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’The NBBO flutter
Oh the weird and wonderful charts of Nanex.
Here’s the latest one from the market data analytics firm (click to enlarge):
In Nanex’s opinion this is one of their most amazing and clear images yet.
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.
Beware the market spam
In light of the news that Goldman Sachs’ Global Alpha — le quant fund extraordinaire – has started “liquidating” its holdings, and that other algorithmically minded unwinds have probably been stalking the markets,
28 Day-Traders Later
Games of spoof can be very expensive. Just ask Mike Ashley, who reportedly lost £200,000 when playing against his advisors at Merrill Lynch. Or ask Peter Beck, the Canadian day-trading evangelist who has lost £8m to the FSA.
Haldane on HFT’s market-making problem
Sharp thoughts on Friday from Andrew Haldane, executive director for financial stability at the Bank of England, on the changing topology of the market — including the rise of high-frequency trading.
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,
An exchange for the bigger, not the better
Reuters is reporting that the board of NYSE Euronext will hold a meeting on Sunday to discuss the potential merger with Deutsche Börse AG.
Details of what the NYSE Euronext board might discuss or what it might vote on were unclear.
‘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.
Correlation trading and the WTI-Brent spread
Another day, and another widening in the WTI-Brent front-month future spread — this time to what looks to be approaching record wides.
The spread hit as much as -9.50 on Monday and according to Bloomberg data the record for the differential stands at -10.67,
Trouble at Turquoise… [updated]
Something very murky indeed went on in the London Stock Exchange’s flagship Turquoise trading system on Tuesday.
We know that because the LSE told us (via Reuters):
RTRS-LSE SAYS TRADING DISRUPTION TO TURQUOISE MAY HAVE OCCURRED IN “SUSPICIOUS CIRCUMSTANCES”
A jumpin’ Jack flash in aluminium
First there was the flash crash.
Then there were mini flash crashes.
Now, welcome to the cross-fire hurricane of cross-asset jumpin’ Jack mini flashes.
The development first raised its ugly head last week,
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.
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 .
[MoneyTech] The high-frequency flack
Now here’s an interesting development in regulatory capture, uh, the growing diversity of industry and regulatory links in US securities. Flash via Reuters:
RTRS-FORMER SEC STAFFER OVERDAHL TO BE SPOKESMAN OF FUTURES INDUSTRY ASSOC’S NEW HIGH FREQUENCY TRADERS LOBBY GROUP-SOURCES
That would be James Overdahl,
[MoneyTech] ‘Someone will always have the data first’
Financial blogger Kid Dynamite has weighed in on “latency arbitrage”: the fact that some investment firms have access to data — and are subsequently able to trade on such — before other market participants.
Biggest stocks to get circuit-breakers, Reuters says
The first tangible exchange response to the Flash Crash may be imminent, Reuters reported on Tuesday, citing ‘sources’ on plans to set up circuit-breakers to prevent sudden slides in key stocks.
Flashes (excuse the pun) via Reuters:
Tradebot shows Goldman what minting money really looks like
Both Goldman Sachs and JP Morgan were able to boast of having made money every single day in the first quarter of 2010. An impressive feat? Certainly.
But how’s this for performance, via the NY Times (emphasis ours):
Reuters names e-mini ‘flash crash’ seller
A big exclusive for Reuters, which on Friday afternoon revealed the identity of the mystery trader CFTC chairman Gary Gensler said placed a disproportionately large sell order in CME e-mini S&P futures around the time of Thursday’s ‘flash crash’.
CSI: Chicago
The Chicago Mercantile Exchange has published its account of what happened on May 6, and considering trade in the exchange’s e-mini S&P 500 future has been thrust into the spotlight by CFTC chairman Gary Gensler,
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.
‘A 12th ‘sigma’ event if there is such a thing’
Dennis Gartman, author of the daily investment letter of the same name and contributor to CNBC, has been in the markets a while.
But never in his entire trading career does he seem to have encountered anything like Thursday’s Wall Street plunge.
Rage against the machine, the soundtrack
Well, this brings a whole new meaning to open outcry. With a tip of the hat to Zero Hedge, these were the sounds from the S&P 500 pit, as the machines rose up and the Dow plunged (click through to listen):
Asian electronic trading: you ain’t seen nothing yet
It has really only been a matter of weeks since the Tokyo Stock Exchange – Asia’s biggest bourse – gained Arrowhead, or what you could call a 21st-century trading platform.
Already, however, traders have shaken off their usual jaded and cynical view of the comparitively arcane world of Japan-based stock trading.