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".

Feb. 17, 2016 : Vindicated!

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Dec. 12, 2015 : The IEX Comment Letters

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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.

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.

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.

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.

Aug. 15, 2012 : HFT Doesn't Harm Investors

From the 1990's through the end of 2006, electronic trading increased transparency which attracted liquidity, leading to to narrower spreads and greater market stability. The graphic in this recent New York Times article shows the steady reduction in trading costs up until about 2006. Since that time, trading costs have not changed significantly on the execution side but on the analysis side (not factored into the New York Times article), both the number of quotes and the cost of receiving and processing them has exploded.1 Spreads have also become considerably less stable.

Sept. 28, 2013 : Shredding Virtu's Response with Science

The High Frequency Trading (HFT) firm Virtu published a response to our analysis, Einstein and The Great Fed Robbery, in which we showed that Fed FOMC news had to exist in New York and Chicago before it was released at 2pm in Washington D.C. Although it may appear to some that Virtu’s intent was to discredit our work, we will show that Virtu's own data actually corroborates our findings: Virtu's paper, in fact, agrees with our analysis.

May 30, 2014 : Time Warner Double Dips

On May 30, 2014, the stock of Time Warner, Inc (symbol: TWX, market cap: $61 billion) experienced two sudden drops about 6 minutes apart:

Nov. 1, 2012 : The Denial of Service Algo

When this algo ran, it effectively shut down trading in that stock. We found that this algo completely jammed up the consolidated quote when it ran in Nasdaq stocks. Themis Trading believes they found what caused the high quote spam traffic.

Aug. 1, 2014 : Gold Fever

Huge sell order, followed by huge buy order in December 2014 Gold (GC) Futures.

July 1, 2014 : The Odd Lot Bot

There is a new High Frequency Trading (HFT) Algo afoot, probably designed to measure, or cause system latency. This algo sends extreme bursts of 1-share orders in a symbol to two different exchanges: Nasdaq and BATS.

June 27, 2014 : Russell's Jolt

On Friday, June 27, 2014 at 15:50:00 - 143 stocks suddenly moved at least 2% (with some exceeding 10%) in just a few seconds.

June 18, 2014 : Flash Crash Short Sales

There were large short sales in QQQQ during the hour preceding the crash. This is the Nasdaq 100 ETF (the symbol later changed to QQQ).

June 13, 2014 : Nike: "Just Do It (to me HFT)"

On June 13, 2014 at 9:32:46, the stock of Nike, Inc. (symbol NKE, market cap $65 Billion) suddenly dropped 2% in less than a second on thousands of trades. 9 exchanges and an unknown number of Dark Pools and ATS participated vigorously. There were plenty of quotes - with some exchanges sending 20 to 30 for each trade during the event. This will simply be another event to add to a growing list.

June 12, 2014 : Reexamining HFT's Role in The Flash Crash

In the course of researching another issue, we reread transcripts of SEC/CFTC meetings that took place in the months after the flash crash. But this time, we read those transcripts with the gift of hindsight, having gained considerable knowledge from extensive analysis of market data

June 5, 2014 : Euro Mini Halts on ECB News

On June 5, 2014 at 7:45 EDT, it appears the Mini version of the Euro Currency futures at CME collapsed and halted for 10 seconds while trading continued in the regular and micro contracts.

June 5, 2014 : Currency Art

Charts of currency data during the June 5, 2014 ECB Interest Rate news release at 7:45am EDT. Each line represents the percentage change in price (bid/ask midpoint) since 7:45 for one currency pair. Not all pairs are shown (because this is mostly art).