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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
Click for a larger image Click for a larger image

 

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
Click for a larger image Click for a larger image


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
Click for a larger image Click for a larger image


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
Click for a larger image Click for a larger image


Price and Tick Counts per second.

03/21/2011 - Pre Split 05/11/2011 - Post Split
Click for a larger image Click for a larger image


Price and Volume (scaled according to split factor of 10) per second.

03/21/2011 - Pre Split 05/11/2011 - Post Split
Click for a larger image Click for a larger image

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
Click for a larger image Click for a larger image

Some of the most fascinating size algos could be found in Citigroup prior to
the split.

Click for a larger image Click for a larger image
Click for a larger image Click for a larger image
 

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Fri, 05/13/2011 - 13:34 | 1272277 Mongo
Mongo's picture

*blip* *blop*

 

binary disco dancers in neon lights...

Fri, 05/13/2011 - 14:08 | 1272362 Thomas
Thomas's picture

Just like any other split: They wait for the stock to return to the pre-split price and then repeat.

Fri, 05/13/2011 - 15:19 | 1272575 Urban Redneck
Urban Redneck's picture

To be timed to coincide with the launch of QE3

Fri, 05/13/2011 - 14:20 | 1272396 Weisbrot
Weisbrot's picture

the TBTF bank is now TETT, Too Expensive Too Trade :-)

 

Fri, 05/13/2011 - 14:32 | 1272433 He_Who Carried ...
He_Who Carried The Sun's picture

Its the matrix! We're in it.

Fri, 05/13/2011 - 13:35 | 1272279 sabra1
sabra1's picture

but,but, they raised their dividend by 1 cent!

Fri, 05/13/2011 - 13:38 | 1272282 chrisd
chrisd's picture

"volume is not liquidity, and HFT provides volume not liquidity"

 

This needs to be the rallying cry for the destruction of HFT. Keep repeating it until the point is made clear.


Fri, 05/13/2011 - 13:43 | 1272296 Muir
Muir's picture

+1

Fri, 05/13/2011 - 13:51 | 1272317 Rynak
Rynak's picture

+1

Fri, 05/13/2011 - 15:26 | 1272602 pods
pods's picture

I think you meant +2?

pods

Fri, 05/13/2011 - 23:03 | 1273669 longorshort
longorshort's picture

Get lost you 12 year old.

Fri, 05/13/2011 - 13:53 | 1272325 Mercury
Mercury's picture

I suppose you could say liquidity = expected volume but it's ridiculous how the two terms have been thrown around  synonymously for so long.

Fri, 05/13/2011 - 19:17 | 1273277 rocker
rocker's picture

There is a easy solution for this. Tax each trade made. We would all be better off. Then the real liquidity trades would reveal themselves and the phony bots will have to pony up for their fraudulent trades. It's better than having the bots hedge your good trades for days pushing stocks up or down to benefit themselves. 

Fri, 05/13/2011 - 23:24 | 1273705 Rynak
Rynak's picture

Genius! It's like hashcash for marketbots.

Fri, 05/13/2011 - 13:36 | 1272283 oogs66
oogs66's picture

you had me at 10-1 reverse split...you lost me on the charts

Fri, 05/13/2011 - 13:45 | 1272302 SilverRhino
SilverRhino's picture

Well it was a 10 to 1 reverse split.   Of course now it looks like those 10 shares are only worth 9 shares in the last few days of trades. 

It will be interesting to see if C ever drops into single digit territory again.

Fri, 05/13/2011 - 13:36 | 1272284 SheepDog-One
SheepDog-One's picture

Supercool lookin charts, that shit is disco.

Fri, 05/13/2011 - 14:04 | 1272357 Reptil
Reptil's picture

ROTFLMAO

Fri, 05/13/2011 - 13:39 | 1272295 treemagnet
treemagnet's picture

Like seeing things through the eyes of a terminator.

Fri, 05/13/2011 - 16:07 | 1272735 Miles Kendig
Miles Kendig's picture

FTW

Fri, 05/13/2011 - 13:46 | 1272298 The Axe
The Axe's picture

Hearing AIG deal is off the table....its a no go...

Fri, 05/13/2011 - 13:50 | 1272305 centerline
centerline's picture

Sad day when it is time to trade in a terminal for an o-scope.

Fri, 05/13/2011 - 14:03 | 1272345 Trillax
Trillax's picture

+1

Fri, 05/13/2011 - 14:27 | 1272419 Manthong
Manthong's picture

Make sure you get a THz one.

Fri, 05/13/2011 - 16:11 | 1272750 Miles Kendig
Miles Kendig's picture

With that nifty wave lock feature.

Fri, 05/13/2011 - 13:51 | 1272310 covsire
covsire's picture

Don't under-estimate Citi.  They have a lot of infrastructure and brand power left.  Also, they've been selling off their bags of crap as fast as they can.  Of course, this means little if the Obama recovery isn't happening like we're being told it is.  Rumor has it, Citi has found several hundred 100oz bars of Gold in an old forgotten vault and has traded it for some of that magical Obama-fairy dust.  They're planning to sprinkle it all over 399 Park Ave this weekend.  By monday, our obamaconemy will rise and Citi will be catapulted to the high 80's with a 25 cent dividend by years end!

Fri, 05/13/2011 - 14:05 | 1272360 the grateful un...
the grateful unemployed's picture

you're right, their banking business is solid, they got rid of the retail brokerage at the right time, their leadership is relatively blameless in any of the 2008 shennaigans, (they are or were up to their ass in bad mortgage paper, but hey there are no consequences are there?) the government got behind them early, and the worset seems to be over. which  makes me cringe at this latest move. but if it shrinks the float, that is going to help i guess, i figured they would just buy it all back using Bens magic money, and then retire it, so maybe its a good thing

disclosure, went long near the bottom, and inclined to hold.

Fri, 05/13/2011 - 15:27 | 1272604 LawsofPhysics
LawsofPhysics's picture

This is the same citi that has been bailed out by the taxpayer some 12 times in the last 30 years right?

Fri, 05/13/2011 - 17:15 | 1273034 the grateful un...
the grateful unemployed's picture

they are actually a retail bank (although Goldman now has FDIC, is has no retail accounts) and they have international branches. They were in deep in the mortgage fiasco, but probably not as deep as BoA and Wells. A bank is a necessary business, they were bailed out by taxpayers, while Goldman simply stole all of AIGs assets, and then feigned innocence, while their top men run the Treasury department. there's really no comparison between them. their stock was punished, (and their shareholders). and i am sure as a money center bank they do a number of dubious things, their business model demands they participate in most of it. do i like their leadership, and their responsibility to consumers, yeah i do. i do business at a CITI branch and they treat me pretty well. I hear other people bitch all the time about Wells and BoA. and the vampire squid front runs my pension fund, and does zip shit for me otherwise. its a rough world ducklings, but making a few basic distinctions between who is who will help you a lot.

Sat, 05/14/2011 - 02:28 | 1273859 Clowns on Acid
Clowns on Acid's picture

Yo grateful...they were deeper than BOA et al, they were broke..they were bankrupt. Yeh they have sold off a bunch of shiite, but notably no other bank creatyed an entity called "bad bank" to place all there shiite. 

Fri, 05/13/2011 - 13:54 | 1272316 TruthInSunshine
TruthInSunshine's picture

Propaganda!

I see Green Shoots, an organic recovery, a strengthening economy with solid fundamentals, and if the government (which is now, in reality, the marginal additional consumer of the economy) pulls its extraordinary level of hot beef injections, all will be unicorns, pixie dust and rainbows again.

All is well!

 

 

 

/sarc

Fri, 05/13/2011 - 13:56 | 1272326 jstalin
jstalin's picture

I have no idea what I'm looking at.

Fri, 05/13/2011 - 14:13 | 1272375 g speed
g speed's picture

IMHO     --10 for 1 means ten shares traded for one share-- priced times ten at the moment of reverse split-- HFT (high frequency trading) will use computing power to place many trades a second and withdraw or sell instantly when price moves a % of one cent. The trading programs are compeating against other HFT programs so you see many different types of code. However the HFT trade in currency so the number of shares bid is dependant on the price. In this case Citi has volume at one tenth the presplit volume but the liquidity persists--- the crux- volume does not equal liquidity--

Fri, 05/13/2011 - 17:21 | 1273039 augie
augie's picture

+1

Wow. My four-year-old imaginary daughter could understand that explanation.

Fri, 05/13/2011 - 16:20 | 1272801 Miles Kendig
Miles Kendig's picture

Keep at it !!  It isn't all that hard to learn and once you do the fun is stupendous.

Fri, 05/13/2011 - 13:57 | 1272330 Xibalba
Xibalba's picture

shittybank

Fri, 05/13/2011 - 14:26 | 1272428 unununium
unununium's picture

Aw, just because they had to split 1 for 10 to afford a $0.01 dividend?  Harsh!

Fri, 05/13/2011 - 13:58 | 1272333 Reptil
Reptil's picture

Skynet threw up a little in it's own mouth.

Fri, 05/13/2011 - 14:00 | 1272338 Overpowered By Funk
Overpowered By Funk's picture

Markets are dead. End of story.

Fri, 05/13/2011 - 14:00 | 1272339 adonisdemilo
adonisdemilo's picture

NYSE:C 1,000,000 shares @ $4.60 = 100,000 shares @$46.00 date 29 th April 2011

100,000 shares @$46.00 = ZERO, date to be announced, hopefully soon. 

Fri, 05/13/2011 - 13:58 | 1272340 uhb
uhb's picture

well, I see light at the end of the tunnel... it's probably a train :)

Fri, 05/13/2011 - 14:03 | 1272352 Helvidius
Helvidius's picture

I don't know what all that shit means.

Fri, 05/13/2011 - 14:10 | 1272363 Rynak
Rynak's picture

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

 

Even more simple explanation: A bunch of computers selling and buying forth and back to each other, to give the impression that there is strong market activity. Bot A sells to bot B, Bot B sells to Bot A, Bot A sells to bot B.... and so on.

EDIT: Considering how systematic those algos are, i wonder if one could detect such bots, by simply rendering such charts to soundwaves, and then listening to them.

Fri, 05/13/2011 - 14:11 | 1272381 Helvidius
Helvidius's picture

Now see, that's what I'm talking about.  You're now my go-to guy for the ever needed "dumb this down for me" request.

Fri, 05/13/2011 - 14:18 | 1272401 Alex Kintner
Alex Kintner's picture

It's so true. US technology is amazing. All that trading activity done at peta-flop speed.

USA, USA.  #WHINING!

Fri, 05/13/2011 - 14:37 | 1272456 Rynak
Rynak's picture

Actually, it is china and taiwan who is selling the hardware to the USA (though, the software may be inhouse. And from looking at the graphs, it seems to work VERY primitive (but who needs "advanced" when the market is so stupid.... similiar to who needs good propaganda, when the masses are beyond stupid).

Fri, 05/13/2011 - 14:04 | 1272355 Gimp
Gimp's picture

I am all over that 1 Cent Dividend.....yeah baby, ROI is back

Fri, 05/13/2011 - 14:10 | 1272368 digalert
digalert's picture

Wasn't Citi a Cramer buybuybuy fave?

Fri, 05/13/2011 - 14:16 | 1272388 Piranhanoia
Piranhanoia's picture

The atheist priest must still pretend twice to keep its fictitious job.

Fri, 05/13/2011 - 14:27 | 1272416 FreakuentFlyer
FreakuentFlyer's picture

I'm a bit confused by these graphs. i suppose it would help me to compare these with some before/after graphs of 10-to-1 stock splits from the time when there was such a thing as true liquidity. i mean, that would be the scientific method?

Fri, 05/13/2011 - 14:44 | 1272475 Rynak
Rynak's picture

Ohhhh..... dude, look at this stuff..... this has written ARTIFICIAL and "ALGORITHMIC" all over it.... it doesn't get much more clear than sine waves FFS! You don't need some stupid scientific method or a degree or be an expert to know, that a natural market does not behave like a sine wave.

Fri, 05/13/2011 - 14:41 | 1272469 falak pema
falak pema's picture

citi is the TBTP bank par excellence. If it disappears in the ruins of the coming wind down it will be poetic justice. But it won't as it is Oligarchy protection prone. So there, what Caesar loves he protects. Get lost you rationalists!

Fri, 05/13/2011 - 14:42 | 1272476 rubearish10
rubearish10's picture

Great report but another one of those,,,,"on the verge" moments that many of us can no longer prepare for.

Fri, 05/13/2011 - 14:47 | 1272477 youngman
youngman's picture

looks like a good beat ....easy to dance to...I´ll give it an 85 Bob......

Fri, 05/13/2011 - 14:47 | 1272484 slewie the pi-rat
slewie the pi-rat's picture

the price charts look like somebody changed the cam in the sewing machine.

embroidery bot.

 

Fri, 05/13/2011 - 14:49 | 1272491 nah
nah's picture

Citigroup should have been liquidated along with all the bad business it created

.

instead i got to read this garbage

Fri, 05/13/2011 - 15:24 | 1272580 covsire
covsire's picture

No way, Citi won fair and square:

http://www.youtube.com/watch?v=1QWyg50K4MU

Fri, 05/13/2011 - 14:57 | 1272510 Plata con Carne
Plata con Carne's picture

Looks like a pervert with palsy trying to draw a vagina on an Etch-a-Sketch!

Fri, 05/13/2011 - 14:58 | 1272519 Moe Howard
Moe Howard's picture

They offered me CC no interest 21 months balance transfers & purchases.

I shredded the offer and mailed the empty envelope.

Fri, 05/13/2011 - 15:26 | 1272591 covsire
covsire's picture

Should have bought something you can easily re-sell for the same price and stuck the money into a CD.  Free profits.

Sat, 05/14/2011 - 02:14 | 1273854 Clowns on Acid
Clowns on Acid's picture

Good work Moe..feck the junsters, Curly would be proud.

Fri, 05/13/2011 - 15:02 | 1272522 jkruffin
jkruffin's picture

Everyone see all that selling when the first sign of an attack was believed to ocurring on the train this morning.  The market plummeted 100 points in seconds.  It is definitely time to get out if you are long stocks, because this ponzi on Wall Street is about to fall through the thin ice into the abyss.

We are seeing small caps (i.e. the ponzi Russell 2000(IWM) selling off hard. This is the precursor to the big board getting wiped out and sold off harshly.

Fri, 05/13/2011 - 15:23 | 1272587 UGrev
UGrev's picture

The HFT master control program used be "PONG". It's heritage is clearly shown here. 

Fri, 05/13/2011 - 16:36 | 1272718 Miles Kendig
Miles Kendig's picture

Great chart porn.  And with the employees of nearly everywhere, including Déjà Vu and Tryst knowing NOT to bank at Citi one has to wonder what this song is really about now .. besides learning folks that bank at Citi are trading to Chrysler.

http://youtu.be/u7aDstrDMf0

Fri, 05/13/2011 - 16:53 | 1272941 TheMerryPrankster
TheMerryPrankster's picture

As long as the federal government and all its spooks need a money laundering entity, Citi will remain viable. Of course should the empire collapse as happened in the USSR and the KGB go tits up, or is that the CIA, hard to tell the commies from the capitalists without a program anymore. - in any case should CITI no longer be needed for money laundering and disbursement of black funds, it would fail since it can't really operate as a business.

I own no banking shares of any banks.

Fri, 05/13/2011 - 17:09 | 1273009 HeavydutyMexica...
HeavydutyMexicanOfTheNorthernKingdom's picture

once again....

I'm guessing the guys who wrote the code for the software must have also designed the user interface. HTF can you look at that screen for extended periods of time? How is a novice supposed to derive any meaning from that? Badass UI/UX design pays dividends son. Too bad software in your industry is stuck in the 80's.

I got three letters for your industry...WPF...google it bitchez!

Fri, 05/13/2011 - 17:29 | 1273057 hangemhigh77
hangemhigh77's picture

Hey, maybe C can get in on the silver short with JPM so when silver goes to $500 they can be destroyed along with JPM.  Oh, they're already destroyed? Never mind.

Sat, 05/14/2011 - 02:13 | 1273852 Clowns on Acid
Clowns on Acid's picture

Wait a minute .. Cramer has been touting C as a value stock for a long time. Well until recently when he said he doesn't like any of the bank stocks..

Call him...for his analysis, and have the pleasure of getting front runned into obilivion.

Sat, 05/14/2011 - 15:37 | 1274554 jkruffin
jkruffin's picture

Whether it is $4 or $44 it is still a ShittyBank!!!

Sat, 05/14/2011 - 15:42 | 1274558 jkruffin
jkruffin's picture

Whether it is $4 or $44 it is still a ShittyBank!!!

Sun, 05/15/2011 - 10:21 | 1275916 Seymour Butt
Seymour Butt's picture

Just die already. Why is this Zombie bank still allowed to live? 

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