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Great News: Just 10% More Quote Churn And The Broken Market "Resets"

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Wed, 08/10/2011 - 16:37 | 1548163 RockyRacoon
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Let's break this thing!   Operation Mayhem.


Wed, 08/10/2011 - 16:49 | 1548293 MarketTruth
MarketTruth's picture

QUICK, call Initech to rework the software... and make sure your trades have the new TPS cover sheet!

Wed, 08/10/2011 - 16:59 | 1548377 buzzsaw99
buzzsaw99's picture

defines the problem perfectly. add another digit to the odometer, duh.

Wed, 08/10/2011 - 17:32 | 1548545 spiral_eyes
Wed, 08/10/2011 - 18:18 | 1548733 Bill Lumbergh
Bill Lumbergh's picture

That is my call on how we will proceed.  However I do need you to come into work this weekend.  Greattt...thanks.

Wed, 08/10/2011 - 17:08 | 1548436 max2205
max2205's picture

Man vs machines.....break the machines. You thought 1987 was bad....

Wed, 08/10/2011 - 17:21 | 1548497 Breaker
Breaker's picture

As much as I hate the idea of giving the feds more money to waste, a 1 cent tax on each order placed would do a lot to fix the HFT caused volatility.

Wed, 08/10/2011 - 17:55 | 1548628 jemlyn
jemlyn's picture

I love your idea!  Let's make it 5 cents.

Wed, 08/10/2011 - 21:45 | 1549539 V10
V10's picture

I'm all for anything that separates actual investors from traders (ie. HFT casino-mentality money movers).

In the same vein, what about requiring anything traded be held for a minimum amount of time? Yeah, yeah, 'providing market liquidity' and all those textbook excuses, but a 24-hour cooling off period is not going to cause real economic activities (people and corporations that actually produce things) to grind to a halt.

Wed, 08/10/2011 - 17:43 | 1548591 FreakuentFlyer
FreakuentFlyer's picture

let me try this.

data feeds can deliver quote messages in two basic modes: tcpip & udp. the 1st one is slower because it guarantees that each message will be delivered to its recepient, and in the order in which the messages have been sent. if one is not confirmed, the networking layer resends the message while the subsequent messages "wait".


udp on the other had does not support delivery confirmation nor sequence validation, but is therefore "much" faster. which is the reason most serious HFT shops subscribe to that version of each ecn feed.


since the message sequence arrival is not guarnateed to be identical to departure, the recepient might have an issue if there is a transmission issue: e.g. nasdaq sends message1=new-quote#1-ibm-100@200.55; next message=quote1-size-reduction-50; next message=quote1-size-increase-70. if the 2nd and 3rd message get "twisted" while traveling on the wire, the recepient firm might have a temporary issue with data quality. or more permanent issue, in case one of the messages is lost (due to buffer overflow, etc.)


so, the data feeds implement message sequence numbers so that recipients can detect if there is message loss or delay - each next message has an increasing message sequence number, and the recipient keeps track of the next # they ought to expect, and wait for.


the reason you wanna wait for the messages in the proper sequence is because you do not know the ticker of the message, until you get it - so you do not know which of your internal stock quote books is incomplete.


since there are a lot of tickers and messages, each data feed in this multicast/udp format, is divided into "channels" based on ticker alphanumeric names. each channel is responsible to broadcast all messages for it range of tickers and number them accordingly. and their max range of seq # per channel is the 99M mentioned.


if one of the receipents detects a loss or a delay, they know the last in sequence # they have received, so they have the option of explicitely requesting a resend of the next/id that they are missing/is-delayed.


but this re-transmission request-response can not work, if the sequence number has been turned over from 99M back to 1, 2..


in reality, waiting for the request-response is too costly, since you would realy need to stop processing all messages, including the tickers not affected, so there is a practice in the industry to just keep going and not "look-back".


long story short, ppl def. rely on the seq number, most do not use its entire intended purpose, and i suspect that wrapping arround the numbers might be a bigger issue than not being able to request-response once that happens.

Wed, 08/10/2011 - 18:06 | 1548684 DCFusor
DCFusor's picture

Good writeup.  I've seen other hints I'm not the only guy here who knows more than a little about the machines.

Wed, 08/10/2011 - 18:18 | 1548738 FreakuentFlyer
FreakuentFlyer's picture


although i disagree with some of the technological "information" found here, i do share many ZH wide "conclusions", so let's both hope that the credit market insights are of greater accuracy than the articles on equities markets' architecture/infrastructure :))))

Wed, 08/10/2011 - 19:29 | 1549032 JohnG
JohnG's picture

Also consider OOB transmissions.....!


yeah, I wrote a lot of SS7 protocols...

Wed, 08/10/2011 - 23:08 | 1549717 Ident 7777 economy
Ident 7777 economy's picture


OOB ="Out Of Band" in case anybody was wondering re: SS7 ...



Wed, 08/10/2011 - 22:38 | 1549656 Bob Paulson
Bob Paulson's picture

You mean Project Mayhem... and yes, destroy it.

Thu, 08/11/2011 - 00:56 | 1549888 US Uncut
US Uncut's picture

Please... someone translate?  

Wed, 08/10/2011 - 16:35 | 1548170 Number 156
Number 156's picture

'We make money the old fashioned way; We churn it!'

Wed, 08/10/2011 - 16:53 | 1548326 Debtless
Debtless's picture

LULZ. I peed a little after reading that. Thank you.

Wed, 08/10/2011 - 17:06 | 1548420 Westcoastliberal
Westcoastliberal's picture

Made me fart, just a little.


Wed, 08/10/2011 - 18:05 | 1548677 The Count
The Count's picture

And I spend money the old fashioned way, I burn it.

Wed, 08/10/2011 - 16:36 | 1548171 Id fight Gandhi
Id fight Gandhi's picture

What does this mean?

Wed, 08/10/2011 - 16:38 | 1548191 Black Forest
Black Forest's picture

Sophesticated software.

Wed, 08/10/2011 - 16:44 | 1548256 Ancona
Ancona's picture

It means tehy need to go get a tube of JB Weld.....like right now.

Wed, 08/10/2011 - 16:54 | 1548270 dwdollar
dwdollar's picture

It's like a congested cell phone network after a natural disaster (unable to talk to family/friends).  It's a positive feedback loop to the panic.  The more people panic the more they try to call, which overloads the network more, which creates more panic...  so on and so forth...

Wed, 08/10/2011 - 16:55 | 1548341 Dr. No
Dr. No's picture

How dare you over dramatize the situation.  So the market breaks.  But to even suggest a cell phone network would go down so the sheeple cannot Facebook is very irresponsible.  This would cause sever panic to which we may never recover.

Wed, 08/10/2011 - 17:17 | 1548482 Spastica Rex
Spastica Rex's picture

Lack of optimism should be treason.

Wed, 08/10/2011 - 17:21 | 1548501 Dr. No
Dr. No's picture

Downgraded.  A couple of years ago, we needed hope.  Now, just optimism.

Wed, 08/10/2011 - 16:55 | 1548339 MolotovCockhead
MolotovCockhead's picture

Is the message suppose to boost our confidence?

Wed, 08/10/2011 - 16:58 | 1548365 Mad Max
Mad Max's picture

It's a bit like the Y2K problem, except it's quotes and it's more like the Q 1x10^9 problem.

Put simply, there so much HFT bullshit going around it's exceeding the limits of daily quotes that the system had been designed for.

Wed, 08/10/2011 - 17:07 | 1548431 Id fight Gandhi
Id fight Gandhi's picture

So they're stuffing too many quotes into the system? Or is it actual trades?

What's the end result? Halt?

Wed, 08/10/2011 - 17:10 | 1548449 max2205
max2205's picture

No problem with my I Phone trading Apps. Weeee

Wed, 08/10/2011 - 16:36 | 1548172 phungus_mungus
phungus_mungus's picture

Churn-em and burn-em! 

Wed, 08/10/2011 - 16:36 | 1548175 Eagle Keeper
Eagle Keeper's picture

What would the market volume look like if there were no HFTs?  

Wed, 08/10/2011 - 16:37 | 1548185 Iriestx
Iriestx's picture

Can you imagine, a market full of humans buying and selling?  How un-American.

Wed, 08/10/2011 - 16:51 | 1548310 The Man in Room Five
The Man in Room Five's picture

Don't you mean "a market full of humans selling".

Wed, 08/10/2011 - 17:26 | 1548521 toady
toady's picture


Wed, 08/10/2011 - 17:03 | 1548403 Dr. No
Dr. No's picture

LAtely the news has been showing traders on the floor in an effort to put a face on the crash.  I always wonder if they are just actors or if the cleaning crew wears ellaborate uniforms.   What are they doing there?

Wed, 08/10/2011 - 17:43 | 1548587 NotApplicable
NotApplicable's picture

CNBC extras.

Wed, 08/10/2011 - 16:39 | 1548201 Saxxon
Saxxon's picture

What does it mean?

Wed, 08/10/2011 - 16:50 | 1548307 New_Meat
New_Meat's picture

Keep adding one to the number each time so each transaction has a unique number.  Pretty soon, all of the bits are set to one.  Add one more and get an overflow (TILT in pinball terms, NAN error) or get a wrap-around and now have two transactions with the same number.

That breaks the program and unusual things happen.  So they would have to break all subsequent (DK) trades.

- Ned

Wed, 08/10/2011 - 16:58 | 1548369 Nozza
Nozza's picture

UQDF is the UTP Plan Quote Data Feed (UQDF) - providing continuous quotations from all market centers trading Nasdaq-listed securities. It is split into channels. Each channel can handle 99 million transactions per session, before having to be reset. It's usually reset before trading. But if reset is required during the trading day, then previous transactions could get, er, lost, so they dont let the rollover happen as such, but implement some other procedures so trading shouldn't be affected. Apparently.

UTP is Unlisted Trading Privileges. It allows BBO - besg bid and best offer quotes for participants, as well as consolidation of national best bid and best offer (across all market centres).

When you see NASDAQ numbers scrolling randomly under the screen on CNBC, Bloomberg or Fox (lol) the numbers have come from this. As the data is "live" you have to pay a licence to publish it within 15 minutes (I believe).

With HFTs - high frequency trades - running the markets using algos (algorithms - or math rules) on busy or interesting days (like today lol) the number of trades is VERY high - 99 million in the letters S to Z range.


Wed, 08/10/2011 - 17:09 | 1548447 Id fight Gandhi
Id fight Gandhi's picture

Wow, thanks for the explanation.

Wed, 08/10/2011 - 17:15 | 1548468 A Lunatic
A Lunatic's picture

But do you really have to smile when you say it?

Wed, 08/10/2011 - 18:21 | 1548750 Nozza
Nozza's picture



Wed, 08/10/2011 - 17:44 | 1548594 Saxxon
Saxxon's picture

Thanks for the explication. 

Wed, 08/10/2011 - 16:40 | 1548213 Jonathan Toews
Jonathan Toews's picture

I think I get the gist of it, but can someone explain what this means in laymens terms, please?

Wed, 08/10/2011 - 16:54 | 1548330 NotApplicable
NotApplicable's picture

Just what Milton says below (the Y 99,000 k). Basically they've run out of digits to number the quotes with.

Wed, 08/10/2011 - 16:58 | 1548373 Abitdodgie
Abitdodgie's picture

I think it means all the orders it has pending are/may be cancalled and you will have to resubmit your sell/buy orders

Wed, 08/10/2011 - 17:10 | 1548450 Westcoastliberal
Westcoastliberal's picture

Reminds me of the Y2K good 'ol days!

Wed, 08/10/2011 - 16:40 | 1548215 Chief KnocAHoma
Chief KnocAHoma's picture

Baxter you know I don't speak spanish!

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