Nanex ~ 14-Feb-2013 ~ Nefarious High Frequency Trading
On February 14, 2013, at the opening, the stock of Cymer Inc.(Symbol CYMI) had an NBBO
with hundreds of price changes per second of time. Charts below capture the freakish
nature of High Frequency Trading.
The first chart below is incredible. It shows 1 second of time. During that 1 second,
the NBBO changes over 100 times. Prices of trade executions vary by more than $1. Quotes
moved so quickly, algos were fooled to follow prices higher rather than
wait a few milliseconds. Academic studies sponsored by HFT lobbyists will tell you
that the NBBO spread in CYMI was a tight 4 cents (the narrowest point), when in reality,
it was over $1. Missing the mark by a factor of 25 would be a bit of an exaggeration. What else are they exaggerating?
1. CYMI showing trades color coded by exchange and NBBO (gray shading). Chart
shows 1 second of time.