Nanex Research

Nanex ~ 23-May-2012 ~ BOKF Quote Attack

BOK Financial Corporation (BOKF) has a market cap of $3.82 Billion. All day long, the quote spread violently shifted anywhere from 1 cent to 75 cents and everywhere in between. Sometimes the spread would change one cent at a time, from 1 to 75, in the same second. Maybe there was some loop in a news feed and the HFT machines, which lack basic common sense, accepted the same round of news stories a thousand times a second. That could be it.

But more likely, what is going on here is that the symbol BOKF is processed on the same network or machine as the target symbol, and is just an innocent victim. You see, you can overload ANY network or machine anytime you want by just giving it more work to do. Jam quotes in BOKF, and instantly all symbols processed on the same network and by the same machines suffer, equally. Well, not quite equally - because there's often more than one feed. Some are so hush hush, all but the best exchange clients know about them. So jam the other guys feed, and pick off his stale quotes! Only the other HFT guys know, and won't tell the SEC because they are doing it too. Each HFT thinks they are outsmarting the others. Meanwhile, our SEC is a decade away from having capabilities to even begin to grok the disturbing heights that manipulation has reached. It doesn't help any that there are probably a dozen reporters in the entire world, total, that could tell you the difference between a trade and an order. I wish I were kidding.

There is a world of difference between having the capability to cancel a quote in a millionth of a second..
..and canceling a million quotes every second.


It seems the worst of HFT doesn't grasp this basic grade school logic. Oh the drama. "If we can't cancel our quotes in a fantasecond, we are going to take our ball home and no one can trade anymore and the financial world will end as we know it." Please. What they really mean is they want to be able to cancel quotes faster than the other guy. The slowest gets "picked off", which means their orders get executed. They end up buying or selling stock. Truly an end of the world scenario. We should bail them out.

So dear reader, entering and canceling quotes, as in the case of BOKF, has absolutely nothing to do with wanting to buy or sell this stock. It has everything to do with some nefarious HFT trying to improve the odds of picking off a less fortunate trader.

And to be sure, this is just one form of bad behavior that has infested our markets because there is no authority figure to provide clear and consistent guidance. No one to tell Johnny's computer to stop mugging Sally's computer, because well, they are just computers, right? Again, I wish I were kidding. Every imaginable way to prevent the flow or pervert the quality of information, has been, is, or will be tried. It's all just wires and computer chips, right? Besides, no one is looking, and after all, "Money is Money"*.

We call this the anti-Stock Market.

* actual quote from a regulator.

Charting the Price Un-discovery Process

BOKF on 23-May-2012. Up triangles are bids, down triangles are offers (asks). Shaded area is NBBO bid/ask spread. Many charts have hundreds of thousands of quotes.

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