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.
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.
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.
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.
On May 2, 2014 at 8:30:05, right after release of the Non-farm Payroll number, quotes and trades in Treasury futures from CBOT halted for about 10 seconds. Sequence numbers before and after the event indicate no data was dropped. What is unsual about this event is that quotes also stopped updating - indicating a possible system issue at the exchange.
On January 10, 2013, about 8/10ths of a second before the Labor Department released the widely anticipated Employment Situation Report, trading activity exploded in Treasury futures, sending prices much higher in less than 1/10th of a second. The speed and magnitude of buying activity during a period of low liquidity, quickly overwhelmed the 5-Year T-Note market causing a stop logic circuit breaker to trip and shut down trading for 5 seconds.
In today's markets, with the presence of High Frequency Trading (HFT) machines that place and cancel orders in less than a millisecond, financial markets are significantly more volatile during a news release. The same volume that would barely budge the market during normal times, can cause severe price swings right before and during a news event. This is because there is no liquidity (resting orders) when news is expected, because only the fastest traders are able to participate in this sub-second ecosystem.
Back on September 20, 2011, we coined the term fantaseconds to describe the phenomenon of trades printing ahead of quotes. We wrote this paper which included ample evidence of fantaseconds in the stock of Yahoo. What many readers of the paper didn't realize at the time, was our suggestion that somehow high frequency traders figured out how to go faster than light, was satire. It didn't help that just hours later, CERN announced the possibility that they detected particles travelling faster than light, and many people conflated the two stories.