Nanex Logo
The RETF Algo - Table of Contents

Back to Main Research Page

On May 2, 2011 we began noticing a strange algo phenomena that would begin immediately after the official market close. It started with one issue, affecting only the ask price. It soon progressed into more stocks and soon began affecting both the bid and ask price. As of 6/10/2011 it is seen in over two dozen issues. The algo has several unique characteristics:
  1. To date we have only seen the algo run after normal market hours (specifically between 16:00:00 EST and 16:15:00 EST).
  2. It runs in short and long ETF issues (i.e. an ETF and it's Inverse ETF).
  3. It averages approx. 2000 quotes per second on each issue it runs on.
  4. Quotes from multiple exchanges follow the price.
  5. It consistently raises the ask price and recently began dropping the bid price (many times until the bid hits zero). In the majority of cases it also moves the NBBO to the same outrageous price levels.
  6. We have not seen any trades occur while the algo is running (yet). As it runs in fairly illiquid ETF's and after hours, this is likely due to the fact that there are no trading opportunities at the time.
  7. It has increased it's scope of ETF issues every week.
It would be easy to say this algo is a test of some type -- if it was only seen on one or two days. However, seeing it run every day for six solid weeks (as of this writing), increasing in both symbol scope and frequency, raises many questions. One thing however is painfully clear; all one needs to bring a stocks quoting price to zero (on the bid side) or into the stratosphere (on the ask side) is the will to do so (and an algo that will blast thousands of quotes a second to raise/lower the NBBO in small increments, thus not violating the recently implemented stub quote rule).

Click for a larger image

As of 06/10/2011 we have seen the algo run in the following issues:

BIB  ProShares Ultra Nasdaq Biotechnology
BIS  ProShares Ultra Short Nasdaq Biotechnology
BGU  Direxion Daily LG-Cap Bull
BGZ  Direxion Daily LG-Cap Bear
GASL  Direxion Daily Nat Gas Bull 2X
GASX  Direxion Daily Nat Gas Bear 2X
IFNA  iShares FTSE EPRA/Nareit
KRS  ProShares UltraShort KBW Regional Banking
KRU  ProShares Ultra KBW Regional Banking
LTL  ProShares Ultra Telecommunication
MWN  Direxion Mid-Cap Bear 3X - Triple-Leveraged
REK  ProShares Short DJ US Real Estate Index ETF
RETL  Direxion Daily Retail Bull 2x Shares
RETS  Direxion Daily Retail Bear 2x Shares
RXD  ProShares UltraShort Health Care Fund
RXL  ProShares Ultra Health Care Fund
SAA  ProShares Ultra Small Cap 600 Fund
SBB  ProShares UltraShort Small Cap 600 Fund
SBM  ProShares Short DJ US Basic Materials Index ETF
SDK  ProShares UltraShort Russell MidCap Growth Fund
SIJ  ProShares UltraShort Industrials Fund
SJF  ProShares UltraShort Russell 1000 Value Fund
SJL  ProShares UltraShort Russell MidCap Value Fund
SKK  ProShares UltraShort Russell 2000 Growth Fund
UCC  ProShares Ultra Consumer Services
UGE  ProShares Ultra Consumer Goods
UKK  ProShares Ultra Russell 2000 Growth
UKW  ProShares Ultra Russell MidCap Growth
ULE  ProShares Ultra Euro
YCL  ProShares Ultra Yen


Publication Date: 06/13/2011

This report and all material shown on this website is published by Nanex, LLC and may not be reproduced, disseminated, or distributed, in part or in whole, by any means, outside of the recipient's organization without express written authorization from Nanex. It is a violation of federal copyright law to reproduce all or part of this publication or its contents by any means. This material does not constitute a solicitation for the purchase or sale of any securities or investments. The opinions expressed herein are based on publicly available information and are considered reliable. However, Nanex makes NO WARRANTIES OR REPRESENTATIONS OF ANY SORT with respect to this report. Any person using this material does so solely at their own risk and Nanex and/or its employees shall be under no liability whatsoever in any respect thereof.