"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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Bear's picture

Aliens ... obviously.

thisandthat's picture

Do you really - because their already were, by the original creators; obviously, it was a too good business/pasttime for it to go away just like that.

PatsPal's picture

Amen brother. this is the type of creativity and motivation we need to push a wave to make a real change. Obama is smoke and mirrors to placate the masses. The fascist new the situation and painted a black facade on top of their crooked, cheating and swindler ways.

optimator's picture

Caution:  Do  NOT try this at home.

SuperBull's picture

Market manipulation?  Oh, please.  You naughty bunch~ :)

There is an invisible hand, we all know that...

Someone has to do God's work; that's the rule.  Someone has to play the role of a banker in the game of Monopoly.   

Don't be naive... We are pros, here...  Come on, what's next?  Hmmm?  Can you seriously say goodbye to your lifestyle?  Can you seriously give up all the benefits?  Who is going to pay the bills?  Your baby's diapers?  Your rent?  Your pension?  (You do wish to retire at 'some point', right?)

Come on, you are smarter than this.

 

Look, you and I know that we will all be back to the trading desk next week.  Same old, same old... Just like the patterns you see above. 

 

I see that you folks are still glued to the screen.  Come on folk, let's get outside! 

Go to the beach!  Catch some fish!  Come on!  All the bad news will wash away.

Fill yourself with happiness and love.

 

Grab some cookies and cupcakes.  Pamper yourself, you deserve some sweet stuff!

 

Enjoy a sweet lovely wonderful weekend.  Remember, you deserve better!

PatsPal's picture

Is this you Mr. Congressman? I guess zerohedge is becoming so popular that soon they will try to infiltrate the blog and cause doubt and misdirection. Someone junk this clown.

Ardent Spirits's picture

Hey, Are you offering us teckkys & geeks a piece of the action to shut up? Might consider it but I can't speak for my fellow bloggers.

Ardent Spirits's picture

Is this a sort of re-run from the 80's? As I recall there was a tiff about computerized trading back then. Of course it was all stone age compared to this HFT stuff. As I recall trading was triggered by certain market conditions. I think it led to some sell-offs etc & there was some sort of stink. Were any legal precedents set back then? I know certain things were eventually changed in the markets because of it.

Tripps's picture

this post proves alot with these patterns. We are literally seeing the visual patterns of their manipulation as they are so disctinct and interesting depending on the stock they analyze. As someone said, all music can be viewed as a wave file for example with unique patterns as well. everything is energy and vibration.

We have caught these morons red-handed. the game is rigged. the jig is up.  if you continue to play in this market you continue to be a pawn of the manipulation and fraud.

 

some of you are traders and would do nothing else..many of you should make like a tree like many did after the CRASH, and after the recent Flash Crash. Our markets are infiltrated by terrorists and more flash crashes will occur. in fact they crashed Cisco for a few minutes the other day! Nothing has changed!

 

Bear's picture

Learn the signs and play their game.

FranSix's picture

OK- the bulk of these high frequency trades are utterly futile, don't exchange any money, and buying and holding or shorting and absorbing the premium over a long period is a superior strategy?

PatsPal's picture

How about "Protest before nothings left!" or "Don't be a dummy withdrawal your $$"

candyman's picture

is there a way to fill these bids thereby sinking the whole f' in ship of these guys?

PatsPal's picture

There is zero chance for that. The only hope the people have is to form a more perfect union. Awareness is the key to success. We need to find a way to get people to ask questions. To want to know. Main stream is under the control of our fascist government and only a massive movement from within can topple the evil. It has been done before and it will be done again. The colonials didn't have the advantages in technology that we have today. Word was  spread mouth to mouth, home to home until a powerful movement was created. It happenned in the 1960s civil rights movement. It is very possible and this is what the oligarthy fear most. Hence control over the media. We have the internet. We have blogs. All it takes is communication and cooperation. Just don't stop spreading the truth. Zerohedge is our spark which can turn into a blazing inferno!

PatsPal's picture

The banksers are comming, The bankster are coming. Don't steal the government hates competetion.

PatsPal's picture

Want change? Take your change. 3/.10/11

gallowglass's picture

Who cares about all this stuff? Snooky has been arrested!!!

Fast Twitch's picture

Something patriotic and anti oligarch with an apocalyptic theme...? How about " Charlie Don't Serf...! "

 or " Serfing USA...! "

 

don't know ?...just taking a kick at the can

Bear's picture

"the SEC still fails acknowledge that it is precisely the HFT market participants that persist in destabilizing stock prices"

SEC, SEC, SEC, SEC, Are you kidding? ... they think that this is stabilizing prices.

Maybe they are either are too busy fending off FOIA requests or better yet too engaged in "Hollywood comes to the Farm" on their Apples. 

Misean's picture

Hey Village posted up on your point but it's way old.  Try this:

Kelly's Heros

http://en.wikipedia.org/wiki/Kelly%27s_Heroes

"Oddball: Who is that guy, Crapgame?
Crapgame: Him? Name's Kelly. Used to be a lieutenant, pretty good one, too, till they gave him orders to attack the wrong hill. Wiped out a half a company of G.I.'s. Somebody had to get the blame and he got picked."

"Kelly: [after he finds the hidden gold bar in the Colonel's bag] Sit down on this bench. I want you to have a drink.
Col. Dumpkopf: Under the Geneva Convention...
Kelly: This isn't Geneva, Colonel."

Zero Debt's picture

Reminds me of the DOS game Scorched Earth.

 

Dr Hackenbush's picture

"thou shall not be bastardized hucksters"

Village Idiot's picture

A tremendous amount of ground covered today.  Look at what has been accomplished -

  • 1000 people resonating
  • ATM withdrawal (august 12)
  • Symbol of unity and acknowledgement (bumper sticker)
  • Some really smart traders/analysts/people who can reproduce the sound of stock trading, who, with time and tools, might give some "right back at ya" or at least continue to "expose"
  • a call for organization

And the last seed of an idea coming from, MacktheKnife, who, whilst tugging at a raccoon(raccoons bite, I know), suggested hanging animal tails from car antennas. Forget tails...bankster bobbles, hanging from car antennas!

There are the naysayers and such who will strike up the band - that's ok.  Several people think that we have an easy starter here. I do too.  I may have thrown out a couple of organizational ideas farther up, check it out. 

I do freely admit that I am just a soldier of average intelligence.  I know that there are many people on this site who could get something this easy off the ground. Let's take turns. have some (legal) fun. We already have plenty to keep us busy. 

Where is the incubation room? And who might volunteer some PR time when we hit some mass? Keep it rolling.

 

PS - I think this is a thread worth saving - good thread. 

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

Before I look, i just want to say thank you. The bag is getting old.

Bear's picture

Anything for the Village Idiot

Village Idiot's picture

hey, the options for "village idiot" are endless.

PhattyBuoy's picture

How about a pic of Mel Gibson ...

addvalue's picture

What about 'ponzi busters do it at zero hedge', for the bumper sticker that is...

Cheers...

PS, any sound engineers here that can point me to some digital synth sw? tnx

Bear's picture

It finally happened ... those who believe that a Double Dip is coming are actually the ones causing it. From our friends at MSNBC: "When Double Dippers become economic party poopers"

http://www.msnbc.msn.com/id/38507261/ns/politics

welcome to the to the world of shouda, couda, wouda 

Kina's picture

If they did this in China each and everyone of them would be dead, with a bullet to the back of the brain, including all the regulators.

Privatus's picture

The SEC's corpse is really starting to stink up the joint. When's the funeral?

Brokenarrow's picture

It's not a matter or if its a matter of when................

 

I wonder which morning will have an article describing someone who just had enough.

 

Where I reside, recently a woman of "means" abused a support employee. He bashed her face in.

 

More to come.

Ardent Spirits's picture

I just Emailed this URL to my pension fund with a stiff note about the implications for them. I suggest that everyone with a mutual fund or pension fund at risk do the same. Don't assume they already know; they might be on autopilot.

Inspector Asset's picture

The one nice thing about the Federal Reserve is that there is only 12 branches.

A coordinated attack on all 12 branches, simultaneously, would be quite the feat.

Then we can talk solutions.

Downtoolong's picture

One simple metric I would love to see brought into the light for algo trading is the ratio between their action on the market (the trades where they hit a bid or lift an offer) to the trades where they are acted on by the market (have their bid or offer taken out). I think this simple ratio, measured separately for opening and closing of round trip trades, could become a key indicator of imbedded aggressiveness (manipulation). I would be very interested to know how these metrics for so-called market making or SLP algos compare to those of a traditional specialist on the exchange floor. 

Downtoolong's picture

I wonder how many small investors and 401k participants realize that, thanks to these behind-the-curtain changes in market structure, their game has gone from something like hopscotch to something like the obstacle course on the hit show Wipeout. I wonder how many realize their investments are being mugged, raped, and robbed at the speed of light every day, and that the chances their future performance will exceed their past experience is now less than the chance they will wake up one day and look like Brad Pitt or Angelina Jolie.  I wonder how many of their fund managers, brokers, and financial advisors have told them about it. Not many I bet. Most retail marketing rap has been unwavering through it all; “Come on, take charge of your financial future, you can do it. Pay no attention to what’s going on in the backfield. Our coaches (market strategists) have got that all figured out for you. Just give us your money and keep your eyes on the cheerleaders and the scoreboard. Give me a T, R, A, D, E, what’s that spell….what’s that spell…..what’s that spell.”   

Clampit's picture

Actually seeing the algo's work I'm a but disappointed at the mathematical simplicity. Nearly all are linear functions, no exponential, no logarithmic, no high order polynomials or anything. The only odd man out looks like the scribbling of child (not that impressive in the digital era), instead of mathematical elegance.

To me this is evidence for two possibilities; 1) either government has become directly involved, or 2) we really haven't wasted our best and brightest minds in finance.

Is it possible this *is* the PPT and the PD community is all to happy not blowing the whistle? 

New_Meat's picture

Jed-I'm guessing basic system characterization, approximate the puppy as linear time-invariant (valid maybe for small t), recharacterize on some period that they have determined and/or are determinig as we watch.  So the inverse transform for delta, step, and ramp can be made really fast and they may have a good-enough estimator, maybe reduced to single input, single output controller.

And we really don't know what other patterns they might be playing with.

#497842

- Ned

 

Ardent Spirits's picture

Could it be that these algorithms are just the low hanging fruit? Quick & dirty because they didn't think anyone would be looking for them. That brings up the spectre of what they will do now that these early & crude devices have been exposed. Then again what happens if they begin colluding with each other to muddy the waters? I think,unfortunately, the surface has just been scratched.

Ardent Spirits's picture

I went over to Nanex with the link in the post. These are the smartest guys in the room. Do you want to know their recommendations for stopping this shit? They don't say put a speed limit or any limit on how much you can put up, have at it. What they do say is that an offer has to be held open for long enough to be a legitimate offer. They define that as enough time for an acceptance to get to NY from CA or vise versa. This makes these 4000 quote a second charades very risky to put up because somebody might take you up on 4 or 5 hundred of them. Then what you gonna do Sucker? Maybe I'm getting parts of it wrong but the idea is beautiful. It has to be up long enough to be a legitimate quote. Quote, cancel, quote, cancel (repeat a zillion times a second) doesn't meet that criterion. It brings things back to earth & reinforces the business of the market over shenanigans.

theprofromdover's picture

Sow the wind, reap the whirlwind;

The Stock market should not be an abstract game, it should be used to reflect the value of companies, their prospects and their performance. In a real world, any decent analyst -presume they are all redundant now- would understand what BoA, Ford, Amazon, Apple, were doing, and the market value would float to the right level. Insider trading would also be easy to spot.

If they don't either time-delay the screens by a couple of seconds, (so that everyone is in catch-up mode and can't manipulate the values so easily) or regulate that bids have to remain on the table for a set time (see Ardent Spirits above), or set minimum holding time for any shares (say 24 hrs), then everyone who isn't playing with other peoples money will probably leave this game.

Maybe they all have already. (Addicts excepted -and you need counselling pal).

theprofromdover's picture

..... or charge a timewaster fee if you withdraw a bid.......

No More Bubbles's picture

That's why this is going to ZERO!

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