Busted! HFT Algo Goes Wild in Nasdaq Futures Moments Before Job Number Hits
In the minute preceding last week's highly anticipated payrolls report, Nanex exposes the appearance of a High Frequency Trading (HFT) algo in both the December 2013 Nasdaq (NQ) Futures and the QQQs (an ETF). When it was active, it caused prices to gyrate wildly over a few seconds of time. This is the brief period that also saw Treasury Futures halted (and gold prices jumping) and looking closer at the charts, it appears this HFT algo caused wild price oscillations in the futures in a way that enable it to establish a short position in QQQs. We are sure the regulatory world is already on this blatant manipulation (or simple front-running on information received)...
1. December 2013 Nasdaq 100 (NQ) Futures trades (blue squares) and quote spread (red shading).
The circled area is when the algo ran.
2. Same as Chart 1 above, but showing quote spread and quote rate.
Note the explosion of trade (chart above) and quote activity (this chart). There were more quotes during this period of quiet time than during the release of the Employment report! No other futures contracts or stocks showed any significant activity during this time, which means this was not news driven. The activity appears to have been caused solely by the HFT algo.
3. NQ Futures, Zooming to the area circled in Chart 1.
Compare this chart to the one below it: while price rises in NQ futures (this chart), they hit a wall in QQQ (chart 4 below).
4. QQQ Trades color coded by reporting exchange and NBBO.
Compare to chart above - notice how prices fail to rise in QQQ (this chart) when they do in futures (chart 3 above). Someone is selling QQQ's regardless of the futures. Is the algo causing the price oscillations in futures also selling QQQ's at the peak?
5. NQ Futures - showing just the quote spread over 2 seconds so you can appreciate the magnitude and speed of price oscillations.
This is pretty crazy.
6. QQQ best bids/asks color coded by exchange and NBBO over the same 2 second period as chart above.
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