Visualizing The Death Of The Citi HFT Rebate Collection Machine

Tyler Durden's picture

Earlier this week Citi underwent a reverse 10 for 1 stock split to create the perception that the world's worst financial company is not a pennystock. So far it has failed miserably, with Citi stock dropping in nearly a flatline since the event. But the biggest casualty by far are the rebate collecting robots who would ping pong the stock among each other with no intention of ever holding, merely creating the impression of a deep and liquid market (repeat after us: volume is not liquidity, and HFT provides volume not liquidity). With the price increasing tenfold from before, it was expected that broad trading in the name would drop but a substantial margin. Sure enough, Nanex has helped us by preparing the relevant charts indicating the dramatic change in trading and quoting pre and post the change.

Quote and Trade Price and Size (note the extreme difference in quote sizes).
Trades and Quotes are plotted sequentially as they occur

3/21/2011 - Pre Split 05/11/2011 - Post Split
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Trade Price and Size. Size is scaled to the same amounts pre and post split.
Trades are plotted sequentially as they occur.

03/21/2011 - Pre Split 05/11/2011 - Post Split
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Trade Price and Size. Size is scaled by a factor of 10 (as this was a 10-1
split). Trades are plotted sequentially as they occur.

03/21/2011 - Pre Split 05/11/2011 - Post Split
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Quote Counts per second.

03/21/2011 - Pre Split 05/11/2011 - Post Split
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Quote Counts per second (5 second view).

03/21/2011 - Pre Split 05/11/2011 - Post Split
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Price and Tick Counts per second.

03/21/2011 - Pre Split 05/11/2011 - Post Split
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Price and Volume (scaled according to split factor of 10) per second.

03/21/2011 - Pre Split 05/11/2011 - Post Split
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Next Nanex looks directly at the heart of the issue: simple algo repeaters, or the same constructs that were responsible for the infamous crop circles:

It was common to see Citigroup ("eC") in our simple size algo filters
everyday, all day. These were usually low grade repeaters (such as the algo
images below demonstrate) that ran at fairly low to moderate quote rates. We no
longer see any from Citigroup.

03/21/2011 - Pre Split 05/11/2011 - Post Split
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Some of the most fascinating size algos could be found in Citigroup prior to
the split.

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