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How HFT Minted Money During the Financial Crisis

Tyler Durden's picture




 

We'll give you a hint, says Nanex: fantaseconds. Fantaseconds, everywhere. This is how High Frequency Trading (HFT) practically minted money during the financial crisis. With no regulators in sight, HFT robbed investors and other traders blind. With very little effort, Nanex has created numerous charts to illustrate the absurdity that markets functioned well during the financial meltdown. Many of the short term oscillations shown in these charts were created by HFT algos to induce a lag and create latency arbitrage opportunities.

We are confident there are hundreds of thousands of examples like these during the fall of 2008, and that many would show far more egregious behavior than presented below. And yet the regulators could not spot a single one. Even after spending millions on MIDAS.

 

Here are just 2 examples for the biggest ETF - SPY...

 

 

Want to see more examples? How about 562 charts of QQQQ
?

 

Source: Nanex

 

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Wed, 10/16/2013 - 18:41 | 4062693 Dewey Cheatum Howe
Dewey Cheatum Howe's picture

What part of the word corrupted do people not understand.

Wed, 10/16/2013 - 18:47 | 4062728 knukles
knukles's picture

Golly gosh.  Don't look no different than when the regulators are in their offices.

I wonder how much the midget tranny porn viewing is down from home computers.
Ah hem....

Wed, 10/16/2013 - 19:06 | 4062824 negative rates
negative rates's picture

Isn't that the definition of a democrate?

Wed, 10/16/2013 - 18:47 | 4062730 NotApplicable
NotApplicable's picture

Well, the past tense part means it's over, right?

Wed, 10/16/2013 - 18:53 | 4062771 Dewey Cheatum Howe
Dewey Cheatum Howe's picture

It is like weeds in a garden.

Wed, 10/16/2013 - 18:42 | 4062700 Tenshin Headache
Tenshin Headache's picture

Remind me where the regulators come from, again? Oh yeah, industry.

Wed, 10/16/2013 - 18:51 | 4062755 NotApplicable
NotApplicable's picture

Joke's on Nanex, as regulators are color-blind from birth.

Wed, 10/16/2013 - 19:38 | 4062914 RockyRacoon
RockyRacoon's picture

What a great gig.  They aren't even using their own money.  Ain't this how it's supposed to work?  Give 'em no-interest money created out of thin air just for them, then look the other way when they leverage it up 50 times and use it to bilk the markets.  Hey, it's all in an effort to recapitalize the zombie "banks".  It's working smooth as silk!  Too bad we peons can't get a piece of the action.   Oh, yeah, I forgot -- it trickles down to us.

Wed, 10/16/2013 - 19:46 | 4062934 Miss Expectations
Miss Expectations's picture

That means no more red and green charts.  Problem solved.

Wed, 10/16/2013 - 18:44 | 4062717 Leveraged Algorithm
Leveraged Algorithm's picture

Yes - this is the future.........

Wed, 10/16/2013 - 19:01 | 4062721 Cognitive Dissonance
Cognitive Dissonance's picture

"And yet the regulators could not spot a single one. Even after spending millions on MIDAS."

Can't see what you ain't looking for and you don't want to find.

<All in the name of national security.....bitches.>

Wed, 10/16/2013 - 19:41 | 4062919 RockyRacoon
RockyRacoon's picture

I believe you've hit upon it.  Tools are useless when idle.

(Oh, I suggest udder cream for callouses.  Check out the farm supply store.  ...joking aside.)

Wed, 10/16/2013 - 18:48 | 4062741 RaceToTheBottom
RaceToTheBottom's picture

Start treating these as incidents of financial terrorism.

Wed, 10/16/2013 - 18:54 | 4062775 pndr4495
pndr4495's picture

GONEFutures , Inc.

Wed, 10/16/2013 - 19:44 | 4062759 jcaz
jcaz's picture

Epic find, dude-   this is REAL Pulitzer work.....

Wed, 10/16/2013 - 18:53 | 4062772 pndr4495
pndr4495's picture

What does Crude oil look like during your study period  - particularly the front butterfly spread ? 

Wed, 10/16/2013 - 18:57 | 4062790 Samual Adams
Samual Adams's picture

Look mister 'I think computers are stealing and are corrupt' conspiratorialist.  We have the SEC and FTC for a reason and you don't work for them so sit down, shut up, and stay where you are.   Step calmly into the unmarked black van and don't resist when the black bag is placed firmly over your head in order to transport you safely to be re-educated.

Wed, 10/16/2013 - 19:03 | 4062812 The Econ Ideal
The Econ Ideal's picture

Even moreso, short sellers took advantage of rampant "fails-to-deliver" conditions, pushing down individual names and ETFs. One cannot blame short sellers for this - brokerages were all too easy to allow the conditions, and the SEC, even though it had the data to make enforcements, did nothing. 

As for HFT: Gets too much press as the singular bad guy. Yes, there is abuse with HFT algos, but there is just as much if not much more on larger timescales, such as large block trades, taking out bid/sell stacks and stop orders (this is a truly old game), etc. 

Wed, 10/16/2013 - 19:04 | 4062815 alien-IQ
alien-IQ's picture

It's not time travel. It's not magic. It's just run-of-the-mill grand larceny.

Wed, 10/16/2013 - 19:06 | 4062822 Cacete de Ouro
Cacete de Ouro's picture

Nanex backwards is Xenan. Xenan was a character in Xena: Princess Warrior, but is no relation to Xena, although Xena was the midwife at his birth..which probably explains why they called him Xenan...

This is true ...if you don't believe me...

Wed, 10/16/2013 - 19:10 | 4062838 knukles
knukles's picture

And I suppose her calming influence was Xanax, her pet Rainbow Unicorn

 

BTW, you people know why you loose so much weight on LSD?
Can't get past the dragons guarding the fridge.

Wed, 10/16/2013 - 19:07 | 4062826 Silver Garbage Man
Silver Garbage Man's picture

I hope the fine people at nanex don't get acquainted with one of the Nobel prize winners love drones.

Wed, 10/16/2013 - 19:26 | 4062889 AuEagleNest
AuEagleNest's picture

Focus on the future .... we need to keep looking forward, not backwards.   /sarc

Nothing to see here folks.

Thank you, drive through.

Wed, 10/16/2013 - 19:30 | 4062897 The Count
The Count's picture

Regulators? Oversight? What's the diff if they are on the job or not? Did they catch Cornjulio (Corzine) or Dr. Mad Orf (Madoff)....in time, nope! Sack the whole sorry bunch and tell the bankers, from now on when they f+uck up their ass is sent to gitmo.

Wed, 10/16/2013 - 21:13 | 4063310 asteroids
asteroids's picture

After 5 years of "free money" from the FED, the boys now have much deeper pockets. They have the ability to "buffer" the market. The goal is to trap buyers/sellers and to move the market against them in real-time.

Thu, 10/17/2013 - 07:43 | 4063712 prains
prains's picture

money is power and when you control the money you control all the twats who want the fiat, funny thing is it's all just a paper dream, meaningless in the end....and this is why the aliens will exterminate us with extreme prejudice. If I was an extra terrestrial and took one look at this ficked up two legged orgamnism walking the planet that's exactly what i'd do. One look at Jamie Dimon, Ben Bernank, Greenspan et al. and there'd be no reason to let this animal live.

Thu, 10/17/2013 - 00:01 | 4063900 Godisanhftbot
Godisanhftbot's picture

 Botomy dudes, Botomy.

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