Nanex Research

Nanex ~ 15-Oct-2013 ~ SEC Market Structure Revelations

1. Comparing Time-stamps between Direct Feeds and the SIP should be their top priority.

2. A High Frequency Trading Firm Exonerates High Frequency Trading

We finally know who helped the SEC write the flash crash report: the infamous report that incorrectly laid blame on a mutual fund company that traded futures through Barclay's. This is the same report that exonerated High Frequency Trading (HFT) from causing the flash crash.

From the bottom of this page under "milestones":

That's right! A High Frequency Trading firm provided flash crash analysis that exonerated High Frequency Trading. See if you can find this disclosed anywhere in the SEC flash crash report or related press conferences. Did the press bother to ask? Will they now?

3. High Frequency Quote Spam

Odd how most charts are millisecond/microsecond, except when it comes answering one very important question: how fast are orders canceled? The best charts to use in answering that question are the cumulative cancel charts (click last button - "Cancel Survivor and CDF", should look like black chart on the right, below). Why is this chart shown in minutes? It's one of the few charts that are.

We know you can download data and create your own charts, but not many people are going to take the time, so we did it for you. We created the left chart with data downloaded from the SEC's website. This chart is essentially a much expanded view of the first 10 to 100 milliseconds of the chart on the bottom right.

With our chart, you can quickly see that over 25% of all orders in "Large Stocks" are canceled in about 25ms (1/50th of a second): which is before they could be physically accessed by anyone west of the Mississippi. These are large capitalization stocks. This is High Frequency Quote Spam. This is from the SEC's own website!

Watch the video below (or on youtube) to see HFT Quote Spam in action.

Nanex Research