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It Took Algos 4 Seconds To Fully Process The Flashing Red DELL Headline

Tyler Durden's picture




 

At precisely 14:04:08 a flashing red Bloomberg headline hit that "DELL IS SAID TO BE IN TALKS TO GO PRIVATE." Moments later the stock slammed higher by 10% triggering a circuit breaker. Whether or not there is an actual deal behind this is unknown: considering the "two sources" used by Bloomberg gave virtually no details on who the buyers are, or what the vision for the pro forma private company will be, we are inclined to assume this is nothing but a big, and successful, fishing expedition by a party that sought to make a quick buck. Either way, it will be made known if there is a deal here within a few days, because unless some PE firm steps up they will be unable to say the 20% premium is based on a pre-announcement price, and will end up having to overpay by another 20%. What we do know, is something completely unrelated. Courtesy of Nanex, who have broken down the trades from the pre-headline prices of $10.90 to the halt price of just under $12.00, it appears that today's robotic algo brains take no more and no less than 4 seconds to fully process flashing red headlines. This is how long it took to send the stock in a straight line from the bottom of the range to the top, because all along the ride there were offers, until finally the offer stack was exhausted at the circuit breaker price. To anyone who blinked and missed the move: condolences - just get a collocated algo and any future LBO announcements - real or fake - will be far more lucrative courtesy of an electronic trigger finger located right on the exchange.

Source: Nanex

 

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Mon, 01/14/2013 - 15:57 | 3151831 SmoothCoolSmoke
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Them there compooters Ma.....theys fast.

Mon, 01/14/2013 - 15:58 | 3151835 ZippyBananaPants
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I just took me 6 seconds to realize the fart I just delivered, was not just a fart!

Mon, 01/14/2013 - 16:04 | 3151851 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

You Bidersharted?

Mon, 01/14/2013 - 16:13 | 3151876 redpill
redpill's picture

Oh if I only had access to the Bloomberg newsfeed for just a few minutes.  

BREAKING>>> TREASURY AUCTION GOES BIDLESS

BREAKING>>> COMEX DEFAULTS

BREAKING>>> AUDIT OF AAPL REVEALS MASSIVE FRAUD, INVESTORS SUING

The fun we could have!

Mon, 01/14/2013 - 16:39 | 3151971 Smuckers
Smuckers's picture

Now now, don't go running around spouting truths.  Doesn't do anyone any good.

Mon, 01/14/2013 - 17:14 | 3152078 Koffieshop
Koffieshop's picture

I know you are joking, but you may be onto something here.
Swinging the HFT trades like this could make a lot more money then one would need to spend to employ some competent hackers.

Mon, 01/14/2013 - 17:19 | 3152095 seek
seek's picture

You know, given that crap trades have happened with bogus twitter accounts, if one were so motivated you could shadow a real news source with a plausible fake account for six months, then drop a bomb like the above.

If you work for GS or JPM, you can even do this without being prosecuted!

Mon, 01/14/2013 - 16:13 | 3151884 the mad hatter
the mad hatter's picture

M&A Advisor: Dude, you're getting Dell!

Mon, 01/14/2013 - 16:10 | 3151859 TruthInSunshine
TruthInSunshine's picture

 

 

  • MARKET TALK THAT BRITISH PETROLEUM SEEKS TO PURCHASE APPLE COMPUTER, XEROX, KODAK & GATEWAY COMPUTER CORPORATION IN "PACKAGE DEAL", ALL AT 400% PREMIUMS OVER CURRENT AASBMD (ALREADY ASININE SYKWARD BERNANKE'D MARKET VALUES); source is unconfirmed.

 

  • MARKET RUMOR THAT NEARLY ALL PUBLICLY TRADED COMPANIES ON ALL INDEXES, REGARDLESS OF CASH POSITIONS & STATUS OF BALANCE SHEETS, WILL HIKE DIVIDENDS BY A MINIMUM OF 1000%; anonymous source reporting.

 

 

Mon, 01/14/2013 - 16:12 | 3151880 Xibalba
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Ben Bernanke caught giving a $RIMMjob in the $GS elevator. 

Mon, 01/14/2013 - 16:19 | 3151892 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

He is getting excited throwing dollars in the furnace at the Marriner Eccles building.

Mon, 01/14/2013 - 16:12 | 3151882 Global Hunter
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Ben Bernank to print a new Beatles album, vinyl sales expected to go parabolic, through the roof, hockey stick and all that!

Mon, 01/14/2013 - 15:56 | 3151832 Gubbmint Cheese
Gubbmint Cheese's picture

<go> <go> gadget "buy"

Mon, 01/14/2013 - 15:58 | 3151836 fuu
fuu's picture

Efficient!

Mon, 01/14/2013 - 15:58 | 3151837 buzzsaw99
buzzsaw99's picture

don't worry about michael dell, he got plenty already and he's fixin' to get much much more. pension fund losers lose again. SUCKERS!

Mon, 01/14/2013 - 16:01 | 3151842 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

If it turns out there were no talks to go private, the hilarity will be due to the fact that Dell never denied the rumor while watching their equity spike.

Mon, 01/14/2013 - 16:02 | 3151843 I Am Not a Copp...
I Am Not a Copper Top's picture

I read "DELL IS SAID TO BE IN TALKS..." and that was enough for me, I furiously logged into my E-trade account and by the time I hit confirm, I got in right at $12.00!  Woohoo!!!!!  no, wait... did i just get screwed?

Mon, 01/14/2013 - 16:01 | 3151844 fonzannoon
fonzannoon's picture

Dell today is the market holding out one hand and yelling LOOK AT ME while they hold the other hand which would consist of another tech stock about to break all support behind their back.

Mon, 01/14/2013 - 16:09 | 3151871 Global Hunter
Global Hunter's picture

I was thinking along the lines a short squeeze (posted 4 mins after you) but that didn't make sense to me, your post does.

Mon, 01/14/2013 - 16:02 | 3151847 Smuckers
Smuckers's picture

If it took under 4 seconds, the algo wasn't running on a Dell.

 

Mon, 01/14/2013 - 16:04 | 3151855 AccreditedEYE
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VIX-termination clock counting down... time for news highs on stocks. Our Chairman MUST look good at his QnA.

Mon, 01/14/2013 - 16:05 | 3151857 Global Hunter
Global Hunter's picture

Did goldman release a note recommending a short dell position this morning?  WSJ report 60mm shares short as of Dec 31, float of 1.74bn doesn't seem that high to me...

Mon, 01/14/2013 - 16:06 | 3151860 hannah
hannah's picture

circuit breaker prices and overhead resistance matched...?! how prophetic.....

Mon, 01/14/2013 - 16:08 | 3151869 chaartist
chaartist's picture

This is good. System is getting faster at eating itself

Mon, 01/14/2013 - 16:31 | 3151922 philosophers bone
philosophers bone's picture

Time to start issuing press releases with National Enquirer type headlines, such as:  "APPLE TO BUY GOOGLE AT DISCOUNT" (speculates market observer).  Others?

Mon, 01/14/2013 - 16:30 | 3151926 WezTheJuic
WezTheJuic's picture

Dam.

Last time I gave this some thought, I was thinking 30 sec. Think about it, to read, to digest, and then to act.

Even then, is that program just a headline hunter, or an article finder? (And then, that is before the program is keyed for which source is defined to be acceptable, and that is before so many other variables.) OR, is it just another test run like the "Gator Algo"? (Tyler.)

Even then, 4 Seconds. I smell a loop-hole being sown up. Hmmmm. Noted.

Thank-you for sharing Tyler.

Cheers,

Pens,

Mon, 01/14/2013 - 16:33 | 3151932 negative rates
negative rates's picture

Those algos are completely useless.

Mon, 01/14/2013 - 16:39 | 3151952 Floodmaster
Floodmaster's picture

The Stock Market is a bankster playground,it's only good if you have the right friends. Respectable companies should be private.

Mon, 01/14/2013 - 16:37 | 3151955 A Lunatic
A Lunatic's picture

Everything from investing to murder has been computerized; it's no wonder our learned money men have so much free time on their hands to devise grand schemes for directing the future...........

Mon, 01/14/2013 - 16:41 | 3151978 recidivist
recidivist's picture

I would like to see a variable cap gains tax depending on how long you hold the asset.  Go long and hold something for five years, the cap gains rate for that transaction should be 14%.  But if you make your money with HFT and hold for 100 milliseconds, 90%!  (Let the down arrows commence!)

Mon, 01/14/2013 - 16:50 | 3152005 helping_friendl...
helping_friendly_book's picture

How about taxing a dime for every cancelled trade?

That should slow them down!

Tue, 01/15/2013 - 03:36 | 3153437 MeelionDollerBogus
MeelionDollerBogus's picture

+1 for theory & intent, but I question: who COLLECTS this tax? How is that good for us?

Mon, 01/14/2013 - 16:43 | 3151984 helping_friendl...
helping_friendly_book's picture

Apple is about to dip under $500/share. This should launch many orders? To Sell i.e.

Mon, 01/14/2013 - 17:01 | 3152032 helping_friendl...
helping_friendly_book's picture

Looks like Kevin Henry is fighting to keep it over $500. To the wire we go!

Oh well!! Not today! It is only Monday though!

Mon, 01/14/2013 - 17:25 | 3152117 bluemaster
bluemaster's picture

> 1 second is not algo trading! 

Mon, 01/14/2013 - 18:42 | 3152383 itstippy
itstippy's picture

The algos didn't scan the Bloomberg headline and then act.

Numerous insider human traders were tipped off that this Bloomberg headline was coming, and when.  They couldn't hit "buy" until the headline actually hit the wires, or they'd trigger insider trading flags.  But they were all set up and had their fingers poised over the enter key, like a guy trying to snipe an eBay item at the last second.

The headline hits the Bloomberg terminals.  Insider humans hit "enter".

The algos recognize the price action instantly, and try to frontrun the buys (as they're programmed to do).  But the buy orders are unusually large and numerous.  Within 1 second the algos are driving the algos.  At 4 seconds critical mass is reached and the circuit-breakers halt trading.

 

Tue, 01/15/2013 - 05:16 | 3153480 geekgrrl
geekgrrl's picture

Thanks for this post. I was initially wondering if it was headline reading algos, but your explanation makes more sense. The curve looks like a cumulative distribution function for a normal distribution, which would be what you would expect with a bunch of independent actors all waiting for the same event, but timing it slightly differently. A lot of the algo "events," "malfunctions," or whatever you want to call them, seem much more erratic, and at least to my untrained eye, bizarre.

Mon, 01/14/2013 - 17:37 | 3152161 orangegeek
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Shorts got squeeeeeezed!!

 

Another low margin hardware success story.

Mon, 01/14/2013 - 17:59 | 3152233 CaptainSpaulding
CaptainSpaulding's picture

Must be those intel Quad200 9000GHz processors

Mon, 01/14/2013 - 20:37 | 3152657 Dr_Lucid
Dr_Lucid's picture

I hope other companies catch on to this trick.  Dell already cried wolf re: going private, but hey why not try again? 

It's like the fat kid at the playground with all the big marbles in the sandbox and nobody wants to play.  So instead of making friends, he says he's packing up and going home taking his fat marbles with him.  In this case its fat desktops and a lackluster stock price.

Molycorp should try this.  So should Office Depot or Sturm Ruger. 

Any wagers out there on which company would be next to want to say they are crying in their beer and want to go private?

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