Desperate HFT Algos To Scour Twitter For Momo Feedback

Tyler Durden's picture

In yet another example of just what a farce our market has become, it appears that HFT algos, no longer able to freely frontrun the market courtesy of counter HFT-measures offered by major banks and an SEC which has started sniffing around illegal HFT activity, have stooped to the second-lowest rung in the ladder: scouring through momo trader tweets on Twitter, particularly those from the StockTwits network and somehow converting that into actionable "intelligence." Because while until now some amusing attempts at money management using the garbled noise of Twitter had been implemented, all of them relied on human eyes to translate content, going forward it will be robots doing the actual analysis, not to mention sarcasm translation. STM reports: "A Boulder, Colo., collector and redistributor of comment expressed on social media networks Thursday will launch a pair of streams of data from Twitter and the securities discussion site StockTwits that are 'normalized' and ready to be fed to computers for analytical processing. Gnip said it has prepared the streams as part of the launch of a product it calls MarketStream, that is designed for use by hedge funds and high-frequency traders. The move follows the launch in May of a social-media-based hedge fund in London. In that launch, Derwent Capital Markets said the fund it created would try to achieve consistent above-market returns from real-time analysis of comments on social data." Well actually if they really want above market returns they should also add Yahoo Finance message boads to StockTwits: that will really put the bind on Steve Cohen to come up with new and improved ways to generate information arbitrage. At that point the entire momo crowd in the whole world will be swaying the market like an explosive-laden boat full of news reactive lemmings, who believe they move the market, only to receive terminal margin calls within days. But, yes, the safety of the crowd is soooo nice.... Until it isn't. As for the algos, we can bet what side of the trade they will be vis-a-vis the prudent investor subsegment that chases market heatmaps in a market in which VIX 30 is the new normal.

More on this latest attempt by vacuum tubes to scrape the proverbial bottom of the barrel:

In the Gnip case, the streams of tweets have been turned into data in a uniform or 'normalized' format that hedge funds or firms of any type that rely on automated processes for making high-speed trading decisions. And those streams are intended for use along with other statistical and news-based sources of market data.

 

The launch Thursday is being made in conjunction with StockTwits, a Web site and service whose users comment solely on capital markets events and individual stocks.

 

Initially, MarketStream will actually provide two streams of normalized data: One that relays comment from Twitter, the progenitor of the concept of a single user broadcasting 140-character messages to the web at large, and StockTwits, which created the $(TICKER SYMBOL) tag that lets tweeters identify exactly which stock a message is talking about. Such tags allow users and computing systems to quickly pick up content relevant to a single stock such as KO (Coca Cola Company).

And the punchline:

The combination of the "broad" feed from Twitter and "specific" feed from StockTwits will translate the "voice of the market,'' in McGuire's term, into "workable data" for algorithmically-driven trading systems.

Well, as long as it does not translate into a "picture of the market."

Nor, of course, of the abovementioned companies IPO chances...

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dwdollar's picture

Angie's List... LOL... Does that garbage even pretend to be profitable???

docj's picture

Anyone who has to work and/or make rent in this market has my deepest sympathies.

Anyone still "playing" in this market richly deserves the royal screwing they're certainly going to get.

css1971's picture

Mmmmm, pump and dump heaven.

the grateful unemployed's picture

okay so pretty soon the EVIL hedge fund starts generating thousands of false messages with the word BUY APPLE. the machine reads this, the GOOD hedge fund buys APPLE and the EVIL hedge fund sells into the rally, but wait, then as the market starts to go down, the PPT puts a bid under the futures, and since APPLE is indexed it goes up too, and wait, the guys who bought APPLE as part of an elaborate ruse get rich anyway. then the EVIL hedge fund goes short and puts out a million messages that say SELL APPLE, and the PPT calls up the GOOD hedge fund and together they squeezes the shorts at the EVIL hedge fund like a giant pimple. moral of the story you can't buy the DIP unless there is a DIP in the first place. second moral of the story, don't be the guy who creates the dip in the first place

adr's picture

So this will kind of be like how a stock can jump 20% in a few minutes when 1000 law firms release statements that they are looking into company finances on allegations of fraud. I see it all the time when I look at the highest percentage daily movers. There isn't any good news, just reports that generate lots of headlines. Momo trading Algos see the same company mentioned 100 times in a few minutes and think they need to buy the stock. My guess it is a programmed golden parachute so insiders get to sell off the last bit of stock at inflated prices before a comapny goes down.

Your Creator's picture

Checkmate said the canary in the goldmine.

ZeroPoint's picture

Wow. Has the steady stream of insider information dried up?

 

Occupy Wall Street should immediately flood this thing with #"BANK OF AMERICA STOCK IS SHIIIIIIIIIIT!!!!!"

 

 

Dr. Gonzo's picture

Shoe Shine Boy Algorithm. I heard it was still in developement. This must be the first prototype.

WTF_247's picture

These bots never give up with the stupidity.

 

For around $100.00 anyone can purchase over 1000 valid Twitter accounts that are verified and ready to go.  Add a bit more and they will include followers.  To really do it right you probably need several thousand.  As of August 2011, they had about 100,000 registered users - http://blogs.investors.com/click/index.php/home/60-tech/2539-stock-market-volatility-not-hurting-stocktwits.  I would guess on any given day not more than 20% of the registered users are active.

It would not be hard to then register all these accounts with Stock Twits and then just create a  program to flood it with random trade information through proxies from all over the world.  All you have to do is have it scrub the real time stream and then model the junk posts exactly after the real posts so that the textual context is correct, you just change the symbol and action to something else.  It would not be hard to have leaders and followers created (of trades and streams), and to have it converse with itself to appear normal.

Because you know 100% that the programs scrubbing twits is looking to fade the dumb retail market, it would be easy to generate information to mislead them and in the end make money off of their stupidity.  I highly doubt I am the only one that would think to do this based of the bots moving in to an area where they should stay out.

The bots entering into stocktwits will ruin what many users enjoy using on a daily basis.

Apocalicious's picture

The quants actually have been doing this with internet message boards for years.

I know an ex DE Shaw guy who used this:

http://strategy.sauder.ubc.ca/antweiler/public/returns.pdf

And I know some ex MS Search programmers who did basically the same thing. Like everything else, it worked for awhile. Twitter seems like the next logical extension of the premise.

 

Instant Wealth's picture

So, let's disturb them a little bit:

 

I am gonna buy some GRPN stocks today. They look real cheap.

I am gonna buy some GRPN stocks today. They look real cheap.

I am gonna buy some GRPN stocks today. They look real cheap.

I am gonna buy some NFLX stocks today. They look real cheap.

I am gonna buy some NFLX stocks today. They look real cheap.

I am gonna buy some NFLX stocks today. They look real cheap.

I am gonna buy some LULU stocks today. They look real cheap.

I am gonna buy some LULU stocks today. They look real cheap.

I am gonna buy some LULU stocks today. They look real cheap.

I am gonna buy some LNKD stocks today. They look real cheap.

I am gonna buy some LNKD stocks today. They look real cheap.

I am gonna buy some LNKD stocks today. They look real cheap.

I am gonna buy some FSLR stocks today. They look real cheap.

I am gonna buy some FSLR stocks today. They look real cheap.

I am gonna buy some FSLR stocks today. They look real cheap.

 

 

viahj's picture

Robot Trader just blew a circuit

CapitalistRock's picture

Nothing new here. For more than 10 years people have been writing software that takes the text from discussions on the Internet and uses algorithms to make trades. Most are not making money. A few attempts might be. The Boulder, CO company that is assisting in compiling the data is a far better bet.

To each his own. This is simply the free market at work.

sabra1's picture

must be a hacker somewhere who can inbed a virus into a headline? just like in the movie, "Independence Day!" give those bots a cold!!!

JenkinsLane's picture

I suggest a mass tweet of "How about a nice game of chess? #Dow #S&P 500", etc., etc.

lizzy36's picture

BUY $JEF

BUY $JEF

BUY $GM

BUY $GM

BUY $GM

SHORT HOWARD LINZDON

MrBinkeyWhat's picture

Today's take home word: Desparate

johnQpublic's picture

is that a misspelling of disparate or desperate?

PunkSgt's picture

Oh look I just jammed 5 stocks with this one little tweet. 

Bank of America new commercial, thanking customers during this difficult time.  http://goo.gl/BvrFt #funny #banks #ows $bac $gs $ms $wfc $jpm #occupy 

rosiescenario's picture

Hard to comment on this insanity...it would appear that if real, excuse me, fiat money is being gambled in this fashion we are drawing near to The Rapture....

MarcusLCrassus's picture

It sounds as though you could really wreck havoc on these scumbags if you use one of those high frequency posting software programs.  You could tell your program to, for example, automatically post tons of bad things about, say, Coca Cola on tons of message boards and twitters all over the internet.  The HFT programs would pick this up and act accordingly.  If you had shorted Coke in advance you would be golden.  Rinse and repeat. 

 

Someone out there has to already be doing this. 

 

NEOSERF's picture

Seems like it should be illegal but this is where I expected things to get to...in the last 20 years as media has gone from taking days or weeks to hear about changes and news, to a couple of days, to a day to hours on MW we now have someone trying to look at seconds on Twitter...question is whether they are using the data to start a trend vs. jumping on one sooner than others...identifying a swing in sentiment and jumping on the bandwagon is different than using algorithms to stuff a trend forward...seems like this is going to be pretty dangerous stuff for the hedgies as my minute to minute sentiment is like new england weather

TooRichtoCare's picture

Maybe these algos could be put to more productive use....like maybe in noticing internet chatter containing critical words like "airplane" "World Trade Center" and "can't wait to get me some virgin muff"....

flattrader's picture

They do.  I think it is still called Echelon.

El Viejo's picture

Where's the Rodent Freicorps when you need him. Maybe this will make up for my taste in Nutria (the other white meat) sausage:

http://www.animalliberationfront.com/News/2006_08/LemmingMyth.htm

 

Peter_Griffin's picture

Why do HFTs need to look at news when they can just look at buy/sell orders coming in?  They see the market in the future.

Killuminati's picture

zerohedge gotta admit dude some twitter data is good. like when doug kass tweets market is strong and bullish then not long later it crashes... cant beat that kind of data

Yen Cross's picture

 Happy [ New ...ing] year!   Slewie called that " front  rubb-a-dubb"!    Nice work Slewie!

 

 On a lighter note. ( Intervention is the Mantra? )   Let's trade/ ya boners!<>...