Coexisting without Colocating A proposal for improving the market for everyone More Nanex Research Our last paper ended with: We think we found a possible solution to the HFT/non-HFT divide that lets the market itself decide the value of an equity quote. The solution is incredibly simple and has virtually zero impact on the [...]
HFT is Insatiable - its Hidden Costs Requires expensive capacity increases, puts the market at risk every minute of every trading day Back to Main Research Page We have spent the last 24 years working with real-time market data on a tick-by-tick basis. We monitor our commercial datafeed in real-time to stay [...]
High Freak Volatility An example of HFT causing explosive volatility Back to Main Research Page Updated: 10/4/2011 On October 3, 2011 beginning at 11:10:00.450, in the stock CA Technologies (symbol CA), a bizarre interaction between multiple HFT algorithms caused a wild oscillation in the NBBO with over 1,000 trades executing [...]
Usually when algorithms go haywire in the markets, they execute trades at wild prices; many of which will later be canceled. 'Pretend it didn't happen' is the current mantra of our regulatory agencies. The regulators would also appreciate it if you didn't talk about these events as they could harm investor confidence. [...]
HFT Breaks Speed-of-Light Barrier, Sets Trading Speed World Record. Adds a new unit of time measurement to the lexicon: fantasecond. Back to Main Research Page On September 15, 2011, beginning at 12:48:54.600, there was a time warp in the trading of Yahoo! (YHOO) stock. HFT has reached speeds faster than the speed-of-light, [...]
Exhibit A Back to Main Research Page The chart below shows how many quotes it takes to get $10,000 worth of stock traded in the U.S. for any point in time during the trading day over the last 4.5 years. Higher numbers indicate a less efficient market: it takes [...]
Overloading the U.S. Options Market Back to Main Research Page On August 10, 2011, at 9:50:16.467, someone sent 8,557 quotes for 522 option contracts on the stock BIDU (Baidu) in 1 millisecond. This is equivalent to 8.5 million quotes per second, about twice OPRA's current capacity. The quotes were sent from each of the 9 [...]
HFT is Out-of-Control The explosion in quote traffic rates obsoletes most research papers on HFT. Back to Main Research Page Lately, readers have sent in links to a few research papers extolling the virtues of HFT, namely, that they provide liquidity, reduce spreads, and probably cure cancer. At first, it [...]
Stub Quote Rule Violations - Letter to Mary Schapiro Back to Main Research Page Dear Mrs. Schapiro, We would like to thank the SEC for implementing the Stub Quote Rule in December of 2010. While stub quoting did not cause the Flash Crash of May 6th 2010, it was a [...]
New SEC Limit Up/Down Proposal Would Have Made Flash Crash Worse Bellwether stocks halted and frozen near the bottom! See charts below. Back to Main Research Page We have read the SEC Limit Up/Limit Down Plan to Address Extraordinary Market Volatility (LULD, or the plan). We have also read through the comments submitted to the SEC [...]