Oslo Stock Exchange Fights Back Against HFT And Quote Stuffing

Tyler Durden's picture




 

As High-Frequency-Trading rapes and pillages its way across global capital markets, perhaps it is no surprise that the country that gave the world 'Vikings' would be the first to stand up to the computerized hordes. In a breakthrough moment of clarity, The Financial Times reports, the Oslo Stock Exchange will issue punitive changes to traders if they send too many orders into the exchange that do not result in deals being done.

This first-of-its-kind crackdown on 'Quote Stuffing' comes after the exchange has seen a surge in the number of orders flooding its systems and while the bourse does not quite go so far as to say HFT is "in itself necessarily negative for the market", it says the placement and cancellation frequency of trades has reduced the efficiency of its market. Bente Landsnes, chief executive of Oslo Bors, said: "A market participant does not incur any costs by inputting a disproportionately high number of orders to the order book, but this type of activity does cause indirect costs that the whole market has to bear. The measure we are announcing will help to reduce unnecessary order activity that does not contribute to improving market quality. This will make the market more efficient, to the benefit of all its participants." From September 1st the exchange will limit each trader to 70 orders for every trade executed and any excess of that ratio will be charged $0.0008 per order. We are sure the NASDAQ, wanting to make up for its SNAFBU, will be next in line to punish the pernicious penny-pinchers.

Naturally, we fully expect those very much irrelevant, and lately totally tarnished US trading venues such as the now 'butt of all jokes' Nasdaq, to attempt to poach even more lowest common denominator HFT traffic from Europe, and provide even more "liquidity" rebates to Algo-Matic, in the process pushing electronic trading as a % of total nearly to triple digits.

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Thu, 05/24/2012 - 10:35 | 2458766 Debtless
Debtless's picture

Fuckin' robots.

Thu, 05/24/2012 - 10:40 | 2458776 SilverTree
SilverTree's picture

Couldn't they solve it with a one second delay?

Thu, 05/24/2012 - 10:43 | 2458783 Deo vindice
Deo vindice's picture

  "perhaps it is no surprise that the country that gave the world 'Vikings' would be the first to stand up to the computerized hordes."

Or by sending more vikings to the bank offices that do the trades.

Thu, 05/24/2012 - 11:31 | 2458986 Hopeless for Change
Hopeless for Change's picture

Pretty soon with the S&P below its 200 day MA and Eurocalypse and Chuck Schumer and Mark Suckerturd and JPM and the algos fishing for sell stops, all signs are going to point to sell.  Unlike The Terminator, when the robots take (took?) over the world, they will not be shooting 4,000 bullets per second but 4,000 sell orders.   

Thu, 05/24/2012 - 10:43 | 2458791 ITrustMyGut
ITrustMyGut's picture

^ this

END the bots~

( its a start )

Thu, 05/24/2012 - 11:07 | 2458881 DeadFred
DeadFred's picture

My guess is that this ends the Olso exchange.

Regulators get caught in hotel rooms with under-age girl scouts

or the exchange comes under sudden pressure and valuations drop mysteriously until the rules change back.

Still, hope for the good guys

Thu, 05/24/2012 - 11:24 | 2458959 Xkwisetly Paneful
Xkwisetly Paneful's picture

We really don't want free markets.

We want free markets except.............

Joke times ten million plus one.

Thu, 05/24/2012 - 14:42 | 2459709 Bansters-in-my-...
Bansters-in-my- feces's picture

Xk P....

You really are a loser ,ain't you.!

Thu, 05/24/2012 - 14:46 | 2459718 Xkwisetly Paneful
Xkwisetly Paneful's picture

THe biggest on the entire planet! Plus, I am a total moronic imbecile on top of it.

The weird thing is I get this shit, so how can anyone else possibly not get it?

Thu, 05/24/2012 - 12:13 | 2459147 xtop23
xtop23's picture

Exactly. Does anyone really believe the PPT will allow HFT trading to get hamstrung?

That's ridiculous. It's the only thing keeping this farce together.

Thu, 05/24/2012 - 10:48 | 2458814 spanish inquisition
spanish inquisition's picture

I was thinking about that, it would help if it was randomized between .3 and 1 sec. (i.e 10,000 trades come in over 3 nano seconds, they are randomized .35,.99,.57,.36,.43,.42. It shouldn't affect real orders)

Thu, 05/24/2012 - 12:26 | 2459188 Tidewater
Tidewater's picture

A randomized time-delay would be effective. And/or a miniscule per-share charge for every order or cancelled order.

The high-freaks of algo thrive by technology, but can be put down -- and easily -- by very minor tweaks to microstructure. Watch the dead red eye burn out.

...

Not surprised that a peripheral market like Oslo has moved first. Everyone looks to the U.S. and U.K. for leadership here, and lead we have and do -- in the wrong direction. Full-spectrum capture.

Ropespinner, bitches.

Thu, 05/24/2012 - 15:02 | 2459792 OpenThePodBayDoorHAL
OpenThePodBayDoorHAL's picture

Daisy, Daisy....giiiive mmmeeee yooouuur aannnsweerrrr doooooooooo........................................................................................

Thu, 05/24/2012 - 14:32 | 2459669 Umh
Umh's picture

The randomization would change the sequence of orders executed.

Thu, 05/24/2012 - 14:25 | 2459647 Umh
Umh's picture

It looks like they are trying to discourage fake trades, but still let the computers do the trading.

Thu, 05/24/2012 - 10:38 | 2458774 SheepDog-One
SheepDog-One's picture

I was long ago saying to do this kind of thing...charge each unexecuted trade from quote stuffers .1 cent. That alone would shut down HFT's. 

And why not require every trade be executed only after a CAPTCHA is answered...hell everything else requires it why not a stock transaction?

Thu, 05/24/2012 - 10:42 | 2458788 Chaffinch
Chaffinch's picture

I like that CAPTCHA idea a lot!

Death to the damned robots!

Thu, 05/24/2012 - 11:01 | 2458865 SWCroaker
SWCroaker's picture

Bullish for the robo-captcha crack hackers!

Thu, 05/24/2012 - 10:40 | 2458778 GeneMarchbanks
GeneMarchbanks's picture

Norwegians are way smart.

+1 for SNAFBU

Thu, 05/24/2012 - 14:26 | 2459653 Umh
Umh's picture

What does the "B" stand for?

Thu, 05/24/2012 - 10:40 | 2458779 Chaffinch
Chaffinch's picture

Nearly 1/1000 of a cent per excess order.

Well, I suppose that is a start!

A thin end of a much-needed wedge!

Thu, 05/24/2012 - 10:41 | 2458785 I should be working
I should be working's picture

70 orders per fill?  Hardly punative for us humans...

Thu, 05/24/2012 - 10:56 | 2458842 Greyzone
Greyzone's picture

Exactly. It's not supposed to be punitive for humans, just for bots.

Thu, 05/24/2012 - 11:02 | 2458867 SWCroaker
SWCroaker's picture

Uberly disgusting that 70 *is* actually punative.   Egads.

Thu, 05/24/2012 - 10:45 | 2458786 John Law Lives
John Law Lives's picture

"SNAFBU"

I love it!

Thu, 05/24/2012 - 10:43 | 2458790 Sudden Debt
Sudden Debt's picture

$0.0008 per order....

Thu, 05/24/2012 - 11:53 | 2459077 Whatta
Whatta's picture

limit each trader to 70 orders for every trade executed and any excess of that ratio will be charged $0.0008 per order

 

Yeah, big whoop. and 70 orders for every trade? sheesh.

That ought to make a huuuuuuuge difference. Sarcasm, of course.

Thu, 05/24/2012 - 12:01 | 2459102 Fanatic
Fanatic's picture

Actually that number is wrong. It's 10 times that. Its 5 Norwegian øre, which is 0.05NOK, which is 0.00833 USD.

Thu, 05/24/2012 - 10:44 | 2458797 Confundido
Confundido's picture

It's a fucking fallacy to say that HFT brings in liquidity. It assumes that prices are rigid, that trading doesn't take place, unless there is liquidity. It's just like the fucking central banks want us to believe about asset prices. 

The underlying issue here is that perhaps the public equity market is not for everyone, that it is overextended and that a lot of public securities should have actually been funded in the private equity market!

Well done, Norway!

Thu, 05/24/2012 - 10:49 | 2458818 neidermeyer
neidermeyer's picture

Well said ,,, HFT killed the floor traders and people that bought seats ,, ... the people that actually created liquidity when needed and acted upon real news and earnings rather than just milking order queues. I like the tax ... it can be adjusted (upward) until we get rid of the vermin.

Thu, 05/24/2012 - 11:28 | 2458973 Xkwisetly Paneful
Xkwisetly Paneful's picture

Good strawman because before HFT front running never took place.

Same dead people did not largely engage in same activity as HFT which is basically what  caused their death, getting beat at their own game.

 

 

Thu, 05/24/2012 - 12:09 | 2459122 Assetman
Assetman's picture

Lets start with the first sentence:

Good strawman because before HFT front running never took place.

Before HFT, there were a myriad of methods to front run... in fact, very creative ways.  What HFT allows, though, is a method of skimming in massive volumes, and taking advantage of information in picoseconds.  It does nothing to increase the effeciency of the markets, because the liquidity it provides is done for the purpose of manipulation-- not true price discovery.  HFT is very efficient at setting up and executing front running scenarios, though.

Now, if you were trying to be sarcastic in that first missive, however, you might need more practice.

Lets go to the second sentence:

Same dead people did not largely engage in same activity as HFT which is basically what  caused their death, getting beat at their own game.

WTF????  Dead people don't trade.  It's because they're dead that makes it so challenging.

Now THAT was sarcasm.

 

Thu, 05/24/2012 - 14:34 | 2459673 Xkwisetly Paneful
Xkwisetly Paneful's picture

The great thing is then-I used to be able to log onto a PC and see the front running clear as day,

now I just pretend it doesn't exist because I can't see it given the PC hasn't been invented yet.

 

 

 

Thu, 05/24/2012 - 14:40 | 2459694 Xkwisetly Paneful
Xkwisetly Paneful's picture

BTW the notion that the floor traders purposefully provided negative expectation for the purpose of supplying liquidity may be the single funniest post on the site this month.

Try going with have no clue how much they were stealing from you before and preferred to be ignorant rather than informed.

Thu, 05/24/2012 - 17:13 | 2460247 Assetman
Assetman's picture

Obviously, I'm am glad I am able to provide you with a most glorious laugh of the month based on your own preconceived notions of U.S. equity market trading operations.  Because most of the time, comedy really isn't my strongest suit.

I don't care how much I'm being skimmed as a retail investor.  I care than I'm being skimmed and front run in ways that are blatantly unfair-- and I see the evidence every single day as an institutional investor.  That alone is enough to keep me-- and thousands of other retail participants-- out of these manipulated markets entirely.

I hope that made you laugh even more, sweetheart.

Thu, 05/24/2012 - 18:25 | 2460529 Xkwisetly Paneful
Xkwisetly Paneful's picture

Take your head out of your ass.

You did not post that. The other guy won post of the month for standing up for the former saints of Wall St, the floor trader.

You've been skimmed and scammed since the notion of a market became reality,

it is super laughable given how cheap it is to trade that folks such as yourself are so blinded with a need to be the victim, that the obvious is so elusive.

I could go on further regarding the delusion that somewhere that money found a less corrrupt market but seems pointless.

Fri, 05/25/2012 - 04:11 | 2461531 Assetman
Assetman's picture

Oh stop it, Mr. Ferocious... now you're making me laugh.

I did not post what I just posted?  WTF?  More than half of what you say makes no sense whatsoever.  And the other half just isn't accurate.

Being a victim is YOUR term, not mine.  You plop your money down in an increasingly corrupt market as a retail investor and you lose that money, there is no one else to blame but yourself.  Your other alternative is not to participate.  I choose not to. Thousands of others have done the same.  The only trading that has increased to a significant degree over the past 3 years in the U.S. equity markets are those related to your self-endorsed HFT activities.  

I don't see anyone crying and claming vicitimization in these markets, save the investors involved in MF Global... and they were truly victims in every sense of the word.  

What I do see is people leaving these markets and not returning, because they see HFT for what it is-- a massive skimming operation that destroys true price discovery though the guise of providing liquidity and lower realized bid/ask spreads.  This is anything but 'cheap trading'... it's more like a wolf in sheep's clothing.

If it were not such a complicated issue, and listings could be placed on competitive exchanges worldwide, I'd place my money in Oslo well before I plumped down another USD in New York.  At least the NASDAQ is beginning to move in the right direction, though.

 

Thu, 05/24/2012 - 10:48 | 2458801 JustObserving
JustObserving's picture

Norway has the highest quality of life in the world.  That is the result of honesty and integrity in their government and markets.   In the US, we have regulatory capture.

Bring back the uptick rule to fix US markets.  But that will never happen.

Thu, 05/24/2012 - 10:51 | 2458824 SheepDog-One
SheepDog-One's picture

Yep, the uptick rule would certainly inhibit 1.5% 30 minute market-wide swings like we were unfortunate enough to witness yesterday.

Thu, 05/24/2012 - 14:51 | 2459734 Xkwisetly Paneful
Xkwisetly Paneful's picture

I am going to start living like a Norwegian!

Going to put my 950sq ft house up for sale and move into a 450sq ft one,

going to sell one and half cars, so I will be left with half of one,

going to buy a bike and go get some mass transit schedules,

going to take all of those leftover proceeds and fund a healthcare account.

Then I am going to pretend I am in Norway and that is the highest quality of life on earth.

 

Thu, 05/24/2012 - 10:46 | 2458804 Lost Wages
Lost Wages's picture

Norway is great at making meaningless moralistic gestures.

Thu, 05/24/2012 - 10:55 | 2458840 Greyzone
Greyzone's picture

It's not meaningless. This stops the machines otherwise the cost of quote stuffing becomes prohibitive. I'd go even further and make it 1 in 20 or 1 in 10. And I'd slap a much higher fee for unexecuted trades once you cross the threshold.

Just kill the HFT bots entirely by making their actions un-economic.

Thu, 05/24/2012 - 10:48 | 2458816 NEOSERF
NEOSERF's picture

At least it is a start at pulling the curtain back from the the 1%ers.  Something has to be done.

Thu, 05/24/2012 - 10:53 | 2458834 fuu
fuu's picture

I think lining them up against a wall and shooting them would work too.

Thu, 05/24/2012 - 10:59 | 2458854 rehypothecator
rehypothecator's picture

While I like that idea, another is to expand the idea of "short term" captial gains.  We peasants have to distinguish between assets held more than a year from those held less than a year.  Taxes could be raised again for assets held less than a minute, less than a second, or less than a millisecond. 

Thu, 05/24/2012 - 11:01 | 2458866 fuu
fuu's picture

I was thinking the Pols could join them along the wall but ok.

Thu, 05/24/2012 - 11:20 | 2458937 JustObserving
JustObserving's picture

A 50% additional tax on assets held under 1 second, 30% extra tax for assets held less than 20 seconds and a 20% one for assets held under a minute will fix everything nicely.

Will help reduce the budget defict and bring integrity to markets.

Thu, 05/24/2012 - 13:04 | 2459299 overbet
overbet's picture

The truth is they would find another way to make money which is what all you haters should focus your energy on rather than crying that they found an edge. Go find your own edge. No thats too difficult just sit around on you pc and whine about the injustices of capitalism. Tax them more......why so you can sit on your ass and whine all day?

Thu, 05/24/2012 - 14:12 | 2459578 Waffen
Waffen's picture

cheating the system and or gaming a system that you are able to write your own rules to, is not capitalism

 

it's also what leads to leftist revolutions, which I am sure even you do not want to see

Thu, 05/24/2012 - 15:03 | 2459787 Xkwisetly Paneful
Xkwisetly Paneful's picture

Uh yea it actually is the textbook definition of free market capitalism.

The regulatory response is typical of liberal socialism.  The notion that somehow they are going to level some playing field all the while they are wholly responsible for all of the unlevel fields in the world.

and NO, all forms of government move from less to more and end with none. There is nothing new or novel or special in this current existence.

at some point I am hopeful that even the biggest dolt recognizes this massive growth of governance the last centuries was brought to you by the rich and powerful for the sake of the rich and powerful and stop being so naive to believe more governance is going to benefit you in any way shape or form.

the endgame here? any higher costs to trade will filter to the bottom just like some ridiculous percent of taxation  and regulation is usually paid for by us at the bottom.

 

 

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