July 14, 2015 : HFT Hot Potato 2 - The Treasury Flash Crash

On July 13, 2015, the U.S. Department of Treasury, the Board of Governors of the Federal Reserve System, the Federal Reserve Bank of New York, the U.S. Securities and Exchange Commission, and the U.S. Commodity Futures Trading Commission released a joint report analyzing the significant volatility in the U.S. Treasury market on October 15, 2014 (press release, paper [pdf]). We'll simply call it the "Fed paper".

March 18, 2015 : U.S. Dollar Flash Crash

On March 18, 2015 between 4:02 and 4:09 PM Eastern Daylight Time, the U.S. Dollar flash crashed, losing over 3% of its value in just under 4 minutes, then gaining most of it back over the next 3 minutes. This event occurred 4 minutes after the regular session of stock market trading closed on the NYSE and Nasdaq at 4 PM (16:00). Two hours earlier (2 PM) was the widely anticipated and watched Federal Open Market Committee (FOMC) event. A quarter of a second after the initial 2 PM announcement, the U.S. Stock market exploded higher. At the same time, the U.S. Dollar moved sharply lower, setting up conditions for the flash crash 2 hours later.

March 6, 2015 : Shining a Light

Concept art for Nanex Research. Created by Igor Cheban.

March 5, 2015 : Robber Barrons Update

Our main issue with Alpert's article is that it never states that Marketable Limit orders were excluded (a big deal as explained here). Alpert informs us that this information does exist in the code which was supplemental to the story. But the reader would have to download and install software, then download, compile and run his code to discover that fact. We think that is entirely unreasonable.

March 4, 2015 : Robber Barrons

The February 28, 2015 weekend edition of Barron's carried an article by Bill Alpert about how trading has never been better for "The Little Guy". Alpert claimed to have arrived at this conclusion after months of studying SEC 605 reports. He further went on to rank the "Stock Wholesalers" (folks that actually execute most retail orders) and proclaimed Citadel the winner. Themis Trading wrote a must-read review of this article, so we'll avoid repeating some of the excellent points they make.

June 6, 2014 : The People vs. Big Finance

Must read story: Fast money: the battle against the high frequency traders by Andrew Smith in The Guardian

Feb. 17, 2016 : Vindicated!


Dec. 12, 2015 : The IEX Comment Letters


Oct. 15, 2014 : Treasury Flash Crash

On October 15, 2014 between 9:33 and 9:45, liquidity evaporated in Treasury futures and prices skyrocketed (causing yields to plummet). Five minutes later, prices returned to 9:33 levels.

Sept. 8, 2014 : CME Rule 575

Beginning September 15, 2014, CME's new rule 575 ("Disruptive Practices Prohibited") goes into effect. The document accompanying rule 575 describes many of the issues we have pointed out and published over the years. Although these manipulative strategies have been illegal in the past under existing prohibitions on manipulation (see the CFTC Pather fine), rule 575 explicitly lists several types.

Aug. 24, 2014 : SEC Comment Letter

Last week, the SEC asked Nanex Founder and CEO Eric Scott Hunsader for his comments regarding the NBBO and his thoughts toward regulation improvements.

Aug. 15, 2014 : The Quote Stuffing Trading Strategy

Usually, exchange disciplinary actions are identical to FINRA's except for name changes, however in this case, there was one paragraph in the Nasdaq action missing from FINRA's. And not just any paragraph, but the most stunning revelation about Quote Stuffing to date: Citadel was sending excessive orders (Quote Stuffing) as a trading strategy!

Aug. 1, 2014 : The Stock Market's Perception Problem

On July 29, 2014, Representative Scott Garrett (R-NJ), Chair of the House Financial Services Subcommittee on Capital Markets and Government-Sponsored Enterprises, held an equity market structure round-table at the Library of Congress in Washington, D.C.

July 29, 2014 : Market Rigging Update

Our recent post, Perfect Pilfering, set a record for the number of emails we received from High Frequency Traders - each writer wanting to make sure they were "talking off the record" and "please don't attribute any of this to me".

July 15, 2014 : Perfect Pilfering

We received trade execution reports from an active trader who wanted to know why his large orders almost never completely filled, even when the amount of stock advertised exceeded the number of shares wanted.

July 31, 2014 : Retail Trades Disadvantaged by Direct Feeds

While internalizers matching retail trades claim they use direct feeds for pricing, there is overwhelming evidence that retail customers, in fact, are getting prices based on the SIP (Securities Information Processor also known as the consolidated quote).

May 20, 2014 : Nanex Discoveries Lead to Policy Changes

Between May 2013 and December 2013, Nanex discovered 5 sources of early news leaks from analysis of market data and published the results. Each of these discoveries led to significant policy changes.

July 25, 2014 : The Stock Market''s 25,000 Most Active Seconds

Feb. 13, 2014 : HFT Quote Spammer Redux

During regular market trading hours on February 13, 2014, we found 633 extreme high frequency trading (HFT) quote spamming events. We define an event when 1 symbol has 6,000 or more quotes and less than 300 trades in 1 second of time. Events like these are rare, usually only a few appear in a trading day. There were 633 such events on February 13.

April 1, 2014 : Refuting HFT Claims

Ask them to define what liquidity means. Here's the Chairman of the FIA Europe who completely gets it wrong. Here's an email exchange with an academic who helped write the SEC flash crash report who also, completely gets it wrong! Yes, HFT provides liquidity, but only if we are using the term liquidity to mean something else.

Oct. 8, 2013 : Compare the Time-stamps Already!

For the first time, the SEC's new multi-million dollar market data analysis tool, "Midas", allows the regulator to measure a stock exchange's compliance with a core rule that lies at the heart of regulations governing how our stock markets work. We are referring to rule 603(a)(2), which basically states that exchanges cannot send stock quotes faster to special groups than to the public quote.

Sept. 20, 2013 : Einstein and the Great Fed Robbery

This is the paper that led to a Fed Policy Change. One of Einstein's great contributions to mankind was the theory of relativity, which is based on the fact that there is a real limit on the speed of light. Information doesn't travel instantly, it is limited by the speed of light, which in a perfect setting is 186 miles (300km) per millisecond. This has been proven in countless scientific experiments over nearly a century of time. Light, or anything else, has never been found to go faster than 186 miles per millisecond. It is simply impossible to transmit information faster.

Oct. 10, 2011 : RegNMS Rescinded

The SEC actually rubber-stamped Nasdaq's proposal (below) which, for all practical purposes, destroys the core concept that holds Reg NMS together - but only for the Nasdaq exchange. It's interesting that other exchanges have not made this proposal (that we can find). We strongly recommend the New York Attorney General or Congress investigate.

March 12, 2013 : Exploratory Trading in the eMini

Links and commentary on an explosive paper that changed everyone's view of HFT. On November 14, 2012, Adam D. Clark-Joseph published Exploratory Trading, which analyzes CFTC audit level trading data in the eMini S&P 500 futures market. This is a special, "regulators-only" data-set that contains all orders and trades, and each order and trade has a trader identifier. What this paper exposes is astounding.

Dec. 14, 2012 : Quote Stuffing Bombshell

In June 2010, while analyzing the Flash Crash, we noticed that many stocks had extremely high rates of canceled orders (1000+ per stock, per second). We then looked at data back to 2004 and found hundreds of thousands of examples: the first beginning in July 2007, which not coincidentally is when High Frequency Trading (HFT) began exploiting the flaws of Reg. NMS.