This page has been archived and commenting is disabled.

The Huge Shift In Market Structure That Occurred Yesterday

Tyler Durden's picture


Equity markets relatively collapsed intraday yesterday given the recent lack of volatility with the range around four times larger than the three-month average and volume at its highest in that period. While that is significant of itself, as the S&P broke its uptrend, Nanex has found a much more serious shift in the market structure that occurred yesterday. Soon after the open on the US day session, market-making HFTs surged their quote-stuffing efforts to the highest level in months. Whether this was intended to artificially inflate orders to enable institutional sell-orders to be crossed with falsely hopeful retail orders is unclear but given the order flow and direction of trade, it seems something significant changed yesterday.

Via Nanex,

On February 25, 2013, starting around 10:35, the number of quotes relative to the number of trades began surging and rocketed to levels not seen for several months. Although the levels have not come anywhere near the preposterous heights set back in August 2011 (when HFT reigned with impunity), the surge is enough to warrant extra attention. Charts below plot the ratio of quotes to trade value (similar to Quotes/Trades but in way to better compare the shifting lower transaction size since 2006). Each line shows the one-minute average value for all NMS stocks (about 8,000) for each minute of one trading day (9:30 to 16:00 ET), color coded by age: older dates towards the violet end of the spectrum, while recent days are colored towards the red end. The thick red line is Feb 25, 2013: note the surge doesn't start until about 10:35.

A total of 764,962,237,673 quotes and  43,688,052,096 trades were processed to create Chart 2.

1. Quotes per $10K of stock traded. One-minute average from Jan 2013 through Feb 25, 2013 for every minute of the trading day. Red line is Feb 25, 2013.
Things are normal until about 10:35am, when quote spamming surging. 

2. Same as chart above, but showing from Jan 2007 through Feb 25, 2013
Excessive quote traffic has been on the decline. Though the surge on Feb 25th stood out in stark contrast to recent trading, it is still way below the crazy days of August 2011, when HFT reigned with impunity.

3. SPY 30-Minute OHLC bar chart. Red Arrow indicates when the surge in quotes began.



- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Tue, 02/26/2013 - 13:48 | 3278264 beaker
beaker's picture

There's a disturbance in the universe...

Tue, 02/26/2013 - 13:52 | 3278281 edb5s
edb5s's picture

The HFTs were probably just providing liquidity for the retail buyers taking part in the great rotation. Someone has to fill all those market buy orders for FB and AAPL!


Tue, 02/26/2013 - 13:54 | 3278287 Divided States ...
Divided States of America's picture

Zerohedge is now a scientific blog??? This is some huge solar flare!

Tue, 02/26/2013 - 14:00 | 3278310 francis_sawyer
francis_sawyer's picture

Looks like the Nanex has been using the SUCK KUT too...

Tue, 02/26/2013 - 14:04 | 3278329 cifo
cifo's picture

Can't Nanex identify who did that?

Tue, 02/26/2013 - 14:27 | 3278416 francis_sawyer
francis_sawyer's picture

Waddell & Reed

Tue, 02/26/2013 - 14:44 | 3278454 A L I E N
A L I E N's picture

Ha Ha, their ES hedges dominate

Tue, 02/26/2013 - 14:51 | 3278488 Clowns on Acid
Clowns on Acid's picture

No - but the Exchanges can.....

Tue, 02/26/2013 - 14:14 | 3278360 Freddie
Freddie's picture

Hemmeroid flare up.

Tue, 02/26/2013 - 14:21 | 3278397 zuuma
zuuma's picture

I think I've found a way through the HFT/ Algo investment chaos.

Other than buying additional PMs: Gold, Silver, Lead, Brass;

I am confining my investment strategy to Old Crow bourbon.

It is surprisingly smooth, for its moderately cheap price.

I feel quite good about all those charts!

Tue, 02/26/2013 - 14:44 | 3278464 Crash Overide
Crash Overide's picture

I am still long ammo, gardens, and booze.

Tue, 02/26/2013 - 17:32 | 3279276 SunRise
SunRise's picture

Well . . . armed with ammo, gardens, AND booze, you may want to consider adding bandaids & torniquets to the mix, or a coordination lock for the whiskey box.

Tue, 02/26/2013 - 14:06 | 3278338 Bizaro World
Bizaro World's picture

Just turn it off, wait 10 seconds, then turn it back on...that's what my IT guys always tell me...

Tue, 02/26/2013 - 14:41 | 3278452 nugjuice
nugjuice's picture

Don't forget to clear out your cookies too. It's always the cookies

Tue, 02/26/2013 - 13:50 | 3278271 Sophist Economicus
Sophist Economicus's picture

Aurora Borealis...

Tue, 02/26/2013 - 14:18 | 3278381 waterwitch
waterwitch's picture

aurora bernanQE-olis

Tue, 02/26/2013 - 13:51 | 3278275 blu
blu's picture

Oops my bad.

Tue, 02/26/2013 - 14:04 | 3278332 ZerOhead
ZerOhead's picture

Hey... you sound like the Chairman of the IPCC.


Breaking Global Warming news... (and it's worse than we thought! :)

The UN’s climate change chief, Rajendra Pachauri, has acknowledged a 17-year pause in global temperature rises, confirmed recently by Britain’s Met Office, but said it would need to last “30 to 40 years at least” to break the long-term global warming trend.


Meanwhile last summer there was record heat and drought in Texas almost as bad as the 1930's.

Right now, the region of most intense drought (see map) is uncomfortably similar to that of the 1930s, focused on western Nebraska, Kansas, Oklahoma, and Texas, plus parts of eastern Wyoming, Colorado, and New Mexico.

Yesterday record snowfall in the Texas panhandle beats the last record during the dustbowl in 1934.

She says the city’s snowfall was the second-most in a 24-hour period, just behind the 19.3 inches that fell March 25, 1934. The storm that moved across the Texas Panhandle also was the third all-time snow event. The most snow in one event was 20.6 inches that fell March 25 and 26, 1934.


Tue, 02/26/2013 - 14:15 | 3278365 ParkAveFlasher
ParkAveFlasher's picture

There is absolutely nothing blackswannish about the term "dust bowl" especially as it possibly applies to a formerly-industrialized military superpower that has outsourced production, exported its gold, impeded the tapping of resources, taxed and harried its citizens, practices fractional reserve banking, disrupts its currency supply in spite world reserve status, and leans heavily on expensive agricultural exports generated by vast, flat grassy regions that are prone to 100-year climate disasters like drought, dustbowl, and flood. 

Absolutely nothing blackswannish, whatsoever, whatsohaveyou.

Tue, 02/26/2013 - 14:21 | 3278399 ZerOhead
ZerOhead's picture

I heard Goldman was busy buying uncovered crop insurance on farms in the south-west in the form of CDS's (Corn Disaster Swaps).

I expect thay will be hedging with purchases of physical napalm in the commodites market just to be on the safe side...

'God's Work' you know...

Tue, 02/26/2013 - 22:18 | 3280310 thisandthat
thisandthat's picture

AHAHAH What a douche.

but said he would need to last “30 to 40 years at least” to break his long-term investments trend.

This I would believe :P

Tue, 02/26/2013 - 13:56 | 3278278 Cognitive Dissonance
Cognitive Dissonance's picture

That's a nasty island/gap to be filled down there around SPY $143 folks.

Tue, 02/26/2013 - 14:00 | 3278311 CPL
CPL's picture

Benny has this.  He's got the spackle to patch it and a high volume printing device with a fleet of HFT's to do it.

Tue, 02/26/2013 - 14:13 | 3278358 francis_sawyer
Tue, 02/26/2013 - 14:14 | 3278359 francis_sawyer
francis_sawyer's picture


Tue, 02/26/2013 - 14:20 | 3278389 thecoloredsky
thecoloredsky's picture

What about this chart?

Not time yet CPL? Thinking about backing up the truck right about.... now

Tue, 02/26/2013 - 15:16 | 3278595 eclectic syncretist
eclectic syncretist's picture

Sell em' hard.  I'll probably be selling some soon too, but I've still got some silver to accumulate first.

Tue, 02/26/2013 - 14:20 | 3278392 dontgoforit
dontgoforit's picture

And duct tape & baling wire & epoxy too.  Too bad he doesn't know how to fix anything....

Tue, 02/26/2013 - 14:28 | 3278419 McMolotov
McMolotov's picture

I'm pretty sure he's figured out how to fix the "markets."

Tue, 02/26/2013 - 15:02 | 3278530 francis_sawyer
francis_sawyer's picture

14 minutes & 59 seconds... ON THE NOSE!

Tue, 02/26/2013 - 14:20 | 3278391 Dr. Engali
Dr. Engali's picture

Nothing a little SPY 80 point flash crash can't fix.

Tue, 02/26/2013 - 14:27 | 3278415 candyman
candyman's picture

Island formation I believe, the downtrend ended with 80% probability. just guessing.

Tue, 02/26/2013 - 13:55 | 3278293 dcb
dcb's picture

It would be nice if pictures could give some guess as to the significance or impact of these changes. Meaning, so what, what does it mean, why should I be concerned

Tue, 02/26/2013 - 14:01 | 3278312 Cognitive Dissonance
Cognitive Dissonance's picture

It means the ride could get very exciting from right about >here<.

<Please bring your seat and tray table back to their upright position and fasten your seat belt. Then kiss your assets goodbye.>  :)

Tue, 02/26/2013 - 14:01 | 3278318 CPL
CPL's picture

90% of all trades are machine stuffing now.  Means Bullish.  Hyperinflationary type of bullish.

Tue, 02/26/2013 - 18:39 | 3279590 blu
blu's picture

You'll take whatever kind of bullish they give you -- and you'll like it.

Tue, 02/26/2013 - 13:55 | 3278295 Vashta Nerada
Vashta Nerada's picture

I'm pretty sure it was someone on E-Trade trying to buy 4 shares of AAPL, whose enter key got stuck upon execution.

Tue, 02/26/2013 - 13:57 | 3278302 ziggy59
ziggy59's picture

Perception Deception continues unabated except for ZH

Tue, 02/26/2013 - 13:58 | 3278303 Motorhead
Motorhead's picture

No wonder the economy and the stock market is all fucked flares (whch, of course, affect the weather).

Tue, 02/26/2013 - 13:58 | 3278305 TrumpXVI
TrumpXVI's picture

Those charts look like the Genesis Weapon from Star Trek terraforming an alien planet.

Tue, 02/26/2013 - 14:01 | 3278316 blu
blu's picture

Except we're not an alien planet. But yeah, we're being transformed. Kinda sucks actually.

Tue, 02/26/2013 - 14:01 | 3278320 TrumpXVI
TrumpXVI's picture

Good point, now I'm depressed again.

Tue, 02/26/2013 - 14:07 | 3278342 ParkAveFlasher
ParkAveFlasher's picture

Know what I do when I'm depressed by algos terraforming the economic landscape?  I stack tits.

Tue, 02/26/2013 - 14:42 | 3278455 blu
blu's picture

In that case you might be ready for some of my alternative reality:

See if you can stack any of that, son.

Tue, 02/26/2013 - 14:03 | 3278327 Oldwood
Oldwood's picture


Tue, 02/26/2013 - 14:18 | 3278377 dontgoforit
dontgoforit's picture

Beam me anywhere, Scottie!

Tue, 02/26/2013 - 14:03 | 3278324 SheepDog-One
SheepDog-One's picture


Tue, 02/26/2013 - 14:04 | 3278330 fuu
fuu's picture

I'm sure someone will come along shortly and explain why Nanex is wrong without actually providing any data.

Tue, 02/26/2013 - 14:09 | 3278346 buzzsaw99
buzzsaw99's picture

i sense a great disturbance in the farce

Tue, 02/26/2013 - 14:17 | 3278374 dontgoforit
dontgoforit's picture

The farce has farted and look what came out:  Bernanke!

Tue, 02/26/2013 - 14:29 | 3278424 Kitler
Kitler's picture

the farce is with us

Tue, 02/26/2013 - 14:15 | 3278363 Lord Of Finance
Lord Of Finance's picture

Dont be depressed boys and girls. This was destined to happen. The greatest market crash in the history of the world is coming. We cant stop it. All we can do is prepare. We are prepared much more then most. So sit back with a brewskie or a pepsi and enjoy the fruits of your labor. There still is plenty of time. You are witnessing something quite historical. Speaking of which. . .


   'It IS the best of times, It IS the worst of times.'

Tue, 02/26/2013 - 14:18 | 3278378 Cognitive Dissonance
Cognitive Dissonance's picture

"I have not begun to fight." - Bernanke

<Or his successor.>

Tue, 02/26/2013 - 15:20 | 3278618 22winmag
22winmag's picture

I'm ready for the future of trading: a can of beef stew in exchange a roll in the hay with a less prepared individual's wife.

Tue, 02/26/2013 - 14:16 | 3278369 dontgoforit
dontgoforit's picture

Sales happen.  This was a lot of sales.  We'll be back buying in 3-4 months (or years)....

Tue, 02/26/2013 - 14:22 | 3278402 gatorontheloose
gatorontheloose's picture

Yesterday, SPY March 16 150 calls broke below 2.20 and OI increased by 60k.  this strike appears to have been the anchor to all trades since Jan.  They even whipped these calls all the way to 3.70 and 3.30 without the slightest drop in OI until yesterday.

Tue, 02/26/2013 - 14:28 | 3278418 Stock Tips Inve...
Stock Tips Investment's picture

Yesterday there was a clear deterioration in the market. Technically, we can speak of a correction process enough to pull down Wall Street between 5 and 8%. However, it is likely that Ben and his friends try to "calm" the markets. This can be through a statement to the media, an injection of liquidity or a combination of both.

Tue, 02/26/2013 - 14:28 | 3278420 orangegeek
orangegeek's picture

"The Huge Shift In Market Structure That Occurred Yesterday"



"The Huge Shaft In Market Structure That Occurred Yesterday"


There - fixed it for you.

Tue, 02/26/2013 - 14:48 | 3278476 Edward Fiatski
Edward Fiatski's picture

At first, I thought that was an infra-red photograph of the Sun's corona.

Tue, 02/26/2013 - 15:04 | 3278534 DowTheorist
DowTheorist's picture

4 independent volume readings show the odds favor declining prices in the near future. Any way you cut it, volume is short term bearish:


1.      We have had six bearish days in a row.
2. Don’t forget the “volume of the top” reversal bar of 02/20/2013. More about it here:
3.  The trend line of volume was not supportive of the last stage of the rally and, conversely, it has been supportive of declining prices.
4.  Yesterday's volume was significantly larger than that saw on 02/04/2013 (last minor low).
Tue, 02/26/2013 - 15:15 | 3278592 WarPony
WarPony's picture

The Shift has Hit The Fan?

Tue, 02/26/2013 - 16:03 | 3278824 MFLTucson
MFLTucson's picture

The US stock market is a fraud!  There is no other way to say it, it is courrpted by computerized trading, printed money and overall courrption.  I will never own a stock in any US company as long as I live.

Tue, 02/26/2013 - 16:36 | 3278986 mkhs
mkhs's picture

Did you just start reading ZH yesterday?

Tue, 02/26/2013 - 18:37 | 3279576 blu
blu's picture

Fresh meat.

Tue, 02/26/2013 - 16:30 | 3278945 Black Markets
Black Markets's picture

What is the problem with market participants demanding huge volumes of quotes?

When I trade I always demand a stream a quotes so that I can see the real liquidity at touch on both sides of the book.

When there are lots of quotes being demanded it usually means that someone is deeply concerned about the price impact of their actions.

That is to say, they will not want to sell more than the volume at touch on their next order as they do not want the market to tick lower.

This NANEX data, shows that the trades going through the market on 25th were trades from institutions with very large holdings, holdings so large that they cannot be liquidated without causing significant price impact.

The quote/trade ratio explodes when these institutions attempt to reduce the price impact of their actions.

It is a good thing. It always for a less volatile market.

If anybody wants to discuss the finer points of HFT methods and market microstructure then meet me outside the saloon at high noon.

Tue, 02/26/2013 - 17:28 | 3279266 Random_Robert
Random_Robert's picture

I bought a new shovel today....

It works GREAT for digging holes.

Tue, 02/26/2013 - 21:05 | 3280061 blu
blu's picture

Random_Robert is random.

Tue, 02/26/2013 - 20:06 | 3279841 Lumberjack
Lumberjack's picture

Solar flare!

Tue, 02/26/2013 - 23:43 | 3280652 Godisanhftbot
Godisanhftbot's picture

 I can never figure out how to make 2 cents with that nanex stuff.



Do NOT follow this link or you will be banned from the site!