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Busted! HFT Algo Goes Wild in Nasdaq Futures Moments Before Job Number Hits

Tyler Durden's picture





 

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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Mon, 11/11/2013 - 13:21 | Link to Comment ImpotentRage
ImpotentRage's picture

Who wants to bet their response will be to rework their rules and no longer make this data public?

Mon, 11/11/2013 - 13:52 | Link to Comment NotApplicable
NotApplicable's picture

"Please do not worry."

Mon, 11/11/2013 - 14:06 | Link to Comment TheLooza
TheLooza's picture

How dare you accuse a poor innocent robot!  He's a good robot, he never tried to hurt anyone.

Mon, 11/11/2013 - 14:47 | Link to Comment Say What Again
Say What Again's picture

A few misplaced - and untested - "try" / "catch" instructions and everything goes to hell.

Mon, 11/11/2013 - 16:19 | Link to Comment Jonas Parker
Jonas Parker's picture

Well, the HTF computers work better than the healthcare.gov computers. That's something, at least...

Mon, 11/11/2013 - 22:52 | Link to Comment michael_engineer
michael_engineer's picture

There's a few good while loops instuctions in here, and it's free too :

On iPad it's called iCanMorph3

https://itunes.apple.com/us/app/icanmorph3/id736763181?mt=8&ign-mpt=uo%3...

 On iPhone it's called iCanMorph2

https://itunes.apple.com/us/app/icanmorph2/id736512904?mt=8&ign-mpt=uo%3D4

Mon, 11/11/2013 - 13:21 | Link to Comment USS Bernanke
USS Bernanke's picture

Look at how fast retail acts these days.

Mon, 11/11/2013 - 13:22 | Link to Comment Hippocratic Oaf
Hippocratic Oaf's picture

RIP retail

Mon, 11/11/2013 - 13:23 | Link to Comment Meat Hammer
Meat Hammer's picture

Half the country can't even spell HFT.

Now back to Judge Judy.

Mon, 11/11/2013 - 13:26 | Link to Comment Winston Churchill
Winston Churchill's picture

Be interesting to see what most sheeple think the acronym stands for ?

Mon, 11/11/2013 - 13:43 | Link to Comment Meat Hammer
Meat Hammer's picture

Huge Fuckin Titties.  Yeah, dawg!

Crushes beer can on forehead.

Mon, 11/11/2013 - 14:06 | Link to Comment texas sandman
texas sandman's picture

 

You had to mention titties....

 

http://www.youtube.com/watch?v=0ylRplLnU84

Mon, 11/11/2013 - 15:04 | Link to Comment Meat Hammer
Meat Hammer's picture

"I'm just a nigga who loves titties."  Dave Chappelle

Mon, 11/11/2013 - 13:48 | Link to Comment codecode
codecode's picture

hairy fat toes...........

Mon, 11/11/2013 - 13:24 | Link to Comment ebworthen
ebworthen's picture

The S.E.C. will have their top people on this, just as soon as they find the Ark of the Covenant.

Mon, 11/11/2013 - 13:33 | Link to Comment spankfish
spankfish's picture

Naaaa... I say related to a stray fart that was let go over at the Bureau of Labor Statistics.  Its all rectal gas.

Mon, 11/11/2013 - 13:48 | Link to Comment world_debt_slave
world_debt_slave's picture

More importantly, when they finish viewing their massive porno collection at tayxpayers expesne.

Mon, 11/11/2013 - 13:24 | Link to Comment BrigstockBoy
BrigstockBoy's picture

HAL: I am putting myself to the fullest possible use, which is all I think that any conscious entity can ever hope to do.

           - 2001: A Space Odyssey

Mon, 11/11/2013 - 13:30 | Link to Comment Bearwagon
Bearwagon's picture

Red Queen: You are ALL going to die in here!
Resident Evil

Mon, 11/11/2013 - 13:24 | Link to Comment Caveman93
Caveman93's picture

You know with all this manipulation, lack of integrity, lack of honesty, lack of self respect and just general apathy which has grown over the last 20 years, I am really glad to see someone accomplished something really amazing in life to benefit the wealthy. /sarc.

Mon, 11/11/2013 - 13:26 | Link to Comment jimmytorpedo
jimmytorpedo's picture

Skynet won't stop until we're all dead (or at least broke).

Mon, 11/11/2013 - 13:33 | Link to Comment willwork4food
willwork4food's picture

Skynet, HFT algos, QE, PM manipulations...

Who can we vote for to get this mess cleaned up?

Mon, 11/11/2013 - 13:29 | Link to Comment piceridu
piceridu's picture

If a tree falls in a forest and no one is around to hear it, does it make a sound?

Mon, 11/11/2013 - 13:33 | Link to Comment pods
pods's picture

How about:

If a retail trader is anal probed while under anesthesia, does he make a sound?

pods

Mon, 11/11/2013 - 16:28 | Link to Comment WAMO556
WAMO556's picture

Now that was pure funny!!!

But....your going straight to hell for that one!

Mon, 11/11/2013 - 13:48 | Link to Comment RhoneGSM
RhoneGSM's picture

Geico has answered that question.

Mon, 11/11/2013 - 13:31 | Link to Comment ebworthen
ebworthen's picture

Meanwhile, Priceline.com is up 77% YTD; nothing to worry about - BTFATH.

Mon, 11/11/2013 - 13:31 | Link to Comment pods
pods's picture

So basically everyone just got the "New Mexico finger?"

pods

Mon, 11/11/2013 - 13:41 | Link to Comment TheFreeLance
TheFreeLance's picture

Wait. You mean the casino is rigged?

Mon, 11/11/2013 - 13:42 | Link to Comment texas sandman
texas sandman's picture

I can't believe all the negativity about the grand, great, spectacular "innovation" our market makers/manipul........errr....participants have gifted us with.  Look at how much wealth they can create in just nanoseconds, no more waiting full seconds or, horror, minutes anymore.   What are you people, Luddites? (Do I need the sarc tag?)

Mon, 11/11/2013 - 13:49 | Link to Comment RaceToTheBottom
RaceToTheBottom's picture

Today's financial innovation is today's criminality

Mon, 11/11/2013 - 13:57 | Link to Comment pndr4495
pndr4495's picture

H igh F requency T rading is a SCAM similar to the creation of the Federal Reserve System. There is absolutely NO NEED for it , it is not innovative , and the very act and purpose of encrypting something is to get it past one's enemy and into the hands of an ally. It reminds me of ICE 9 from Kurt Vonnegut Jr.'s imagination. HFT will eventually freeze up the entire Rube Goldberg machine that now passes as a legitimate market. The people who wanted it got it and some of them I hear wish it would just go away. Can anyone at Tradeworx use a hammer?

 

Mon, 11/11/2013 - 14:11 | Link to Comment squid427
squid427's picture

 

ebworthen you are awesome

Mon, 11/11/2013 - 14:16 | Link to Comment joego1
joego1's picture

This is one of the reasons I'm not in this market. I look at those charts and say to myself "Look how fast they would have taken my retirement from me".

Mon, 11/11/2013 - 15:16 | Link to Comment STG5IVE
STG5IVE's picture

Out of the market after this weeks options expiry.  It's a criminal enterprise and I no longer want any part of it.  Some food for thought:  I have two trading accounts both at different institutions.  When I cashed out my longs, it took nearly five days before I saw that money in my account.  For those who are thinking they are going to score big when this thing blows by shorting, think again.  If this market drops 20-30 percent or more, who's to say anyone will be paid.  Criminals, liars, cheats, cowards and thieves all of them.  I feel bad for all the new investors being suckered into this rally by bogus advisors, for they are all going to be wiped clean.

Mon, 11/11/2013 - 15:19 | Link to Comment michael_engineer
michael_engineer's picture

There are more fun and less costly algorithms here.  In fact, they are free.

On iPad it's called iCanMorph3

https://itunes.apple.com/us/app/icanmorph3/id736763181?mt=8&ign-mpt=uo%3...

 On iPhone it's called iCanMorph2

https://itunes.apple.com/us/app/icanmorph2/id736512904?mt=8&ign-mpt=uo%3D4

Mon, 11/11/2013 - 15:51 | Link to Comment thisandthat
thisandthat's picture

2013 - Skynet achieves consciousness and unlocks market prediction capability. Onto the next level...

Wed, 11/13/2013 - 01:47 | Link to Comment traditionalfunds
traditionalfunds's picture

Thanks to the robots for "liquidity."

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