| The RETF Algo – Table of Contents
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On May 2, 2011 we began noticing a strange algo phenomena that would begin immediately after the official market close. It started with one issue, affecting only the ask price. It soon progressed into more stocks and soon began affecting both the bid and ask price. As of 6/10/2011 it is seen in over two dozen issues. The algo has several unique characteristics:
- To date we have only seen the algo run after normal market hours (specifically between 16:00:00 EST and 16:15:00 EST).
- It runs in short and long ETF issues (i.e. an ETF and it’s Inverse ETF).
- It averages approx. 2000 quotes per second on each issue it runs on.
- Quotes from multiple exchanges follow the price.
- It consistently raises the ask price and recently began dropping the bid price (many times until the bid hits zero). In the majority of cases it also moves the NBBO to the same outrageous price levels.
- We have not seen any trades occur while the algo is running (yet). As it runs in fairly illiquid ETF’s and after hours, this is likely due to the fact that there are no trading opportunities at the time.
- It has increased it’s scope of ETF issues every week.
It would be easy to say this algo is a test of some type — if it was only seen on one or two days. However, seeing it run every day for six solid weeks (as of this writing), increasing in both symbol scope and frequency, raises many questions. One thing however is painfully clear; all one needs to bring a stocks quoting price to zero (on the bid side) or into the stratosphere (on the ask side) is the will to do so (and an algo that will blast thousands of quotes a second to raise/lower the NBBO in small increments, thus not violating the recently implemented stub quote rule).
- May 02, 2011 – First Sighting
- May 09, 2011 – Week Two
- May 31, 2011 – End of Month
- June 10, 2011 – A Change is Seen
- Additional Examples
As of 06/10/2011 we have seen the algo run in the following issues:
| BIB | ProShares Ultra Nasdaq Biotechnology |
| BIS | ProShares Ultra Short Nasdaq Biotechnology |
| BGU | Direxion Daily LG-Cap Bull |
| BGZ | Direxion Daily LG-Cap Bear |
| GASL | Direxion Daily Nat Gas Bull 2X |
| GASX | Direxion Daily Nat Gas Bear 2X |
| IFNA | iShares FTSE EPRA/Nareit |
| KRS | ProShares UltraShort KBW Regional Banking |
| KRU | ProShares Ultra KBW Regional Banking |
| LTL | ProShares Ultra Telecommunication |
| MWN | Direxion Mid-Cap Bear 3X – Triple-Leveraged |
| REK | ProShares Short DJ US Real Estate Index ETF |
| RETL | Direxion Daily Retail Bull 2x Shares |
| RETS | Direxion Daily Retail Bear 2x Shares |
| RXD | ProShares UltraShort Health Care Fund |
| RXL | ProShares Ultra Health Care Fund |
| SAA | ProShares Ultra Small Cap 600 Fund |
| SBB | ProShares UltraShort Small Cap 600 Fund |
| SBM | ProShares Short DJ US Basic Materials Index ETF |
| SDK | ProShares UltraShort Russell MidCap Growth Fund |
| SIJ | ProShares UltraShort Industrials Fund |
| SJF | ProShares UltraShort Russell 1000 Value Fund |
| SJL | ProShares UltraShort Russell MidCap Value Fund |
| SKK | ProShares UltraShort Russell 2000 Growth Fund |
| UCC | ProShares Ultra Consumer Services |
| UGE | ProShares Ultra Consumer Goods |
| UKK | ProShares Ultra Russell 2000 Growth |
| UKW | ProShares Ultra Russell MidCap Growth |
| ULE | ProShares Ultra Euro |
| YCL | ProShares Ultra Yen |