? I hate to rant patriotic here but the markets are the source of our wealth & the supposed finance of our commerce. I realize these people at the top don't even call themselves Americans anymore but the market isn't supposed to be a monstrous casino. Even the most vicious & jaded of these folks must realize what's at stake here. It can be broken beyond repair. If that happens we all get flushed, them too.

MarketFox's picture

One second minimum....

Good riddance to HFT influences....

The SEC will never be able to think about simple solutions to what seems to be complex problems....

CustomersMan's picture

 

 

I sense something else going on and its this.

 

Imagine you were able to call the top management at one of the larger cap companies and tell them to watch their screen on their company's stock.

 

As they are watching you take the stock down 5 points. You then do the market cap math and tell them how much they just lost.

 

Then you take the stock back up to +1 point on the day and then you tell them where you're going to close it for the day.

 

After this demonstration, you tell the top management people you want all their business, stock option exercise, corporate, 401K, personal brokerage, etc..

What do you think they're gonna say?

thesapein's picture

If you recorded the call...

Not to disagree, I just imagine a similar scenario going on but far less blatant. 

TraderTimm's picture

After staring at the HFT patterns and contemplating the service that zerohedge provides, I decided to make something. Took a massive tagcloud generated from the front page posts of the site, and did a little manipulation to make it a big 'ol poster image.

Enjoy! (That is until my 100MB monthly limit is exhausted on flickr I guess.)

http://www.flickr.com/photos/tradertim/4846759203/sizes/l/

If you want a different caption - suggestions welcome: tradertimm {at} gmail.com

 

DavidPierre's picture

The latest batch of crop circles in England are beautiful.

http://www.lucypringle.co.uk/photos/2010/jul.shtml

I'd love to know how these patterns are created.

Someone...Someday may explain it... MYSTERIES !!!

A great place to find a screen saver or a signature picture.

 

 

thesapein's picture

I've never understood why these our mysterious to some people.