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Algo Activity (And Manipulation) Breaks Record On Friday's Quad Witching Debacle

Tyler Durden's picture




 

Friday was an extremely volatile day with new record highs being achieved miraculously at the open only to be followed by free-fall in the market's most-loved momentum names into the close. It seems that the quad-witching was of particular interest to the algos as Nanex notes, a new record was set for most trades in a 1-second interval. What was even more unusual was the record number of 'unusual' price changes that occurred in the 3 seconds before the market opened and index futures expired. "Efficient" markets indeed...

 

Via Nanex,

On March 21, 2014, at 15:45:00, a new record was set for most trades in 1 second in NMS stocks (NYSE, NY-ARCA, NY-MKT and Nasdaq listed stocks and ETFs - approximately 8,000 symbols). The 3rd and 4th most active seconds were also set, at 15:50:00 and 15:55:00 respectively. The 2nd most active second was set at 10:00:00 on September 1, 2011.

1. NMS 1-second peak Trades per Second for each minute of the regular trading session (9:30 - 16:00).
Each day is drawn as a line, color-coded by age: from violet (oldest) to red (most recent). 

 

But that was nothing compared to the total manipulation that occurred in the few seconds before the US open and futures expiration... (via Nanex)

On March 21, 2014, a record number of stocks with unusual price changes occurred just 3 seconds before market open and the expiration of the March index futures contracts.

1. March and June Nasdaq 100 (NQ) and eMini (ES) futures contracts.
The March contracts expired at 9:30. Note the sudden jump at 9:28.



2. Zoom of Chart 1.



3. Comparing price moves in about 60 select symbols between 9:29:56 and 9:30:01



4. Charts of individual stocks (mostly Nasdaq 100) between 9:29:55.500 and 9:30:01
Note the sudden price drop between 3 and 4 seconds before market open and then a recovery about 1 second before open. The large, black-filled circle is the Nasdaq official opening price.

Here is AAPL...

 

all 100 additional charts can be found here...

One thing we know for sure, Virtu made money....

 

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Mon, 03/24/2014 - 16:34 | 4587053 TideFighter
TideFighter's picture

Don't worry, HFT's are under investigation, right?

Mon, 03/24/2014 - 16:41 | 4587088 DoChenRollingBearing
DoChenRollingBearing's picture

"Fore...!"

Mon, 03/24/2014 - 16:44 | 4587102 negative rates
negative rates's picture

Nope, there over investigation.

Mon, 03/24/2014 - 17:05 | 4587198 ArkansasAngie
ArkansasAngie's picture

That this is legal is appalling.  That some politician isn’t salivating his chops at ripping these guys a new one for voter attention is … oh right … I said politician.  Never mind.

Mon, 03/24/2014 - 21:59 | 4588469 Four chan
Four chan's picture

one day someone will hit the take profits button.

Mon, 03/24/2014 - 16:37 | 4587066 NoDebt
NoDebt's picture

Imagine taking away all the HFT volume.  What would be left?  Awful boring watching one tick and then a horizontal line tracking across the screen for seconds, minutes or even hours before changing again.

Have a sense of adventure about this!  We're setting new records on almost a daily basis (for fraud and manipulation)!

Mon, 03/24/2014 - 16:46 | 4587112 NaiLib
NaiLib's picture

If you took algos away, the naked truth of a broken stock market would show up, And NAsdaqOmx / NYSE cant have that. Nor could the FED accept it since their price fixing would be even more apparent.

Mon, 03/24/2014 - 17:07 | 4587215 ArkansasAngie
ArkansasAngie's picture

Bunch of criminals.  The whole lot of them.  Virtu doesn't have ANY right to suck off the Fedury and become rich with other people's money.

Mon, 03/24/2014 - 16:41 | 4587089 McMolotov
McMolotov's picture

According to Mr. Spock, chart 4 indicates that the planet's atmosphere is too unstable for transporter use.

Mon, 03/24/2014 - 16:44 | 4587101 Ancona
Ancona's picture

So that's what liquidity looks like.

Mon, 03/24/2014 - 16:49 | 4587122 xamax
xamax's picture

Despite algo's problematic, we see S&P500 hit 2400 by year end, as we dont see any alternative to stocka.

Mon, 03/24/2014 - 16:49 | 4587126 BrigstockBoy
BrigstockBoy's picture

Why isn't Eric Hunsader head of the SEC?

Mon, 03/24/2014 - 16:54 | 4587150 sunaJ
sunaJ's picture

Because his parents were married and he now works for a living.

 

Mon, 03/24/2014 - 16:51 | 4587130 FiatFapper
FiatFapper's picture

It will be fascinating when quantum computing is abused by the algo's.

Mon, 03/24/2014 - 16:54 | 4587147 kchrisc
kchrisc's picture

Completely off topic, but it looks like the music at Sears/Kmart just stopped:

(Bloomberg) -- Sears Holdings Corp. has relied on controlling shareholder Edward Lampert for years to help fund its operations. Now the billionaire is cutting out a form of lending he’s provided since 2010 to the owner of its namesake retail chain and Kmart.

http://www.chicagobusiness.com/article/20140324/NEWS01/140329910/eddie-l...

Mon, 03/24/2014 - 19:44 | 4587937 Osmium
Osmium's picture

I was hoping he would go down with the ship. 

Mon, 03/24/2014 - 16:59 | 4587166 SillySalesmanQu...
SillySalesmanQuestion's picture

Soooooo.....that's what "momentum buying" looks like.

Mon, 03/24/2014 - 17:14 | 4587251 buzzsaw99
buzzsaw99's picture

The real question is why do they even bother with the stock market anymore. He's dead Jim.

Mon, 03/24/2014 - 17:18 | 4587269 EmmittFitzhume
EmmittFitzhume's picture

Yeah they did it in Superman 3, underrated movie actually

Mon, 03/24/2014 - 17:40 | 4587378 One And Only
One And Only's picture

It's also spring. Less demand.

Mon, 03/24/2014 - 18:01 | 4587479 Ban KKiller
Ban KKiller's picture

NOW, it is not too early for a puff. Look at the pretty colors on these charts.

CNBC has an article on Wall Street ethics....good for a laugh.

Mon, 03/24/2014 - 19:42 | 4587929 revolutionDD
revolutionDD's picture

What this manipulation translates to: I was short the 1890 calls on the emini es that expires on the open. The open determined by the exchange because of the manipulation was 1893 (SOQ)when the high of the day based on any quote machine was 1883. Accordingly, an option at that should have expired worthless went out at 3,93. I called the CME and they responded that it is too big of a market to be manipulated. If regulators are too lazy to investigate blatant abuse there is no hope!!!

 

Tue, 03/25/2014 - 03:14 | 4589077 Bear
Bear's picture

I would be so, so mad ... I'm sorry DD

Mon, 03/24/2014 - 22:04 | 4588492 Downtoolong
Downtoolong's picture

And here I thought March Madness was about college basketball.

Want to see HFT in action? Just watch the trade in SLV on days like today which was narrowly range bound. Thousands of trades occur with 0.0001-0.005 up tics and back down again on no real supply and demand.  Any carbon based investor armed with a 100 share limit order will move the market miles from the present NBBO before he ever gets filled. What a joke this so-called HFT liquidity is, and these so-called efficient markets are.

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