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HFT Caught-Red Handed In FX Trading

Tyler Durden's picture


After decimating equity and commodity markets, the HiFreqs have boldly gone and broken another market - FX. But that is not news: we reported over two years ago, that while HFT accounting for all of the churn - not liquidity - in stocks, bonds, and commodities, HFT had moved on to the final frontier, FX, where even the smallest moves now are catalysts for avalanche-like surges and plunges on the most meaningless of newslfow. What is news it that finally it has been caught in the act. From Reuters, which is also an involuntary accomplice in this latest HFT unmasking, courtesy of its institutional FX trading platform: "Thomson Reuters Corp is investigating whether one of its currency trading customers gained an unfair advantage when making high speed foreign exchange trades on its platform. Lucid Markets, a privately held electronic trading firm registered in Great Britain, may have benefited from trades using several connections on the Thomson Reuters Matching platform."


"As the operator of one of the largest FX dealing communities, providing a level and fair playing field for the community is paramount," said a Thomson Reuters spokeswoman.


The spokeswoman confirmed that an investigation was initiated when Thomson Reuters became aware of the issue, saying, "Thomson Reuters takes any accusations seriously and uses all the tools at its disposal to enforce its rules." She declined to provide further details as the investigation has not yet concluded.


Dierk Reuter, a founding partner at Lucid Markets in London who has no other known association with Thomson Reuters, said his firm is collaborating with Thomson Reuters on the probe. "We believe that we have been in compliance with Thomson Reuters instructions at all times," he said.


Clients are allowed two connections: one for trading and another as a backup.


A spokesperson for Lucid Markets in New York said the company is "still currently connected and trading through Thomson Reuters."

And now you know why the next time a patently fake and flawed rumor comes out of Europe, the EURUSD moves by 100 pips on what is completely debunked moments later, even as the new (and improved) price level sticks. Because in a market in which fundamentals have no bearing on anything, the only thing left is momentum... which works until mean reversion takes place.

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Wed, 10/31/2012 - 15:55 | 2935532 redpill
redpill's picture

The few remaining FX traders out there with a pulse may want to start to look at some job skill training courses.  I recommend plumbing.

Wed, 10/31/2012 - 16:04 | 2935556 ACP
ACP's picture

Plumbing can be good money. And you're helping to get rid of shit instead of stirring it up.

Wed, 10/31/2012 - 16:50 | 2935653 TruthInSunshine
TruthInSunshine's picture

Broken Markets Syndrome, bitchez!

Born in 2008, thought to have originated in the bowels of one or more full fractional reserve central banking institutions, has spread quickly in the manner of a highly communicable virus, has recombination properties that helps it easily jump to and infect different markets, and there's no known cure or effective treatment. If there's a market left that's not yet been infected, its time is running very short.

You can stab the full fractional reserve banking institutions that front for The Money Masters with your steely knives, but you just can't kill the beast.

The Night of The Living Dead Markets, bitchezzzz!!!!!!

Wed, 10/31/2012 - 16:05 | 2935557 cifo
cifo's picture

or cleaning, if you are thinking of the fan.

Wed, 10/31/2012 - 16:05 | 2935559 Orly
Orly's picture

I'm looking into bookkeeping, myself...

Wed, 10/31/2012 - 16:17 | 2935596 resurger
resurger's picture

or rat grilling

Wed, 10/31/2012 - 16:26 | 2935600 MsCreant
MsCreant's picture

For Halloween: GRILLER!




Go to the next step...rat ranching.

Wed, 10/31/2012 - 15:58 | 2935540 knukles
knukles's picture

And now, plumbing the depths of a Totally Unregulated Marketplace...
What could go wrong?

Wed, 10/31/2012 - 16:03 | 2935552 Lost Wages
Lost Wages's picture

Yes, I'm sure Dierk REUTER has no other association with Thomson REUTERS.

Wed, 10/31/2012 - 16:06 | 2935560 insanelysane
insanelysane's picture

So they were trading on 2 connetions but just with "backup" trades.

Wed, 10/31/2012 - 16:08 | 2935565 Misean
Misean's picture

No, they were probably aggregating the connections to increase bandwidth.

Wed, 10/31/2012 - 16:21 | 2935603 buzzsaw99
buzzsaw99's picture

Right, two connections. One for buying from oneself on the other. :snark:

Thu, 11/01/2012 - 04:39 | 2936862 Itch
Itch's picture

One connection was quicker than the other at certain times, fractions of a second, hence the latency arbitrage opportunity. There was no threat to the overall market, just to Reuters and their liquidity providers on this occasion. All connections cant physically deliver the same FX quote at precisely the same speeds over long durations of time, but most providers will term it as a an abuse of service if the user is seen to be blatantly exploiting this and boot them off the platform. However i get the impression that the HFT crew in this particular case have probably found some loophole in Reuters terms of use, hence they have got away with it and Reuters will be updating its rules ASAP. It was never going to last long as latency arbs are usually paired between two different entities so neither of them ever realise what is happening, but when you rip off just one provider they are bound to catch on quickly. Thats my take on it.

Wed, 10/31/2012 - 16:06 | 2935562 Misean
Misean's picture

I'm sure the solid $50 fine meeted out will discourage others from these sorts of shennannigans.

Wed, 10/31/2012 - 16:09 | 2935568 GoldbugVariation
GoldbugVariation's picture

The rant about FX surges on no news is fairly dumb.  It's no different from other markets.  Correlation, bitchez.

Wed, 10/31/2012 - 16:12 | 2935586 NotApplicable
NotApplicable's picture

No dumber than you criticizing an article by summarizing one of its main points.

Reading comprehension is your friend.

Wed, 10/31/2012 - 16:11 | 2935579 ziggy59
ziggy59's picture

No halloweenie treats today. . Just tricks from the wall street whores.

Wed, 10/31/2012 - 16:13 | 2935587 NotApplicable
NotApplicable's picture

Christie will let you have your treats on monday. Promise!

Wed, 10/31/2012 - 16:11 | 2935582 OMG
OMG's picture

Well someone should alert congress once they get a hold of it, they can give them boyz a stern talking to, maybe we can get an apology or something/sarc

Wed, 10/31/2012 - 16:13 | 2935588 HedgeAccordingly
HedgeAccordingly's picture

Once again the pathetic nature of our markets shines bright...

Wed, 10/31/2012 - 16:17 | 2935592 MsCreant
MsCreant's picture

High frequency shell gaming?

High frequency bag holdering?

High frequency hot potatoing?

High frequency pyramid scheming?

Or just high frequency thieving?

Wed, 10/31/2012 - 16:22 | 2935605 Ineverslice
Ineverslice's picture


Exactly.  Wait til they pay attention to the nations food supply and trade it right from under our childrens mouths.

Tired of this shit.

Wed, 10/31/2012 - 16:49 | 2935646 Fíréan
Fíréan's picture

High frequency algorithmic determination, prior to an incident or reportage, of who may commit a crime, contravene a law or regulation or act of disorderly conduct if an event occurs or is reported, based upon profiles constructed from internet activities and associations, and other telecomms activity.( edit : allows for incarceration prior to, and therefore avoidance of, the illegal activity)  Bets to be taken, and traded, on risk factor of incarceration or fines and bail, and risk of jumping bail, based hence upon algorithmic profiling.

Wed, 10/31/2012 - 16:15 | 2935593 news printer
news printer's picture
Spain empty highways bankruptcy

"Right now we can't meet our debt repayments. We are in the hands of the judge," said Jose Antonio Lopez Casas, director of Accesos de Madrid, the company that manages two major highways around the capital. The two highways, Radial 3 and Radial 5, opened in 2004 at the height of Spain's construction boom.

Wed, 10/31/2012 - 16:23 | 2935607 Orly
Orly's picture

Say, weren't these the guys who were going to build, maintain and toll the Trans-Texas Corridor?

Wed, 10/31/2012 - 16:27 | 2935614 The Proletariat
The Proletariat's picture

No surprise here....

Wed, 10/31/2012 - 16:33 | 2935620 seek
seek's picture

I swear I've seen the same goofy HFT patterns we've seen in stocks on the gold charts in the last couple months.

There is no market the HFT parasites won't infect if they are able.


Wed, 10/31/2012 - 17:03 | 2935683 Perpetual Burn
Perpetual Burn's picture

EBS has been cracking down on HFT. Reuters 3000, not so much...

Wed, 10/31/2012 - 17:12 | 2935700 Orly
Orly's picture

Happy Hallowe'en, everyone!

What's your costume?  I'm Darth Maul, The Clown Sith.  :D

Wed, 10/31/2012 - 18:06 | 2935823 Dealer
Dealer's picture

Mean reversion, bitchez


Wed, 10/31/2012 - 18:07 | 2935828 CalibratedConfidence
CalibratedConfidence's picture

I fucking hate bad algo's

Fri, 11/09/2012 - 04:25 | 2963663 tryhard56
tryhard56's picture

The more publicity this gets the better. Shine the light on it!


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