Paint by algos | FT Alphaville

Paint by algos

Zero Hedge draws attention to a remarkable little study by a group called Nanex.

The datafeed company’s research shows that high frequency players approach trading in an almost ‘paint by numbers‘ way. That is to say, when broken apart and analysed, their algorithmic order sequencing displays patterns which verge on cyber art.

Zero Hedge calls them HFT crop circles. Nanex describes the practice as ‘quote stuffing’.

Whatever you call it though it’s definitely colourful.

And here are just a few examples, courtesy of Nanex:

We’re particularly fond of the golden pyramid outline found in the orders sequenced through the gold ETF IAU on July 12:

And this set of strange boulder type shapes that appeared in Nasdaq orders on July 27:

You can check out more patterns, as well as the general sequences that appeared on ‘flash crash‘ day here.

Although, we imagine, you probably need to be Jumping Jack Flash to make any proper sense out of it.

Related links:
There’s a silver lining in every flash crash…
– FT Alphaville
Was the flash crash caused by “quote stuffing”? – Trader’s narrative
Quant-ifying the HFT effect in stock movements
– FT Alphaville