What Half A Second Of "Trading" Looks Like In Today's Market

Tyler Durden's picture

That modern markets are broken beyond repair should by now be clear to everyone: with liquidity that can be shut off at the flick of a switch, 70% of overall market "volumes" merely churning between various rebate collecting HFT algos, and the consolidated quote tape stuffed by billions of cancellation-sniffing quotes, it is surprising that major, marketwide millisecond +/- 2% swings are not a daily occurrence (as opposed to single-stock flash crashes and smashes which now do take place daily).

However, said realization must also be followed by political and regulatory action, which will not come as these same politicians and regulators are beholden to precisely the same financial parties that have broken the market microstructure and who generously benefit from their Marketstein monster creation (with some fraction of the profits channeled as hush money to political lobbies to keep the regulators quiet and happy).

Which means the best everyone else can do is sit back and watch the accelerating cannibalization with which these same market players go after one another until there is nothing left, and there is no other choice but to go back to the drawing board and start from scratch.

To help pass the time, here is a short clip from Nanex showing just what happens at the proper timescale of modern "markets" - half a second - in the trading of Johnson & Johnson stock. If anyone had any doubts as to the stability of the market before, this should alleviate all doubt.

From Nanex:

The bottom box (SIP) shows the National Best Bid and Offer. Watch how much it changes in the blink of an eye.


Watch High Frequency Traders (HFT) at the millisecond level jam thousands of quotes in the stock of Johnson and Johnson (JNJ) through our financial networks on May 2, 2013. Video shows 1/2 second of time. If any of the connections are not running perfectly, High Frequency Traders can profit from the price discrepancies that result. There is no economic justification for this abusive behavior.


Each box represents one exchange. The SIP (CQS in this case) is the box at 6 o'clock. It shows the National Best Bid/Offer. Watch how much it changes in a fraction of a second. The shapes represent quote changes which are the result of a change to the top of the book at each exchange. The time at the top of the screen is Eastern Time HH:MM:SS:mmm (mmm = millisecond). We slow time down so you can see what goes on at the millisecond level. A millisecond (ms) is 1/1000th of a second.


Note how every exchange must process every quote from the others -- for proper trade through price protection. This complex web of technology must run flawlessly every millisecond of the trading day, or arbitrage (HFT profit) opportunities will appear. It is easy for HFTs to cause delays in one or more of the connections between each exchange.

And said 0.5 second action in its full animated glory:

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TeamDepends's picture

Like sand through the hourglass....

walküre's picture

Muppets aren't buying the pump today, hence the fade.

Sucks to be Wall Street and not having muppets to sell to, doesn't it?

Fuck you Wall Street. Fuck you Bernanke and fuck all those "analysts" who are rooting for the pumpers.

You had your time when muppets like myself were clueless and didn't understand we were being robbed even when markets finished green on the day.

Never again. That money under the mattress is mine.

sunaJ's picture

"We're taking over this conversation:....now!"

(HFT as explained by Close Encounters of the Third Kind)

TeamDepends's picture

Plunge Protection Team stretches, flexes fingers, prepares mentally to enter the game...  Must close +15000 for the Big Win...

Lets Buy The Dip's picture

haha, I love it when people use the word muppets. ITs a great way to explain obama too, and all the elitists friend who have their hand up his arse!

We all know its true. And I agree, its rigged, look at gold biggest drop since 1980 why? so the elitists and criminals can get back in at a nice price, when gold skyrockets in flight, they will get their afternoon delight, and then fly to bankok to play with their 11 year old boyfriend (the evil bastards)

right now there is awesome opportunity in CRUDE and ENERGY....look at the money flooding back into the energy sector => http://bit.ly/18iQAUl WOW

Comon guys, lets snoop onto them, before they SNOOP onto us!

Go Tribe's picture

After watching that, I think we're all fuckin' nuts. This is how we buy and sell things now????

geologyguy's picture

Behold, the instrument of our doom.  Last century it was the atomic bomb.  Now, what you see here will be the downfall of our way of life.  One evening you will come home to find a 0$ net worth in both your 401k & IRA then wonder what happened while the Bankster manages his flight plan to the Cayman Islands with as much PHYZZ as his Gulfstream will hold.

Don't worry, the cops will be around to provide security to the banks & ensure the theft is completed orderly...just like Cyprus.

McMolotov's picture

Looks like the most fucked up game of Asteroids ever.

Clayton Bigsby's picture

Ha!  Was thinking same thing, 'cept Space Invaders, where everyone's shooting everyone else...

ParkAveFlasher's picture

It's like the climax of Reservoir Dogs.  Yeah I'll just mosy down to TD Waterhouse and plunk my retirement savings right ... THERE.

Sofa King Confused's picture

That purple one can really shit some dots!

Precious's picture

Looks like Kim Jong Un's simulated launch attack.

lasvegaspersona's picture

celebrate good times...Oh yeah!!!!

Cacete de Ouro's picture

Nanex should do the lightshow backdrops for Swedish House Mafia...

Then it would be Swedish House Mafia plays Wall Street Mafia

Encroaching Darkness's picture

This is absolutely insane - no way real people would trade any security this way in half a second.

Expect more Knight Capital-like crashes, I don't see how they could be avoided.

The HFT algos will eat each other until only one is left - which will then jack itself off to failure, lacking anything real to compare itself against.

The alien archaeologists excavating the ruins of human civilization will be very puzzled, indeed. "Apparently, your Highness, it all fell apart at once - in less than half a second. The civilization collapsed faster than the eyestalk could see."

Crtrvlt's picture

"until only one is left" - the squid

Jayacts's picture

I'll trade you a nugget of gold for all those 1's and 0's.

alien-IQ's picture

I feel like I'm watching the inside of the Large Hadron Collider.

debtor of last resort's picture

It's the new normal. Yesterday i saw a Higgs part eating a cheeseburger at the lokal McDonalds.

cougar_w's picture

I saw one drinking a pina colada down at Trader Vics. And his symmetry was perfect.

cougar_w's picture

Or the inside of the world's sexiest data cannon:


Friday Fiction! Where the often charming, always delightful and frequently terrifying Fortran finally answers the question that's been on everyone's mind since the last time she casually blew their shit the fuck up, being what does a girl do with 4 trillion computational units anyway? And how does a guy make any time with all that?

Read it and find out. Only on ZeroHedge.

yogibear's picture

China and other countries just need to make the derivatives blow. Any country, if patient, can take down the US financially without even firing a bullet or missile if their patient enough. 



StarTedStackin''s picture

there, their and they're.......3 different words, with 3 different meanings!

Radical Marijuana's picture

That may well be correct, yogibear, except those financial weapons of mass destruction share the same almost omnicidal potential as the other weapons of mass destruction do.

Remember, only you can prevent forest fires, but the longer you continue to do that, the more potential for a bigger, uncontrollable, forest fire is being accumulated.

buzzsaw99's picture

With the current environment there is literally no limit to how high they can push this pig.

q99x2's picture

Nice colors.

Dre4dwolf's picture

Whatever it is, it needs to be destroyed before it becomes self-aware.


catacl1sm's picture

I think I just had a seizure.

XRAYD's picture

Its Schrödinger and Heisenberg mated with Bernanke and Jamie D in a foursome!

Cacete de Ouro's picture

This is what happens at Lady Marmalades when the lights go down....

PontifexMaximus's picture

Do you know that bandwith costs more than money?

bob_stl's picture

Like wow, man. Like, what's with all the light? Is that the fuzz, man? You better hide the ganja.

Radical Marijuana's picture

"... and there is no other choice but to go back to the drawing board and start from scratch ..."

HFT has stratched through the drawing board.

Trampy's picture

Anyone seriously interested in trading needs to get away from ES, ZB, and CL to focus on the less-manipulated markets.

FX (6A, 6J, 6E, 6B), agriculturals (corn, wheat, beans), even natural gas ... (aside from major news releases) often have charts that look like normal supply/demand greed/fear trading of items where there is plenty of legitimate hedging and commercial buyers who often take or make delivery. 

Time of day also is very important when choosing when and what to trade.  My favorite time of day is around the London open when Ransquawk comes on because there is very often a reversal of the U.S. and Asian action that allows fading prior big move with a relatively low-risk entry.  Another thing to look out for are strong moves that occur at exactly the top or bottom of the hour (aside from a news release). Very often the buy or sell programs that start at a "even number" run for another "even number" like 30 minutes or 60 minutes, almost exactly.

Another thing to know is that prices are often stuck in a narrow trading range in the day prior to a major event like FOMC or ECB rate.  That's why the markets always tread water before NFP print.

Market manipulation and strategies are ancient.   So instead of whining about it, why don't we see more here about how to profit by understanding the behavior of the algo trade bots?  Because today's markets are largely driven by machines, they should be more predictable than markets dominated by humans, eh?

Catequil's picture

Frontrunning the algos is possible I think. But.... In the long run you are doomed to a failure for:

A) frontrunners overcrowding

B) HFTs can/will rig the game any way they want in any moment when they find out that frontrunners are extracting too much from them

All in all, in my humble opinion, one better stay aside from algo dominated markets.

malikai's picture

Far more productive to learn to live in the world we inhabit, particularly regarding things we cannot control.

ITrustMyGut's picture

just... wow... you cant make this shit up!!


man.. this is obviously going to end well....errr.... wait

fuu's picture


Temporalist's picture

Pew!  Pew, pew, pew!  Pew, pew!  Pew!  Pew, pew, pew!  Pew!  Pew!

Glass Seagull's picture


Vhat a tangoed veb ve veev

Ourrulersknowbest's picture

Trippy shit indeed.
Your investment may go down as well as up as the terms and conditions say to hapless sheeple.they just don't understand that you can get money fucked in a few milliseconds......

ziggy59's picture

Looks like 3D Pong...

Edward Fiatski's picture

"Three billion human lives ended on August 29th, 2013. The survivors of the nuclear fire called the war Judgment Day. They lived only to face a new nightmare: the war against the machines. The computer which controlled the machines, Skynet, sent two Terminators back through time."