Dear HFT, Please Explain This
From Nanex
Dear HFT, Please Explain This
On August 25, 2011 at 15:45:48, in a one second period of time, there were more than 10,000 quotes and exactly zero trades in DELL. Close inspection of these quotes reveals something very disturbing. This cannot be dismissed as a computer problem or glitch. This can't be explained as stupidity or some oversight. It is not pinging for hidden liquidity. And it's certainly not price discovery. As far as we can tell, it's not adding liquidity or narrowing the bid/ask spread.
What caused this blast of 10,000 quotes in DELL appears deliberate. Of the 10,000 quotes, the bid and ask prices remain the same. The bid size also remains constant except for one change after the first 7,000 or so quotes. The only real variation is the ask size. Not a simple 2 step variation, but one that repeats in a mathematical pattern with a long cycle. This makes it difficult to detect, but it also confirms that it must be emanating from a single source.
There are approximately 4,000 stocks that quote during active trading. Which means 40 million quotes/second if just one of the 9 exchanges allow this nonsense to spread to all 4,000 symbols. You would need 40 gigabits per second of bandwidth to receive data at that rate. Unfortunately, we think it's just a matter of time, because events like this one in Dell are no longer isolated or rare. And it doesn't look like there are any grown-ups in charge.
DELL - Dell, Price and Sizes
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Well nothing to see hear move along
I really cannot understand why this crap is not illegal. Makes no sense that computers can make phony bids. And they ask us why we buy gold and silver.
Think of all the revenue you'd have by taxing every one of these computer 'transactions' at even a minimal 10 cents...... The budget deficit would vanish in short order.
that would require integrity somewhere in our political system and the will to enforce it ... rare as the dodo bird
the only way to win?
DON'T PLAY!
HFT = "High Fucking Treason" against Honest Investors.
Where is the guillotine. Make it a long rope and deep ditch. Off with their heads. Eh.
best way to end up with a million bucks in the stock market?
start with $100 million (preferably other-peoples-money)
The hedge funds pay the math PhDs the big bonuses to write the C++ code to calculate the transaction costs. The government collects the transaction costs from the exchanges and uses the leverage gained from the monetary velocity of the transaction costs to empower the transitory increases in the budget deficit. Thinking is bad. Must stop now.
Not a penny would go to paying off the deficit. They would just find new things to waste money on.
It *is* illegal. You can't post a quote without the intent to have it filled. You can't post quotes that intentionally manipulate the price. You can't post quotes that disrupt orderly trading. These offers are posted, and then immediately canceled, for the purpose of (1) manipulating the price, (2) hindering market price discovery, (3) prohibiting other traders from hitting a price before *you* do. HFT only works because "skimming the delta" lets you screw everybody in the "price drift" only as long as nobody else can figure out what's going on (only as long as they can't figure out what you're doing to manipulate the price).
Just as there is currently no accounting and no reserve requirements (we literally have no standards of any kind for banking and corporate reporting), there are no regulators. Actually, the regulators are "in" on the fraud, because the system is currently only functioning *because of* the fraud.
The curious reader should review that previous sentence until it is understood.
Actually, the regulators are "in" on the fraud, because the system is currently only functioning *because of* the fraud.
What is telling is the your use of the word "system" and not "market" in describing the trading environment. Your analysis is spot on. No longer do we have a market but rather a system.
SEC Covering Up Wall Street Crimes?
http://www.rollingstone.com/politics/news/is-the-sec-covering-up-wall-street-crimes-20110817
Of course....that's what the SEC is paid to do.
The problem is....God is watching:
http://thespiritoftruth.blogspot.com/2011/08/gods-judgment-nears.html
the problem is... a LOT! of "We the People" have Rope and know how to tie a knot!
Then God can have them!
[Actually, the regulators are "in" on the fraud, because the system is currently only functioning *because of* the fraud.]---mikla
Thank you for your post, mikla.
This same game of "Hush, or you'll wake my parents" is being practiced across the globe by those in-the-know.
The market is broken. Gone. Done. But, try to explain that to the average person. Impossible. The bankers and CBs' age-old use of Complexity for Cover is working perfectly.
Thomas Jefferson warned us about this as Alexander Hamilton and his crony bankers and financier friends were plotting and sowing the seeds of public deceit as the ink was still drying on the US Constitution.
Benedict Arnold was a traitor to our cause for Independence. Later, Hamilton was a traitor to Liberty.
EDIT
Not unlike Arnold, Hamilton was a heroic officer of the Revolutionary War. Finally betraying his country. Deceiving even his friend Pres. George Washington, Sec of Treasury Hamilton was trusted by Washington to advise him in matters of money.
EDIT
Jefferson's image belongs on a gold or silver US mint bullion coin. Hamilton's image resides appropriately on the fiat FRN ten-dollar bill.
So you are saying that what you call a "quote", everyone else in the world calls a "bid"?
Why on Earth would they switch terms like that?
In the loose sense, we are talking about "bid quotes" and "ask quotes" (so "quote" can be synonymous for either).
True, the "quoted price" historically represents the last point at which the highest-bid and lowest-ask "met" in a transaction for a stock. For example: http://www.investopedia.com/terms/q/quote.asp#axzz1W6Tb3XVF
The issue is that these high-volume broadcasts are for the sole purpose to cost competitors milliseconds (and nanoseconds) while giving yourself an advantage (front-running and skimming through price drift). You don't intend for your quotes to be filled. You immediately withdraw all your offers after "flooding" the lines with noise. That's HFT.
Thanks, JohnG explained it to me below. I was thinking the algos were (not) buying rahter than (not) selling. Now it makes perfect sense, and I can see why it is illegal.
Oh, but it is NOT legal:
http://taft.law.uc.edu/CCL/34ActRls/rule11Ac1-1.html
A quote displayed without the intent to trade is in blatant violation of this rule.
So the act of getting a quote is implicitly a bid? That doesn't make sense to me. Unless by "quote" they really mean "order".
It seems to me that getting a quote, and declining to trade based on the price presented by the counterparty in that quote should not be illegal, nor should it have any effect on the markets. Only placed/winning bids should effect the market. I am aware of the fact that yanked bids move the market--but they shouldn't. This seems to be a problem with the market. Prices should only move based on completed trades, not aborted ones. Further, if these guys are doing a bunch of annoying shit like requesting quotes millions of times per second, I would think they would just be banned from the exchange.
But then, the fact that anyone plays in this rigged paper market doesn't make sense to me either.
When I was in lumber wholesale/retail the most important concept was "point of sale" POS. This was the exact moment in time when a transaction was executed, and was very significant in everything that followed. "Executed means SOLD... the bullet exited the barrel. Lumber prices change daily, hourly, or even continuously (on the purchasing side). But intent to buy is meaningless in all ramifications.
Which billing period does a credit card transaction fall in, for example?...when you put something on a wish list on Amazon? Try telling a banker your intent to pay his installment was within the grace period. The idea that they use "intent to buy" as a basis for price discovery (whether in HFTs or futures contracts), is nothing other than halariously absurd! The bankers themselves must be amazed that it would be accepted by the public. No wonder they are so fucking arrogant. They think we are complete morons. Maybe they're right?
They're not entirely right, but definitely more than half right, imo.
The "public" does not understand the workings of the market as a whole, much less this kind of arcane minutia. But don't blame the public for that--it's what separates the common man from "investors" and what justifies all the money made in the markets, right?
It's not "the public's" responsibility to do something about it. It's those in the know who have that burden and are the only ones positioned to do anything about it. Unfortunately, most in the "investor" community celebrated the shifts in public policy that led to this place. Financialization of the US economy was all good until "investors" themselves started running into trouble against unfair competition at the hands of transnational corporations and machines.
Sound familiar? It's very similar to what labor faced in the past 30 years with outsourcing, Unfair Trade Agreements, demolition of pension systems and so on. Applying the same standard to the markets, here "competition" seems to be coming full circle in a very similar way to bite those who so fanatically promoted it for other people.
The "public" is primarily concerned with getting decent jobs. How many "investors" lie awake at night worrying for them or their families?
Karma may be a bitch, but don't expect any love, compassion or cries for "fairness" from the public on behalf of wronged "investors."
It is profoundly sad, but the public feels more than a little hope that hurricane Irene will take out NYC for good. That tells you what you need to know about the public.
Unfortunately, it tells you more than you want to know about investors.
Yeah, i understand what you are saying, but i am more and more inclined to think the public NEEDS to understand this arcane BS. People need to take personal responsibily to understand economics, as they should take responsibilty to understand gardening, personal health, child rearing, home maintainence, personal defence, etc, etc. I was as guilty of negligence as anyone. There is a social meme that says "because i worked all day, i have no further responsibilties when i get home. I throw a little money at these other responsibilities, and let those specialists take care of them." Not good.
Agreed, but in this technocrat society such complex issues are deferred to "experts" who make the decisions themselves. The lay public is structurally excluded from the table . . . and the corporate media makes sure they only get the minutes of last week's meeting in passing. With all references to human reality fully redacted.
I agree it's bad. What commoner would have ever agreed to the policies that have destroyed our real economy and gutted our wealth for the benefit of so few?
We have become such a nation of self-serving liars that even being conversant in the issues brings no resolution, though. Look at discussions around here. Crazy misreads of the problems prevail (and sincerity does not transform crazy into anything better than it started life as.) Look how many people see what's happening as socialism!
At this point, I see no hope for improvement for the society as a whole. What it's going to take is a crash that wipes out the upper middle class investor sycophant who has supported this monstrous process from the start.
Only then will he change his tune. Problem is that, as the boy who never cried wolf during many years of culling of the herd, nobody is going to listen to him then.
How awful the epiphany must be that in spite of your self-righteous pretensions you were in reality nothing more than a dingleberry on the ass of the elite who served an essential purpose only in delegitimizing the claims of those "below" you . . . until you were no longer needed.
Suckers.
btw, the "you" is strictly rhetorical, nothing personal meant in that RR!
4. This is an algo gone mad. A programming error. Beginner mistake that didn't choke the algo and was very fucking lucky it shut down before more time elapsed.
If you're trying to game the system better hire some experienced programmers, this sort of error can wipe a firm clean OUT.
5. It was a successful test of a hack designed to bring electronic markets down when used on a wide scale.
Bingo. I'm just wondering who initiates the quotes. The CQS should show the broker ID.
Wonder where it came from, and I'm actually terrified that I might be right in my conjecture.
Nanex? Where's these come from?
ps. The ID can be spoofed, it's just a packet.
I think this is proof that cheaters actually do prosper.
shazam uses speech recognition by collating spikes and troughs to form a audio fingerprint.
perhaps the algo is trying to build a monotone fingerprint in which is seems like noise, but may execute @ that bid/ask in the near future, masking its trade, as other algo have no way to detect the signature from the noise.
Or perhaps the hooker sprawled over the keyboard while getting nailed from behind by HFT man before meeting the wife and kids for dinner and a show....
Tyler, thank you for exposing this. Someone will listen eventually, NEVER give up on this. One day the world will be better, as long as the idealists NEVER give up.
damn , i need that system, my EA in MT4 does not works that fast.
Skynet is now running the stock market. Soon terminators will come after anyone who makes a profit in the market.
Skynet was right - humans are the enemy.... (at leasrt some of them)
Either humans are the enemy...or the human race is a virus. And the important question: do we deserve to survive? There comes a time when you cannot run from the things that you have done.
>Dear HFT, Please Explain This
"I"m sorry Dave, I can't do that".
What's funny is that the sine function used actually is pretty expensive computationally. So it seems like a wasteful flourish to me. That must be one hell of a fast machine if you can afford that sine call 10,000 times a second.
You just make a table, and look up the values....Old DSP hand here.
not really just a fast machine but many of them. If you think of Google having 100,000s just to search for web pages what do you think someone wanting to control the financial markets markets would put together with unlimited budgets. Also keep in mind, just as Google pre-processes to provide instant results, so do financial manipulators. It is not just the algorythm doing the work on the fly but also pre-processed responses as well and pre-planned attacks.
I'm thinking they would use something like this: http://www.cray.com/Products/XK6/KX6.aspx. Speed is what they're after, not servicing 700 million requests for websites about Lady Gaga's pubic hair.
Looking at the brochure for this supercomputer, it states power consumption at 45-54.1kW. So for the bank shown at Cray's website to run for a year, it would consume a bit under half a million kW hours.
I wonder just how much electrical energy is wasted, just wasted, in these firms that are not only completely non-productive, but are parasites on people who actually are productive. How much of all the energy that this country consumes actually goes to something, anything, with real productive value?
Anyway, I hope the HFTs break the entire system. Before it breaks us.
Don't worry, once they break the ETF and Futures markets, they will use these nice supercomputers to CENTRALLY plan all production worldwide.
Utopic Communism will be their target.
Damn, Orwell missed it by 30 years, enough to make a generation forget. hmmm.
Pre-record the sequence. No processing required during playback.
It's precomputed and indexed. Fast, fast, fast.
That's what she said...
No, she said stop. Please. Don't. Stop. Please. Don't stop. Please don't stop. Faster. Please don't. Stop. Faster..........
Like the olde, great college drinking song: "Oh, please, surrender, do not touch me"
Yes a look up table is faster. However, 10,000's of sine and/or trig functions is not that many per second. The average computer can process far more per second than 10,000. Benchmarks are easy enough to produce if requested. I am working on some software using the orthographic projection (lots of sin and cos functions) that processes 400,000 navaids in a fraction of a second and renders them, on an old AMD 939 socket machine.
Supersparc machine laungage junkie......:) Try that shit with a discontinuous function why don'tcha. (A lot of these malicious HFT programs/scalping algos are by definition)
Need some help with that vis bub?
Yeah, thro it down g, I'll fuck you up!
>;)
The point is that none of this imprsses me w regards to processing power or capability of any given box. Bandwidth limits are the bottleneck. Any rusty old box in a colo will do as long as the programmer is not a dumb ass. HFT needs to be outlawed. ZH has been preaching the good word for years.
For example on our dedicated box we run email. web. flight simulation, voip, vpn's, database servers, and virtual machines. Fact is the box is at idle most of the time even under high network load. Machines these days have more than enough power, the bottleneck is the network, hard drives, etc.
Thing is...these servers are colo'd literally across the street from the exchange, on fiber optic conns. The latency is at nearly lightspeed. Almost no network delay. After it's in memory, hard drive is extraneous to the crooks. It's the exchange that has to log it. When the exchange is flooded, that's the latency that can be exploited. It all has too be looged before it can be fed to the CQS, and therefore to other exchages. When this happens, it breaks the market. This is the BAD side of HFT. The exchanges cannot keep up with this. I have yet to find a way around this/ Maybe millions of $ of flash mem, but I'm not even confident that would stop it.
What WILL stop it is min display time. A 1 sec min would do it. 10K/sec would be defeated.
both of you are missing the silicon, pass around.. plug in.
Read my comments here. HFT is a misunderstood. It is two separate things. Legit HFT, and crooks that game the system.
And this programmer was a dumbass. I'd have to kill him if he worked in a legit shop. Then drown him, hang him, and burn his fucking carcass. But that's just me. :)
Reminds me of that ringing in the ears just before one faints.
Not bad.
It does as it's told...
Click the &@%#ing mouse!!!!
My bad, that doesn't need to get called on the fly. That can get set up ahead of time.
Sorry
B/A sizes mean something? Thought it was just another column for lights to flash on.
So pretty.....
Is there a way to change the colors? When you own puts the red is so much prettier.
http://www.youtube.com/watch?v=HwBmPiOmEGQ&feature=player_detailpage
they've HAD it. THE COMPUTERS ARE MAD AS HELL AND THEY'RE NOT GONNA TAKE IT ANYMORE EITHER!
The primary answer to the overall question of why the HFT does this: so that no one can see the actual market for the shares.
The secondary answers range from trying to collapse or accelerate stock prices by spooking other algos, or hiding certain transactions across various exchanges [because the SEC is incompetent], etc, etc.
We are almost certainly within days of another flash crash.
"We are almost certainly within days of another flash crash."
How many times has that been said over the past year? Why days? This shit has been going on nonstop since the last one. Bring on the flash crash.
If you have been watching both the flow of funds and the surging book [quote stuffing back and forth], then you would know what I am talking about.
The ghost in the machine is rising in volume and frequency.
If you believe this put some money on it, I have. Two contracts of NDX weeklies cost $100 plus commission this morning. My rough calculations say a 20% down-and-closed crash makes them worth $50,000. That was two days of coverage at 500:1 pay out. I don't think the chances of a crash are that small what with Bernanke, Irene, GDP, Greece, the Euro and Romania. <I just added Romania so it would spell BIGGER> Maybe 100:1 but the option pricing structure doesn't seem very robust for fat tail events. This is better paying and more entertaining than a lottery ticket. It also satisfies the ZH urge to do battle, at least symbolically with the corrupt system. BTW if anyone out there can show where my logic is off please let me know.
You will not collect on your puts. There. Simple. Don't try and beat the system. Ignore it and invest your hard earned money in real assets that they cannot get their fat fingers on.
Should have used "Ribya". That's how the Chinese pronounce it.
Ironically this crime was performed on a Dell mainframe.
Yeah, but can they quote stuff gale force winds?
This algo seems to be fishing for other algos by the flaoting ask.
Does anyone think the currency market is this manipulated?
yep
yessir the banks completely control the FX market.
AFA HFT is concerned, I actually think... Probably not?
The FOREX market is decentralized http://en.wikipedia.org/wiki/Foreign_exchange_market and HFT requires colocated servers. So unless you could co-locate on all FOREX servers and somehow co-ordinate each computer, I'm pretty sure you couldn't pull off this shit there.
Also, per TD, massive sovreign intervention, REAL attemps at manipulation, are now measured in minutes.
Hmmm.... it seems like a whole lot (or maybe all?) holders of Dell stock want to sell their shares at prices that are too far above the level that a whole lot of potential buyers are willing to pay.
Maybe Dell is gettnig ready to announce that Steve Jobs has a new job.
Or, maybe the whole stock market has turned into a corrupt game of "sodomize the sheep"
It already has been one.
Exchanges should put in a cancellation/ C&R fee. When another big flash crash occurs and the SEC finally figures out quote-stuffing they are going to ream the exchanges for letting this happen. These guys need to get out ahead of this.
i did that to a high volume printer one time with few lines of fortran. the admin was frantically fumbling for the kill switch because the damn thing was about to break loose of its mounts. this shit is malicious.
the poor computer flatlined. no wait there is a small sign of life, the heart was beating too fast to be detected at first.
Source likely = China ... via some sort of software attempt to fuck up our electronic markets. Would anyone actually be surprised?
surprised if they beat OUR pigs to the trough....
still amazes me how u.s. intelligence services, charged with protecting the country, let themselves be punk'd DAILY by the vain douchebags of Wall Street, who've taken the country to the edge of destruction from within...it's got to rub at least a FEW of them the wrong way....i'm sure the rest of them just salute
What better way to collude than in the open talking the common language with only insiders understanding the meaning?
Think about it this way, if you're trying to buy drugs on a phone that may or may not be listened into or recorded, what are you going to say?
1) "Hey buddy, when can I come get that coke we talked about?"
2) "Hey buddy, Thinking I might drop around and play xbox for a bit if that's cool?"
If you picked option two, then you're smart enough to know that the conversation must be completely safe to say infront of anyone, but the meaning must only be understood by the parties involved.
Now, if you're going to game the stock market, how would you hide your collusion messages and still deliver them in an innocent and open manner but still achieve instant interpretation by your friends?
Well, picking up the phone and having a group conference to do this runs the risk of triggering alarm bells. Multiple group conferences between "competing" entities would quickly rouse suspicion, wiretap warrents and investigation. Putting a designated number of untradable quotes on a certain stock? Completely under the radar. Completely innocent at face value, but it still delivers the message which others act upon.
You mean someone sent the text of the bernank's speech tomorrow to a few select friends by encrypting it ON a Dell and IN Dell ?
Fiendishly clever, much better than a double ROT13 cypher. The SEC will have to hire some NSA-level geeks to be able to function. Bullish for the job market
/sarc aside, this is a frightenly plausible explanation
And small discrepancies in the sine wave, like missing pixels in a photo, are then decoded on the magic decoder ring.
Again "/sarc aside, this is a frightenly plausible explanation". We have to hope that the market isn't being brought to it's knees by two love-lorn geeks trying to set up a dinner date on the sly.
Hope you can decode when the black helicopters will pick you up.
You think too much.
What does it all MEAN, Basil?
What is the harm in a lot of quotes going out?
Not defending or justifying, just asking.
It means I can't get a fill. Sick n tired of watching fills a penney below me, before mine fills.
How does a robot requesting a lot of quotes stop you from getting fills? Seems to me that they have to bid to get fills.