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Who Leaked Last Week's (Irrelevant) ADP Number?
In a rare example of forensic market analysis, the WSJ tackles the topic of market moving info leakage, focusing on some peculiar action ahead of last week's bombastic ADP number which ended up being the traditional contrarian indicator we have been saying for months that it is. The WSJ observes: "Data from two independent sources show that trading in select currencies and future contracts surged in the seconds before last Wednesday's unexpectedly strong private-sector jobs report from payrolls processor Automatic Data Processing Inc., raising suspicions that someone obtained the report ahead of its official release. Analysis of exchange-rate prices from foreign-exchange platform EBS
revealed a disproportionately large 0.12-yen spike in the dollar versus
the yen in the last tick period before the clock hit 8:15 a.m., the
report's official release time. The tick data, provided by CQG, are
broken up into small, intraminute periods as per the feed from EBS."And just in case someone is confused how illegal frontrunning works, here is the explanation: "Anybody who placed those orders stood to make large gains in the
subsequent minutes as first high-speed trading platforms and then
regular investors put through big buy orders after ADP reported an
increase of 297,000 in private-sector jobs, nearly triple the consensus
estimate for a 100,000 gain." We are confident the regulators are all over this most recent example of the Efficient Market Hypothesis meeting Johnny 5.
More from the WSJ:
Noting the anomaly in the CME data, some high-speed trading users of algorithmic news feeds, which turn indicators such as the ADP report into electronically executable information, told Dow Jones Newswires that they thought someone had obtained the report early. These people declined to be identified.
ADP says that it followed strict procedures to ensure the data are protected before that release time. "We maintain stringent security controls and procedures designed to ensure the confidentiality of the report prior to its release to the public every month. We are not aware of any deviation from our established controls and procedures prior to the release of the latest report at 8:15 a.m. on Wednesday, January 5, 2011," ADP said in an emailed statement in response to questions on the matter.
The Securities and Exchange Commission declined to comment on whether it had received any complaints about trading last Wednesday. The Commodity Futures Trading Commission didn't immediately return calls seeking comment.
Still, within the millisecond-sensitive context of the modern high-frequency trading environment, the tick data analyzed by Dow Jones Newswires are striking.
Out of the 3,666 E-mini S&P 500 contracts traded in the minute before the ADP release, 3,212, or 87.6%, were completed at exactly 8:14:56, four seconds before the official release, according to the CME. And then in the last three seconds of that minute, only 196 contracts were traded.
In that one pre-release second, more contracts were traded than in the full minute before the ADP data were released in any of three previous months, when an average of just 1,071 contracts were traded in the 60-second period.
In other words, this is the perfect confluence of HFT and illegal data leakage. It is certainly not the first, and definitely won't be the last.
"If I had information on interest rate differential, I could clearly use the FX market," said Bernard Donefer, adjunct associate professor at New York University's Stern School of Business, using industry parlance for foreign exchange. He also cited S&P 500 or 500 Mini contracts in the futures market as prime candidates for such activity because of their liquidity and the ability to place leveraged bets in those markets.
"Anyone could benefit from this type of trading," said Ciamac Moallemi, professor at Columbia Business School. With a just a 10-second advantage, anyone could beat a high-frequency machine to the trade, Prof. Moallemi said. And with just a 100-millisecond advance, a high-frequency trader could win.
What is more, Prof. Moallemi said, high-frequency trading tends to amplify the effect of an initial trade based on early information, as computers pick up on the momentum it creates, triggering additional trades.
What can we say: "perfectly efficient market."
In other news, retail investors are coming back in "droves", glad to be on the receiving end of upcoming slaughter in which they have looked around the poker table and were unable to find who the sucker is.
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was another Waddell operation?
Only marginally on topic, but here is the actual, real job creation numbers over the past decade.
-1.76 million jobs created from 1/1/2001 - 12/31/2010 (annualized) per the JOLTS data (hires - separations). See teh graffix in the link below.
http://manifestdeconstruction.blogspot.com/2011/01/jolts-and-jobless-recovery-decade.html
Clarence Beeks
It thought he was still somewhere in Africa with his man-ape.....
This is good (and neccessary) reporting by the ZH staff. Good work guys. ZH quotes:
In other words, this is the perfect confluence of HFT and illegal data leakage.
To maintain any measure of credibilty, regulators must STOP this kind of market manipulation and pre-release of sensitive market moving data and information. Very unfortunate. Good work Tyler.
Sh*t like this happens all the time. Especially with government numbers. insider trading is the rule, not the exception.
Only wish the SEC attended to this issue, in the same manner that Charlie Sheen attends to hookers.
How hard can it be to find out?
probably much much harder then say, trying to find out who pressured cboe to open way out of the money puts on LEH and then loaded up on them. To me not bothering to reveal those parties is akin to leaving the murder weapon in the gutter because we don't need it since we caught the murderer red handed.
right on
SEC is bussy watching porn, no need to worry
We will move market on the rumors ( which is excluded from inside trading)
Don't be messing on Johnny 5. He's the victim here.
#5 is alive. Of course, you are showing the evil terminator Johnny 5, not the lovable Ally Sheedy sidekick. Of course, I'm waiting for Johnny 5 to kick the butt of the blatant plagiarist Wall-E
I was wondering if anyone would pick up on the switch? :>) You win the prize, all the fiat that's fit to print.
How about a steel cage death match between the "good" Johnny 5 and Wall-e?
So who made the trades?
Perhaps the "expert network"
Still reeling from the (presumed) self serving 588,000 call by Barclays going into the BLS number. It might have been the single worst call ever issued. Why?
Yup no doubt about it. The lying, cheating, crooked SOBs who bring us the unemployment numbers, GDP numbers, and endless waves of bailouts for politically-connected cartels ... should be put in control of what traders are allowed to trade on vs. what will send them to prison!
Yup these lying liars, crooks and thieves will act purely in the "public interest" (whatever that is) if put in charge of what is considered "insider" knowledge and who gets to go to jail for its use!
Bring more force to bear on this #$*&! market to make it $%*&! free!
Heads up.
Looks like they sold the news on Tiffany.
Retail might be finally rolling over. Stay tuned.
They should rearrange the columns on every report and see what happens to the text reading trading algos.
flag as awesome (1)
Why, this is a sham of a mockery of a sham!
Travshamockery
Mocktravshamery
there are so many 'leaks' these days...hard to keep up...
O/T but Julian "The Big Tease" Assange is speeding up the release of the bank docs. You know what would be righteous? If someone else released the docs first and stole Assange's thunder. Then his book would be good. 'I was about to become the most influential person ever, and then George Foreman got his hands on the Fraudclosure bank docs. Now everybody has voted him King of the world, and I can not even pick up Yalie college girls.'
Whoever did it, it worked and the dogs are pulling the DOW to the sky!
http://static3.hln.be/static/FOTO/pe/6/6/6/album_large_4006821.jpg
Let them pull it ever higher, only ensures the collapse of the towering sand castle built of helium foundations will be all the more spectacular!
Who cares? Does nobody realize that crAAPL IS DOWN THREE CENTS!!?? OMG RUN 4 THE HILLS!!!
edit: never mind, it's all better now.
This could be a big nail in the HFT coffin. Hope it gets investigated.
The "esoteric" world has been talking of a big "Finance People" squeeze in the coming weeks, where, whether for public stunt or for undeniable criminality, some high-ranking members of the world of finance will be severely dealt with.
The same would obviously precipitate a calamitous plunge in the markets, since they are really all about the characters, larger than life because all they deal is with pixelated digits.
Watch for increasing scrutiny by the MSM. It's in the playbook.
ORI
http://aadivaahan.wordpress.com/2010/12/31/a-big-part-of-what-this-here-...
"...regulators all over..." Ha haaa. They would be all over you if you caused a big market decline, that's for sure. But Ben is now handing out medals to anybody propping up any market. I am surprised ZH has not been shut down for aiding the 'enemy' yet.
Not only is Johnny 5 sentient, he's psychic!!!
This is news, if you look at charts long enough , you would always see it. I Knew this a year ago.
No! HFTs cheat the market with inside information?
Each and every time folk get wise to yet another way the criminal syndicate known as Wall Street rigs the system, said syndicate simply creates its next rip off. By this, one should understand that even as Mary Shapiro relentlessly meets with L. Blankfein and J. Dimon and the like to figure out which SEC laws she should ignore and which SEC laws bankers are comfortable with her enforcing, the only thing left to the current criminal revelation is choosing the patsy. For the Criminal Syndicate Known As Wall Street has long since moved on and is rigging the system in other ways.
The current Wall Street scam is, in fact, ETFs. So FBI guys, if they want to get ahead of this whole constant crime wave, should simply be heading to criminal syndicate Wall Street banks [of which there about 19 to choose from] to discover things called Creation Units Machines. I'm just suggesting some ways that the FBI and the SEC could finally improve efficiency while...
...ENDING THE OBVIOUS FINANCIAL CRIME WAVE THAT IS CONSTANTLY ARBITRAGING TO DEATH EVERY SINGLE THING ON THE SURFACE OF THE PLANET! DUH!
This happens once or twice a month. Here's a 25 tick chart of the ES on Thurs Dec 16, 2010, as the Philadelphia Fed Survey surprised to the upside:
Prior day's low was taken out in seconds before the report, bids were pulled pulled, combined with large selling into an area where MIT orders would trigger buying. Algos play both sides for a minute. Thereafter a big net long position is accumulated in the confusion. Market never looks back into year end.
Yes....but can you ever know anything A priori? :>)
At the time, I thought there was a good chance the low of the day was in...relative conviction in my book.
BTW, yesterday's BK thread did flash across a few neurons as I wrote that.
Now continue that "Tipping Train" of thought back well over three years you fishhooked bunch of twitters... especially regarding any early "pre-market" posting(s) seconds or minutes ahead of frequently announced Fedsury's "special 8:30 AM monetary press release" all just in time for the morning premarket surge into the open as reported on CNBS's "The Manlies" daily morning Bankster/Gmen segments, which often resulted in immediate beta adjusted flash crashes/pre-market gap moves that make the whole entire period one just primed for a host of formal pre-market SEC timing investigations. Hear of any yet?
In other news, a judge (again) delays a court date regarding any disclosure of multi-national financials involvement in "the other" alleged multi-billion dollar alleged ponzi-type scheme of alleged international tax-friendly jurisdictions - specifically those involving aiding and financing of Standedfor's & Sons alleged misdeeds, but alas, it has recently been quietly swept under the rug of procedural delay, yet once again...
http://www.stockhouse.com/Blogs/ViewDetailedPost.aspx?p=110379