Nanex Research

Nanex ~ 13-Dec-2013 ~ News Leaks at Market Close

Time travel? Earnings News released after Market Close, affecting Market Close

February 20, 2014: Businesswire announced they will no longer provide a direct feed to High Frequency Traders. This is the paper (below) which exposed that practice.

February 6, 2014 note: This paper was completed on December 13, 2013, but we held off publication when Scott Patterson expressed an interest in writing the story for the Wall Street Journal. Using the evidence we present in this paper, Patterson uncovered a related story about how time-sensitive earnings news is released: it can overlap and affect the closing cross. Patterson's first story appears in today's Wall Street Journal. His second story appears online.

On December 5, 2013, Ulta Salon, Cosmetics & Fragrance, Inc. (Symbol: ULTA, Market Cap: $7.8 Billion) released earnings via a news service which transmitted that information less than a second after market closing time (16:00 ET) to high speed trading machines. However, according to SIP data, the market had not yet closed: it was still trading in regular hours mode at 2 exchanges (Nasdaq and NY-Arca). The earnings news severely impacted the Market Center Official Closing prices for those exchanges, and more importantly, the Nasdaq Closing Cross: which printed $3 lower than the last trade which executed just a fraction of  a second before 16:00.


Numbers in brackets [] correspond to labels on Chart 1 and '#' column in Timeline.
  1. Why was there a large price movement ($3) in Nasdaq [4] and NY-ARCA [5] well after the 16:00 close [1] and after Earnings release [2]?
  2. Why was the Nasdaq Closing Cross influenced by trading well after 16:00?
  3. What determines how trades are tagged with the Form-T condition? (Form-T means "after hours").
  4. Why did regular [4] and ISO trades [5] appear after Form-T trades[3]? (ISO means Intermarket Sweep and is used during regular hours trading).
  5. Interesting: the NY-ARCA official closing print [7] matches the size (1,092 shares) and price ($118) of the Nasdaq ISO print [6] that immediately precedes it.

Evidence Timeline

Numbered items (#) correspond to labels on Chart 1.
# Event Note
Last trade before 16:00 was $121.80 at 15:59:59.223  Not shown on chart 1 - doesn't fit!
1 Market closing time - 16:00 Eastern Shouldn't see any more regular/ISO trades after (to the right).
2 Earnings released by high speed machine readable news services About 175 milliseconds after closing time.
3 Form-T trades from EDGE and BAT-Y An indication that the market has closed.
4 Regular trades from Nasdaq Shouldn't see these here, the market should be closed!
5 ISO trades from NY-ARCA Shouldn't see these here, the market should be closed!
6 1,092 share ISO trade from Nasdaq Shouldn't see this here, the market should be closed!
7 1,092 share NY-ARCA "official closing" print Exactly matches ISO print on Nasdaq?
8 Nasdaq Closing Cross: $118 at 16:00:00.688 Over $3 lower than 16:00 price.
1. ULTA - NBBO (gray/red shading) and trades (dots colored by reporting exchange) during 1 second at market close. Numbered labels correspond to Timeline table.

2. ULTA - Zooming out.

3. ULTA - Zooming in on the 15:50 time when closing order imbalance is released.

4. ULTA - Zooming in on the close.
Large blue dot (official close) is duplication of large black dot (closing cross). That is normally how it's transmitted.

5. ULTA - Showing best bids and asks.

6. ULTA - Showing all bids.

7. ULTA - The aftermath.

8. ULTA - A look at trading earlier.

9. ECHO - Another example.

10. WIRE - Another example II.

11. FNSR - What these should look like.

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