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8 Behemoths get creamed in a split second.
What used to look like a bad price or tick, now looks like a bad dream.

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Every week we hear of a new pro-HFT study that claims HFT reduces volatility, tightens spreads and provides liquidity. While HFT operates in time frames of microseconds, every study we have seen is based on data at least 2 years old and never looks to see what happened within 1 second (some have even averaged data over 1 year intervals!). Take a look at what goes on inside of 1 second.

Presented below is the behavior of 8 major stocks on October 17, 2011, shown with both a pre-event/event/post-event chart and an additional chart showing the event in under 1 second. This is the type of behavior we see every day and shows that at any given second, HFT algo's are the first ones to withdraw liquidity in the face of real buyers or sellers.

This is why any study that doesn't include recent data (within 3 months) isn't worth reading.

PG- PROCTOR & GAMBLE ( 1-min bar chart for reference )

PG- PROCTOR & GAMBLE ( pre-event, event, post-event )

PG- PROCTOR & GAMBLE ( 150 millisecond zoom of event )

PFE- PFIZER ( pre-event, event, post-event )

PFE- PFIZER ( 350 millisecond zoom of event )

PEP - PEPSICO ( pre-event, event, post-event )

PEP - PEPSICO ( 150 millisecond zoom of event )

T- AT&T ( pre-event, event, post-event )

T- AT&T ( 475 millisecond zoom of event )

VZ- VERIZON ( pre-event, event, post-event )

VZ- VERIZON ( 125 millisecond zoom of event )

PM- PHILIP MORRIS ( pre-event, event, post-event )

PM- PHILIP MORRIS ( 150 millisecond zoom of event )

JNJ- JOHNSON & JOHNSON ( pre-event, event, post-event )

JNJ- JOHNSON & JOHNSON (725 millisecond zoom of event )

MRK- MERCK ( pre-event, event, post-event )

MRK- MERCK ( 150 millisecond zoom of event )


Publication Date: 10/17/2011

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