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’FX bots make fairweather friends…
BIS is joining the HFT scrutiny party with a paper (PDF) on high frequency trading bots in foreign exchange markets.
It’s a comprehensive study of automated trading in forex, although we’ve already seen several incidents that could be attributed to high volume trades.
When algorithms fight, natgas edition
It’s not an earthquake. It’s last night’s mini-crash in natgas futures, via Zero Hedge:
“It looks like two computers getting into a competition with each other” one market-watcher told Reuters.
If algos can mis-value a book by $23.7m…
… how might they be mis-valuing equities?
So asks Themis Trading on Tuesday after discovering this curio of a story from CNN about algo-bots gone wild on Amazon.
The story relates to the listing of a book called “The Making of a Fly”
Some smart – but conflicted – routers
A block trade, born in a US-based pension fund, is traveling the electronic execution highway.
The trade — let’s call him Benny — is sent to the fund’s broker for execution. That broker, now sitting in his office in New York,
For the bots: Anne Hathaway is NOT Warren Buffett
You hardcore financial types might have missed the below FT story, given it was in the Film & Television section of Friday’s paper and concerned a Hollywood starlet.
But wait! It’s financially relevant.
‘The real sugar community’ vs ‘parasitic computer-based traders’
The FT reported on Wednesday that an industry body representing big sugar traders has launched an attack on their high-frequency and algorithmic-based counterparts — along with the New York-based futures exchange that hosts both groups.
Let there be light … pools
You’ve heard of dark pools, right?
Well meet their opposite. On Tuesday, Credit Suisse announced it was launching a ‘light pool’ aimed at institutional investors wary of the shadowy, murky dark.
Or,
The little match problem
As most European investors would have noticed, Euronext markets suffered a 45-minute outage just ahead of the close on Wednesday.
According to the FT’s Jeremy Grant, the halt was due to a “human error”.
ETFs and HFT (redux)
We don’t like to gloat, but err, in this case we can’t help ourselves.
That’s because from the moment commodity ETFs like the USO and the UNG began acting weirdly in 2009, FT Alphaville speculated they were probably being arbitraged in some fancy fashion by a new breed of index arbitrageur,
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.
Lost in correlation fatigue
Alternate title: The end of valuation.
And this is why.
The following comes from Petromatrix’s Wednesday energy markets report:
Daily Trading Volume for WTI on Monday was at the lowest level of the year and Open Interest is not moving at all.
A Dutch machine with a fat finger
A possible culprit has been found for Wednesday’s sharp movement in cable — which saw the GBP/USD exchange rate drop to 1.5181 and recover in the space of a few minutes. A(nother) tradebot.
To be specific,
There’s a silver lining in every flash crash…
So says JP Morgan’s Michael Cembalest, who might well take an interest in the events of May 6.
As protectorate for “several hundred billion dollars in client assets,” the JPM private banking chief investment officer says he’s very interested in anything that might “detract”
Quant-ifying the HFT effect in stock movements
Here’s something for critics of high-frequency trading (HFT) — and lovers of Markov/Gauss/Mandelbrot minutiae — to pull out for their next dinner party conversation:
It’s a quantitative analysis of 14 NYSE- and Nasdaq-traded stocks between the start of 2002 and the end of May 2009 — including HFT favourite GE .
Nasdaq, NYSE testimony on the flash crash
Talk about insta-outrage: less than one week after last Thursday’s ‘flash crash’, US lawmakers have organised a hearing on the roots of that sudden, short-lived stock market plunge.
The House Financial Committee on Financial Services,
BarCap on that flash crash: ‘a perfect storm’
Regulators, politicians, media types, investors and exchanges are still trying to figure out just what happened to cause that sharp, sudden and scary plunge on Wall Street last Thursday.
Now analysts at Barclays Capital have weighed in:
SEC/CFTC: ‘Yes, yes, we’re on the case…’
Joint statement out of US regulators on Friday regarding Thursday’s Flash Crash. Operative pars:
…We are devoting significant resources and expertise to this effort.
As we determine the cause and contributing factors,
‘We aren’t dinosaurs. Dinosaurs made oil. WE EAT OIL FOR BREAKFAST.’
The wits at the Awl have published a guest op-ed by ‘The Machines’, on the small matter of that Wall Street flash crash.
An extract:
From time to time, The Awl offers space to ordinary, everyday people to deliver commentary on the issues of the day.
Insta-outrage, politicians and the flash crash edition
As the Dow Jones Industrial Average fell off a cliff on Thursday, FT Alphaville wondered: how would US politicians react?
The answer was not long in coming. Within 20 minutes of the close on Wall Street,
Blame the trading bots – again
Does anyone remember the high-frequency-trading outrage that erupted last summer?
Prepare yourself for a redux.
The blame for Thursday’s Dow Jones rout has swiftly shifted from a fat-fingered Citigroup trader to the rise of the machine-trading bots.That’s right,
[MoneyTech] The hedge funds are watching us…
Okay, maybe not ‘us’ as in FT Alphaville, but they are watching some other financial blogs.
From Tim Human at the Cross Border Group:
Data firm monitoring influential blog sites Hedge funds are testing out a data feed produced by monitoring a group of financial commentators that includes bloggers.
[MoneyTech] Rise of the news-reading machines
From the FT — some giant leaps for robot-kind in the world of trading:
The arms race in trading technology is set to intensify this week as Thomson Reuters, the news and market data company, on Monday unveils a service for “high-frequency” traders allowing them to make split-second trading decisions based on news articles “before the information moves the market” .
‘A gold rush moment’ for HFT
Unless you’ve had your head buried in the sand, you’ll know high frequency trading stormed onto the mainstream agenda this summer, catching the critical eye of the international press, public and regulators alike.
Where fantasy finance meets the real world
Is this a spoof?
There’s a firm called Cyborg Trading, which promises to bring “automation to equity and derivative front-end trading platforms, without eliminating or replacing the individual trader.”
[MoneyTech] Why trading machines don’t like news releases
Well, who knew?
Algorithmic FX trading bots — which use computer formulae to trade currencies at high frequency — apparently don’t like news releases, or at least, not initially, according to a new working paper from the Federal Reserve.
Mrs. Robo Jones starts to make an FX impact
We’ve written about the shifting dynamics in the world of retail forex trading before. In particular, the phasing out of ‘Mrs. Watanabe’ in favour of ‘Mrs. Robo Jones’ — the western-based punter seeking returns in a zero-rate environment,
Dawn of the investment assembly line
Machines are taking over the management of equity assets, according a new report issued this week by Tabb group, the research house that drew heavy attention to the proliferation and effects of high frequency trading in US equity markets.
Statistical arbitrage and the big retail ETF con-fusion
Here’s a funny thing about algorithmic trading. Most of it depends on statistical arbitrage, which in turn depends on volatility to detect price variations to benefit from.
In which case the following abstract from a paper by Andrew Pole,