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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.
Algos & Demons
Spoof Wars continues.
The Financial Services Authority (FSA) has obtained an interim High Court injunction preventing a number of companies and individuals from manipulating the market in UK-listed shares.
‘HFT is killing the emini’, says Nanex
Nanex’s Eric Scott Hunsader — the guy who likes to dig through trading data to unearth weirdly fascinating algorithmic patterns — is out with quite a chart on Monday:
And no it’s not a new design for a Missoni scarf.
Who’s been trading natgas futures on the curve?
The natgas mystery continues!
Let’s start first with the following flashes from the CME via Reuters on Friday:
NYMEX PRELIMINARY DATA SHOWS NATGAS FUTURES OPEN INTEREST HIT RECORD HIGH ON JUNE 9–CME WEBSITE
PRELIMINARY DATA ALSO SHOWS NYMEX NATGAS FUTURES VOLUME SET NEW RECORD HIGH THURSDAY–CME WEBSITE
Which means the day after the mysterious mini-flash someone or some people,
The future is all about cross-asset arbitrage
What happens when computer-driven trading reaches a high-speed saturation point?
That is, when high frequency trading reaches its natural limit — it simply cannot get any faster?
The answer is multi-dimensional arbitrage.
Manufacturing arbitrage with ETFs
To the average investor, exchange traded (funds/products/commodities/notes), or ETFs for short, are simply shares which track indices. Copper, the FTSE 100, the retail sector, whatever.
Their defenders insist they have revolutionised the industry,
Beware the ‘Splash Crash’
Introducing ‘the splash crash’.
Like the flash crash but worse because it involves the “flash” spreading cross-asset class to everything from forex to commodities.
The idea springs from John Bates,
Commodity rout – Mark 2
Right…
So here’s the story.
After dumping last week, silver staged a rather spectacular recovery over the current week. It was led in part by a major inflow of fresh money into silver exchange traded funds…
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.
Madoff, father of the automated trade
For those who have not yet stumbled across New York Magazine’s beguiling interview with Bernie Madoff, we do recommend a closer look.
Not only is it a compelling read in its own right — Steve Fishman,
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.
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”.
Trading the correlation bubble
Could there be a bubble in correlation?
And by that rationale could it be time to position against a bursting of that bubble?
Those, at least, are the thoughts of JP Morgan’s global equity derivatives and delta one strategy team,
The unequalizers
We spell ‘unequalizer’ with a ‘z’ in the title as an homage to Edward Woodward, (naturally).
Although, in this case, we’re actually referring to the new breed of internalising institutions on Wall Street and in Europe,
The non-role of internalisers during the flash crash
Themis Trading’s Sal Arnuk picks up on a really important point from the SEC-CFTC’s joint flash crash report published last Friday.
That being: the clear and demonstrable non-role played by broker-dealer/large market maker internalisation desks on May 6.
The apparent rise of the mini flash crash
Another mysterious ‘mini flash crash’ in global equity markets.
This time it occurred in the shares of Progress Energy.
Trading in shares of the energy firm were halted by the New York Stock Exchange for about five minutes on Monday.
High frequency traders do ‘risk’ better
Perhaps it’s not too astounding a finding…
But a Federal Reserve staff working paper by Dobrislav P. Dobrev and Pawel J. Szerszen has found that using historical high frequency data to forecast equity returns is far more effective than using general daily or monthly data.
An impatient market is not a happy market
Andrew Haldane, the Bank of England’s executive director of financial stability, has penned a hugely thoughtful piece about the implications of growing cultural impatience and short-termism on financial markets — and society at large.
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,
Digging into Goldman’s trading losses
Goldman Sachs’ 10-Q filing revealed a much less glittering trading performance in the second quarter versus the first of this year. In fact, the bank registered trading losses on 10 individual days in Q2 2010 versus none in Q1:
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”
Regulators acting at the speed of fax
Hat tip to @carlcarrie via Twitter for the following priceless nugget of information regarding some of the regulatory processes governing the increasingly fast-paced world of high frequency trading across non-equity based asset classes.