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Today's Dose Of "Crop Circle" Quote Stuffing Algos Focuses On V, DUG And TRN

Tyler Durden's picture





 

Now that nobody is left to trade except the Fed, the Primary Dealers and a few semi-sentient computers (and yes, be very afraid of Flash Crash like volatility to celebreate the second coming of Bernanke's Liberty 33 central planning committee), here is the daily quota of milisecond quote stuffing algorithms, focusing on V, DUG and TRN, from Nanex.

NASDAQ "Continental Crust", Symbol V.
2000 quotes in 1 second, alternating the AskSize in a 4 step up-up-down-down sequence, effecting the BBO along the way.

NASDAQ "Power Line", Symbol DUG.
Another nice 4 step repeater, this time from NASDAQ running at approx. 400 quotes per second and effecting the BBO along the way.
See Power Line 2 for a zoom out of the sequence.

Zoomed out view of the 4-step sequence in "Power Line".

NASDAQ "Blue Thicket", Symbol TRN.
A nice 4 step repeater from BATS running at 1,000 quotes per second.
See "Blue Thicket 2" for a close up of the sequence.

 


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Tue, 08/10/2010 - 16:00 | Link to Comment scratch_and_sniff
scratch_and_sniff's picture

What do these algorithms look like when they have spent some time in the actual market???

Tue, 08/10/2010 - 16:28 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

Don't know. When was the last time we had an actual market?

I would say it was long before the recent algo table tennis started. Which from what I can tell began in earnest about 2 to 3 years ago. Sure there's been algo trading for a very long time. Example is the 87 crash. I'm talking about co-located super computers punting the ball back and forth thousands of times a second. It's a pretty recent event considering everything.

Tue, 08/10/2010 - 19:54 | Link to Comment Abiggs
Abiggs's picture

"Which from what I can tell began in earnest about 2 to 3 years ago." Actually the colocation super computers have been around much longer than you think. Nasdaq has been offering colocation to anyone interested since they took over Verizon's datacenter in Carteret which was 2004 at latest. The smart money (every major bank) has been in this space since at least 2000.

What you're seeing is the effect BATS and especially Direct Edge has on the market. Check the TRF, Direct Edge controls nearly the same amount of volume as Nasdaq.

Wed, 08/11/2010 - 06:35 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

Yes, I understand that co-location has been around more than 2 or 3 years. The operative words I used were "began in earnest" and "pretty recent event considering everything".

It became absolutely imperative to be co-located within the past 2 to 3 years if you wanted to keep up with the other houses. 

Wed, 08/11/2010 - 17:38 | Link to Comment Abiggs
Abiggs's picture

"Which from what I can tell began in earnest about 2 to 3 years ago." Actually the colocation super computers have been around much longer than you think. Nasdaq has been offering colocation to anyone interested since they took over Verizon's datacenter in Carteret which was 2004 at latest. The smart money (every major bank) has been in this space since at least 2000.

What you're seeing is the effect BATS and especially Direct Edge has on the market. Check the TRF, Direct Edge controls nearly the same amount of volume as Nasdaq.

Tue, 08/10/2010 - 16:02 | Link to Comment Leo Kolivakis
Leo Kolivakis's picture

Ok, fess up, did anyone of you "girlie-men" buy this morning's dip? It was a gift!

Tue, 08/10/2010 - 16:08 | Link to Comment firstdivision
firstdivision's picture

How about all those dips you bought in March and April?  How come you do not talk about those previous dips you bought on? 

Tue, 08/10/2010 - 16:13 | Link to Comment earnyermoney
earnyermoney's picture

Not interested in blood money.

Tue, 08/10/2010 - 16:22 | Link to Comment homersimpson
homersimpson's picture

Leo never sells.. I guess we know who is the dip is now. Stick with posting chick pics...

Tue, 08/10/2010 - 17:24 | Link to Comment Astute Investor
Astute Investor's picture

So you can show your 1-day annualized return to your LPs?

A meaningless return stream over a meaningless time horizon.

Tue, 08/10/2010 - 16:05 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

These graphs all look like clear criminal evidence to me.

Regulators.  Time to regulate.

I'm so OUT of equities now...

Tue, 08/10/2010 - 16:10 | Link to Comment Steaming_Wookie_Doo
Steaming_Wookie_Doo's picture

Regulators? Um, they'll be right back after the donuts and tranny porn run out...

Tue, 08/10/2010 - 16:17 | Link to Comment Rimpinths
Rimpinths's picture

What's the crime?

Tue, 08/10/2010 - 16:47 | Link to Comment ZeroPower
ZeroPower's picture

?
Please keep your wiki-"evidence" to yourself.

OP is correct, no real crime here. 

Tue, 08/10/2010 - 17:00 | Link to Comment Rimpinths
Rimpinths's picture

It was a sincere question. It doesn't meet the definition of front running, even by the wiki definition. Please quote the section of that article that you think is relevant in this case because I don't see it.

What is the crime in this case? It's still a sincere question, directed to anybody that can answer without calling me an idiot.

Tue, 08/10/2010 - 22:30 | Link to Comment DarkMath
DarkMath's picture

I'm sorry I jumped the gun, technically it's BidRigging or Quote Stuffing. That's illegal end of story. The reason I'm pissed is that people don't recognize what's going on as a crime. It's too complicated. You've also been lulled to sleep by the cop on the beat saying "move along there's nothing to see here". After all the chairman of the SEC hasn't made an announcment that they just discovered evidence of BidRigging and will be making arrests tomorrow morning.

The reason I mention FrontRunning is technically that's what the Treasury/SEC/PPT have "chartered" the SLP (Supplemental Liquidity Providers) to do. They want the SLP participants to sniff out all orders BEFORE they get to the exchange so that SLP providers can be ready to make a market if large volume comes down the pipe. The SLP is institutionally sanctioned FrontRunning. Then once these ass-holes to get their foot in the door(their servers co-located on the NYSE etc) they are free to unleash all manner of scams, in this case QuoteStuffing.

In other words the Instutionally Sanctioned FrontRunning and the SLP program gives participants the cover to do whatever they want to do. The Fed and SEC need the SLP program or else the markets would sieze up like a car without any oil. SLP is a cornerstone in "Extend and Pretend". The SLP provides needed liquity and for that the Fed/SEC/Treasury/PPT would sell their teenage daughter into white slavery so a little FrontRunning and QuoteStuffing is just the price to play the game. Wall Street is run by men whose guile amazes me every day. Because they can get away with stealing they steal, right under the SEC's noses. They know the SEC can't do a god dam thing to stop them.

What I don't know is how much of the BidRigging/Quote stuffing is done by SLP and how much of it isn't. I suppose some of it isn't but how can the SEC enforce a double standard. One you condone FrontRunning then you have given up all manner of legitimacy. Wall Street is now a corrupt Casino in Havana in 1955. Anything goes, you've got the money you can make anything legal. The problem is people have a natural disgust for corruption or so I heard. I know I can't book a trip to Havana.

Move along people there's nothing to see here.

 

Tue, 08/10/2010 - 18:05 | Link to Comment homersimpson
homersimpson's picture

Bidrigging.

Tue, 08/10/2010 - 20:05 | Link to Comment Abiggs
Abiggs's picture

Really? How so?

Maybe you can add a wiki page for reference?

Tue, 08/10/2010 - 22:43 | Link to Comment DarkMath
DarkMath's picture

http://en.wikipedia.org/wiki/Bid_rigging

Every quote must be backed by a valid order. That's the law. However with all laws there are loopholes.

In this case the loop hole is the ability for Quotes to be cancelled. You may send 10,000 bid quotes/second but then you cancel them immediately after. In the mean time you've stunned the market for 500 milliseconds into thinking the price is a tiny bit higher than it really is, then you send a legitmate sell into the higher price. You can imagine there are any number of combinations you could do when anything goes.

I vote for stripper poles a top all the Specialist stations on the floor of the NYSE. Who's with me?

 

Wed, 08/11/2010 - 01:15 | Link to Comment EquityNoob
EquityNoob's picture

You do realize what you are suggesting is nonsense... By your rational if I submit an order I can never cancel it? And besides these are not quotes that are conjured into existence these are actual real orders submitted to to an exchange for which the sender is required to pay if he/she gets a fill by law...

The motivation of an hft shop is to capture short term alfa, it has nothing to do with the way you and I invest. More importantly it has virtually 0 impact on you as an individual.

This is simply capitalism, you find a legal way to make money you are allowed to do so.
Grow up and realize that it is your own mistake to participate in a market you cannot compete in or do not understand.

The real pb here is that the regulators are clueless, not creative and envy most that work at those big wall st banks... It was pathetic they could not reconstruct precisely the events of the may 6th crash tic by tic and even more worrying that no one had ever contemplated the possibility of such an event taking place....

Wed, 08/11/2010 - 09:36 | Link to Comment DarkMath
DarkMath's picture

Well EquityNoob you are indeed a Noob about Equities. Here's a link on Quote Stuffing:

1) http://www.nanex.net/20100506/FlashCrashAnalysis_Part4-1.html

"If you could generate a large number of quotes that your competitors have to process, but you can ignore since you generated them, you gain valuable processing time."

The reason I mention BidRiggning is that that is done too. It's all done. The fact that QuoteStuffing shows up in nice pretty crop circles for you to look at is just mere convenience. Is intentionally deceiving your counter party legal? No, it's not legal when you call it BidRigging, it's not legal when you call it Quote Stuffing. The reason the SEC isn't doing anything about it is they need the liquidity Moron.

2) "This is simply capitalism, you find a legal way to make money you are allowed to do so."

Oh that is such a sweet quote. Sometimes I wonder how Wall Street gets away with FrontRunning,BidRigging and QuoteStuffing. Then ZeroHedge gives me "EquityNoob" to help understand the complete ignorance of the American People. I wonder when I would next get to quote the great HL Menken well I'm here to stuff this quote down your throat "EquityNoob":

 

"No one in this world has ever lost money by underestimating the intelligence of the great masses of the plain people."

Tue, 08/10/2010 - 16:51 | Link to Comment KevinB
KevinB's picture

I made a similar comment on Dealbreaker about six months ago, for which I was repeatedly, and clumsily, compared to the smellier parts of a woman's anatomy.

Haven't been back; haven't missed it.

And I totally agree with you; only a chump would be trading equities on Wall Street right now. They're making Vancouver look like a bastion of probity.

Tue, 08/10/2010 - 16:10 | Link to Comment scratch_and_sniff
scratch_and_sniff's picture

I suppose a decent thing to do would be to start videoing the particular markets these things are deployed in, then when you get the data from your source you can compare them with the video...

Tue, 08/10/2010 - 16:17 | Link to Comment Sudden Debt
Sudden Debt's picture

Tyler, Check out this!

http://www.farsnews.com/media.php?nn=8905160650

 

http://static1.hln.be/static/FOTO/pe/13/0/13/media_xl_3827278.jpg?20100810170854

The war for Iran is getting pretty close now boys.

These "pits" are mass graves for all the American soldiers that will invade Iran. They are now calling America bluff!

My bet: By the end of september! (after the warm summer, so they have all winter)

 

Tue, 08/10/2010 - 16:27 | Link to Comment scratch_and_sniff
scratch_and_sniff's picture

Just out of interest, what did you actually translate the page with?

Tue, 08/10/2010 - 16:22 | Link to Comment old_turk
old_turk's picture

Don't know where 7777 is today, but:

 

Modern Art, bitchez!!

Tue, 08/10/2010 - 16:21 | Link to Comment Mercury
Mercury's picture

Just for kicks has anyone dug into May 6th quote data to see what that looks like in living color?

Tue, 08/10/2010 - 16:22 | Link to Comment Jendrzejczyk
Jendrzejczyk's picture

Is there no way for anyone but the SEC to track where these bots are living?   Come on all you hackers-----help US out here.

Tue, 08/10/2010 - 16:28 | Link to Comment earnyermoney
earnyermoney's picture

kind of thinking about grid computing along the lines of SETI but running algos to confuse the HFT bots.

Tue, 08/10/2010 - 18:15 | Link to Comment Jendrzejczyk
Jendrzejczyk's picture

I was thinking of sending out a YETI to track them down.

http://www.odt.co.nz/files/story/2009/09/a_weta_workshops_yeti_is_prepar...

Tue, 08/10/2010 - 16:34 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

You can lead a horse to water..........

When every one's doing "it", it's no longer illegal. And considering all this is "allowed" in the interest of "National Security" no one will be found guilty even if it was illegal. But of course it ain't illegal as long as the President declares it a national security matter.

Catch 22 anyone?

http://en.wikipedia.org/wiki/Catch-22

Tue, 08/10/2010 - 16:39 | Link to Comment Dismal Scientist
Dismal Scientist's picture

The Prez is too busy learning the lyrics of the following to sing along with Liberty 33 (after he is booted out of office), than listen to our issues...

http://www.youtube.com/watch?v=6_9blTxwFeA

Tue, 08/10/2010 - 18:21 | Link to Comment Jendrzejczyk
Jendrzejczyk's picture

Even if it is deemed not illegal, wouldn't it be in the interest of the citizens of this nation to know who is manipulating this market and why?

If this manipulation IS in the interest of "national security", is it then a crime to expose it?

Catch 44.

Tue, 08/10/2010 - 16:36 | Link to Comment Thunder Dome
Thunder Dome's picture

This site is so paranoid.  You guys are going to miss opportunity of a lifetime to buy equities down here.

 

 

Disclosure: Long AAPL

Tue, 08/10/2010 - 17:05 | Link to Comment Number 156
Number 156's picture

Dennis Kneale? Is that you?

Tue, 08/10/2010 - 17:40 | Link to Comment lizzy36
lizzy36's picture

Shockingly, I have heard that every 12 months since, well 2000. 

I might have a minimal amount of respect for you if you were to point out why equities are the buy of a lifetime. In the absence of a well reasoned argument, you are just another dude spouting the same line I have heard (and disregarded) for the last decade.

 

Tue, 08/10/2010 - 18:04 | Link to Comment homersimpson
homersimpson's picture

Sounds like the real estate clowns of 5 years ago... "You guys are going to miss opportunity of a lifetime to buy homes down here." No thanks.

Tue, 08/10/2010 - 16:38 | Link to Comment Smart-Ticker.com
Smart-Ticker.com's picture

Bats breeds them.  ISO orders are like holy water on them or wood or something like that.

Tue, 08/10/2010 - 16:42 | Link to Comment tmftdoyle
tmftdoyle's picture

mandy, like the rest of the cnbc on air staff is a pig

Tue, 08/10/2010 - 17:34 | Link to Comment SteveNYC
SteveNYC's picture

I'd still do her....

Tue, 08/10/2010 - 16:44 | Link to Comment repo 105
repo 105's picture

 I think I have an idea. Find a poor soul willing to entertain buying the house you can't unload. While negotiating at the dining room table, have 50 of your friends blow up your cell phone pretending to put in bids. The prospect will notice the feeding frenzy and think your house is sitting on top of an oil reserve or something and demand to be sold the house at the last bid price.  At that point, sign the contract, you just doubled the price of that POS you are living in.

Tue, 08/10/2010 - 16:49 | Link to Comment ZeroPower
ZeroPower's picture

I like your name lol (disagree with your idea however).

Tue, 08/10/2010 - 19:04 | Link to Comment william the bastard
william the bastard's picture

I might buy the next flash crash. Meanwhile my only other stock market dreams involve Mandy somehow.

Tue, 08/10/2010 - 21:13 | Link to Comment Honest_Money
Honest_Money's picture

I read today that correlation between the S&P 500 price and volume is at its lowest level (-0.25%) since 1987!

Wed, 08/11/2010 - 01:24 | Link to Comment Number 156
Number 156's picture

I sincerely hope this subject keeps getting covered.

Keep sucking the life out of the algo houses.

Do NOT follow this link or you will be banned from the site!