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Market Data Firm Spots the Tracks of Bizarre Robot Trading
jamie spotted a fascinating story at The Atlantic about "mysterious and possibly nefarious trading algorithms [that] are operating every minute of every day in" the stock market:
"Unknown entities for unknown reasons are sending thousands of orders a second through the electronic stock exchanges with no intent to actually trade. Often, the buy or sell prices that they are offering are so far from the market price that there's no way they'd ever be part of a trade. The bots sketch out odd patterns with their orders, leaving patterns in the data that are largely invisible to market participants."
Spotting the behavior of these bots was possible by looking at much finer time slices than casual traders ever see — cool detective work, but as the story points out, discovering it is just the beginning: "[W]e're witnessing a market phenomenon that is not easily explained. And it's really bizarre."
The "market" is a fucking scam.
There, that wasn't so hard, was it.
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The machine intelligences are communicating through hidden channels in our global network.
Judgement Day is close.
It's the famous Nanosecond Buyout!
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... it's just SkyNet looking after its retirement holdings.
The Mongrel Dogs Who Teach
That the trades are trying to trigger "limits". ie. Someone may have pre-programmed a system to automatically dump stock if the price tanks, so when one of these trades comes in the price looks as if it is tanked, the stock sells and the buyer snaps up a bargain.
Nullius in verba
This looks like high frequency traders have moved on from just gaming the market and now are trying for flood each other with bogus data hoping to trigger a bug in the competition's software or simply overwhelm it.
"The "market" is a fucking scam."
I think I'd prefer to say that the market has a purpose, and that purpose has absolutely nothing to do with maintaining wealth for the casual investor. Once you abandon the idea that the market gives a damn about the solidity of retirement accounts or the portfolios of the masses, then it's easier to accept that the purpose of the market is to move money around and around in a big circle, while slowly siphoning it off into the pockets of particular groups.
Stocks are a massive game of hot potato. Whoever is holding the stock with the game is over gets burned.
I say it's not necessarily a scam because it should be clear to anybody looking in that this is how it works. Like the rake at a poker game, if you wait long enough the house has all the money. This fact isn't hidden - you just have to wake up to the implications.
They are designed to create timing opportunities in other trades.
Its corewars, but with real money instead of simulated computer memory.
http://www.corewars.org/
The name of the game is to send a "signal" that confuses the other guys bots, such that you fool them into making you money.
Very much like aircraft radar guided missiles vs radar jammers vs anti-jamming missiles
"Science flies us to the moon. Religion flies us into buildings." - Victor Stenger
They're obviously designed to manipulate trading volume in order to fuck with the church of technical analysis believers.
When you understand how the spread of ask/bid prices impact candlestick charts, and subsequently: the market's perception of bullish and bearish indicators, you can see how sinister this really is.
http://stockcharts.com/school/doku.php?id=chart_school:chart_analysis:introduction_to_candlesticks
I read an interview a few weeks ago about these trades. When we're talking about the majority of all stock trades being done by these incredibly fast bots, where people are looking for every possible advantage, there are many tricks. One of them is to flood out a huge quantity of bogus bid/sell offers in sufficient enough bulk that it may cause your competition's bot to slip a few micro seconds. Just enough for your own bot to snipe a fraction of a cent advantage.
If you are interested in the 'Cyber-War'. Forget China, head to Wall Street.
-Rick
"Most people in the U.S. wouldn't know they live in a tyrannical state if it walked up and grabbed their junk." - MyFirs
I have a simple solution for problems that could be caused by these high-speed robots doing the trades, and also for eBay's 'sniping' problem (where your item sits for days untouched, and then the bids all land in the last thirty seconds).
Just add some 'fuzzy logic' to the time things happen. eBay auctions would randomly end 'between 10:05 and 10:10", forcing snipers to bid before the end of the trading. Same for the stock market, just have trades execute, by law, on a 'random' basis within a certain time period after they're filed. I'm not sure what the right balance between stability and liquidity is, but I'll guess that a two minute window would discourage most high-speed trading.
"Sometimes, I think Trent just needs a cup of hot chocolate and a blankie." -Tori Amos on Nine Inch Nails
Usury is the sin of lending money for unfairly large amounts of interest. Capitalism is an economic system of lending money for as much profit as possible. Capitalism makes labor subservient to money. It lets people expand their power over others, not by working, but by lending. This unfair adjudication of risk and reward, and the subsequent consolidation of power into fewer and fewer hands, is why many religions, at one time or another before the rich took them over, considered usury a fairly serious sin.
The rich do not have to work to earn a living, they just sit back and let the money roll in. Supposedly the return they get is for the risk, but there is no risk involved. The rich can buy politicians, laws and experts who, in practice, reduce the risk to near zero. The average investor faces at least some real risk, but not the truly wealthy.
- None can love freedom heartily, but good men; the rest love not freedom, but license. -- John Milton
High frequency trading is an abuse of the system. Stop it, take the market away from gamblers and return it to investors.
This is not 'weird' at all. It's just one bot trying to fool another by making it think there is excess liquidity on one side. Oldest trick in the book. Also entirely against the rules. So it proves there are slugs out there gaming the market, but there's no question about WHAT they are doing, that's perfectly transparent.
"Malo periculosam, libertatem quam quietam servitutem." -- Jefferson
WoW has rules against using scripts, bots, and 3rd party programs to play for you. Failure to abide by the rules get you banned.
The stock market trading system has no rules against scripts, bots, and 3rd party programs to buy millions Every time I think about how WoW regulates the artificially increasing of fake wealth while the stock market has no regulation regarding the artificially increasing of actual wealth, I die a little inside.
I judt got a nre Kinesis keybiartf so please excusr ant egregiou typos.
My problem here is the quote "Unknown entities for unknown reasons are sending thousands of orders a second through the electronic stock exchanges". How can you have unknown entities trading? They have to be identifiable in order to make a trade! Or am I insane?
This is probably just testing by foreign actors to see how hard or easy it is to destroy the market, don't worry about it. Keep you gold under your mattress and everything will be all right.
It's called a "ping" and there's a perfectly good explanation for who is doing it and why... you can lead them to google but you can't make them search.
Back when I used to play MUDs, I remember setting up triggers in Gmud. I idly thought to myself, "What if I could do this with the stock market?"
Back when I used to play World of Warcraft, I remember all the auctionbots people would set up to automatically undercut you down to one copper over what was profitable. You could search for a specific item, see one person selling it for say, 1000 gold, put your item up for 990 gold, search for that item again, and see that all five of their items up for sale are now 989 gold and 99 silver. If you set it somewhere absurdly low like 500 gold, it would be bought out by a bot within seconds of posting it. Of course, after buying it, their prices were back to normal. Of course botting is illegal in World of Warcraft.
Again, I applied this thinking to the stock market. What if you had bots to buy if the price was favorable for very popular stocks, but they could manipulate the market to make the price favorable? This kind of manipulation can and will lead to some dire consequences as people no longer act predictably for fear of the bots manipulating them.
Job? I don't have time to get a job! Who will sit around and bitch about being broke and unemployed then?
I suspect that a fair amount of this is emergent behavior - complex patterns from simple rules. For example, if two bots are making test purchases of a stock, one penny greater than the last buy, up to a fixed, you end up getting these odd patterns. The two programmers may not have planned the interaction at all, though they have these weird Game of Life sort of patterns in the data.
I've never really understood the complaints about eBay sniping. Set your maximum bid at the actual maximum that you want to pay. Whether someone snipes or not, if your bid is the highest you will win. If it's not, you won't.
Even if it is an actual problem for some reason though, I'd think that the simplest solution would just be to extend the auction slightly every time there is a new high bid. Add 5 or 10 minutes every time the bid increases, and sniping would be totally ineffective.
Sturgeon was an optimist.
Please don't call this fuzzy logic. Fuzzy logic is a generalization of traditional logic (see http://en.wikipedia.org/wiki/Fuzzy_logic) It is deterministic and NOT inherently random. Sure, you can add randomness to it, but adding randomness does NOT make something fuzzy logic.
So put that in your pipe and grep it
The solution to the eBay sniping problem is to operate like a real auction, i.e., when the auctioneer gets a new bid as he is counting down to
close the auction, the closing time gets extended. So, for example, every bid on eBay in the last 5 minutes extends the closing time by 5 minutes. Same rule applies to the new extended closing time. So no one willing to continue bidding ever gets cut off by the clock.
I've seen this reported on Zero Hedge for months now. The purpose of spamming the market with order quotes is to slow down the competitor's computers, to give you a slight edge in monitoring the market. Basically, you flood the market with order quotes. The competitors' algorithms have to take these into account, while your algorithm can be designed to ignore them. This gives you a slight edge over the competitors in processing actual market data and making determinations.
It looks to me like the orders are trying to match against dark pool bids/asks, and/or all-or-nothing bids/asks. Another possibility is that they are trying to extract non public information from the trading system by purposefully loading the system down and timing responses.
High frequency trading bleeds money away from institutional investors (by sussing out dark pool bid/ask levels) and from market makers (by stealing ETF rebates for volume). Also, most brokerages use fairly simple algorithms to handle market orders which can be sussed out by the more sophisticated algorithms used by the HF traders.
None of this will really effect the retail investor, it amounts to a penny or less on some transactions. Frankly, people have it easy these days where the bid/ask spread is a single penny. When I began trading in my late teens the bid/ask spread was in fractions and was considerably more than a penny. Retail investors get much better pricing these days.
-Matt
You have proposed a solution to introduce more accountability, transparency, or ethical considerations into the free market. Wall Street will not accept your proposal because your solution:
(x) reduces profits gamed from the current flaws
(x) introduces accountability
(x) introduces transparency
(x) introduces ethical considerations
Interesting idea. IIRC eBay already has an anti-snipe option to delay the close to X minutes past the last bid.
Some sort of automatic low bid type thing? Let's say you see 50 brand new cars on eBay with no reserve and you automatically bid $10 on every single one, knowing you have practically no chance in winnin, but thinking that one might stand. Perhaps its an automatic feed designed to buy shares of say, Walmart, but only if it hits .30 cents a share?
Or simply seal all bids until the end, or only allow one bid... Then no one knows what anyone else has bid and you don't get into lame "over spending" bidding wars.
The problem with sniping is that people rarely have a hard maximum -- and even rarer that they stick to it. Plus, seeing other people bidding on an item spurs others to bid on it. I've seen items not sell repeatedly (relisted 5+ times, at the same price) yet get plenty of traffic; as soon as one person places a $0.99 bid, the bidding war is on. (nobody is interested until someone else is.)
That makes a hell of a lot more sense than any of the other explanations that have been posted. "Never attribute to malice what can properly be attributed to incompetence" -- ideas like shadowy international organizations communicating coded messages through stock trades or self-aware machine intelligences a la Skynet forming on the exchanges are certainly entertaining, but they're not needed to explain this phenomenon.
What is needed, of course, is an explanation of why We The People put up with this crap, when traders and their bots are playing Life not with blobs on a screen, but with our whole economy.
The correlation between ignorance of statistics and using "correlation is not causation" as an argument is close to 1.
In the absence of sensible regulation there are many abuses of the "free market" that effectively destroy it and turn it into a rigged game to benefit the already rich and powerful. Monopolies. Cartels. Price fixing. Trading on one's own account ahead of a customer.
These special access high-speed connections to the stock market exchange are market fixing tools, pure and simple. They allow the trading firms to skim the market for their own profit, thus defrauding every market participant in the world who lacks these powerful and privileged tools.
Requiring all buys to be held for a "long" time (a minute?, an hour?) would kill a lot of these shenanigans. Also requiring the link to go through a regulated buffer that introduces a random delay of a second or so would also take the wind out of their sales (pun intended). Or maybe we just impose a fee on each transaction so that they aren't free. Sub-millisecond trading loses a lot of luster if you automatically incur a charge equal to 0.1% (or something) of the stock's value.
Starships were meant to fly, Hands up and touch the sky - Nicky Minaj
Stocks are a massive game of hot potato. Whoever is holding the stock with the game is over gets burned.
When is the game over? Do you mean when a company declares bankruptcy? (the game is over for that stock) Or when the market falls? (it goes up and down constantly) Or is the entire stock market going to crash and burn? (end of American society as we know it)
I agree that the goal of the stock market is not to maintain wealth--if you just want to maintain, you can't beat inflation-protected Treasuries. The stock market is a way to grow wealth, and the winning strategy is not a secret: dollar cost averaging and low-load index funds. It's not a get-rich-quick scheme, but it will grow wealth if given enough time.
If you're wheeling and dealing individual stocks, yeah, it's more like gambling. But that is only one way to play the stock market.
Build a man a fire, he's warm for one night. Set him on fire, and he's warm for the rest of his life.
I've never really understood the complaints about eBay sniping. Set your maximum bid at the actual maximum that you want to pay. Whether someone snipes or not, if your bid is the highest you will win. If it's not, you won't.
You are right in principle, but...let's say I see something now and decide I'll pay $50 max for it. If it sells for $50.01, well damn, I would have paid $50.01. I might not have paid $60, but one cent more?
It's really hard to find the exact to-the-penny point where your "no, I won't pay that" mode is tripped. Virtually everyone will pay a few cents more than their maximum bid - and hence, snipers flourish and cause angst. It's not a case of paying 20% more - that's obvious - it's a case of paying .001% more. Most people can't focus their "maximum that you want to pay" that finely.
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I've never really understood the complaints about eBay sniping.
I suggest you spend more time considering the issue.
Set your maximum bid at the actual maximum that you want to pay. Whether someone snipes or not, if your bid is the highest you will win. If it's not, you won't.
But this a suboptimal strategy that will result in you paying more for the item than you could otherwise get away with. There is a psychological and competitive aspect to bidding, that induces people to up their bids. By bidding your maximum and then leaving the following will often occur: (Say you bid $100.00)
Here's typical scenario... ... yeah, what's another $5, and bid again. ooops outbid by you to $56. Again... what's another couple bucks... oops outbid again at $57. They give up and wander away. You win the auction, at $57.
Another Regular Person X bids against you, $50, and sees that you've outbid them at $51. They think to themselves, $52
But if you had sniped, Person X would have bid $50, saw they were top bidder and walked away. You come in and snipe $100 at the last second and you walk away with a winning bid of $51. Not sniping cost you an additional 12%. That basically amounts to a stupid tax on your proposed bidding strategy.
Meanwhile from the sellers perspective, they hate sniping because they "lose" money. The auctions end before the true 'maximum' bid is allowed to be discovered. That 12% you would have saved by sniping is 12% the seller would have gotten.
So regular buyers and regular sellers both are irked by sniping, while the only people who benefit are snipers. The entire point of an auction system is to place goods into the hands of the person willing to pay the highest amount. In economic theory an auction is a 'perfect market' where demand and supply meet exactly. Sniping distorts it by enabling auctions to end before the true price is properly set.
I'd think that the simplest solution would just be to extend the auction slightly every time there is a new high bid. Add 5 or 10 minutes every time the bid increases, and sniping would be totally ineffective.
I also suggested this to ebay 10 years ago, as a simple fix. Technically, I'd say 5 or 10 minutes isn't enough. In practice the auction should probably be extended an extra day so that all interested parties have time to check and revise their bids. (If an auction ends at 3am, having a window of opportunity to revise my bid until 3:10am isn't really enough. You need enough time for participating parties to receive their email notifications that they've been outbid, and to come back and update if they wish.)
Some people have argued that this would extend an auction indefinitely, but I disagree. I would however, bump up the bid increments to help prevent auctions from being drawn out. If a Pez dispenser is going to sell for $1.10, dragging it out another day so someone else can bid $1.20 is just stupid.
Now some sellers value having a fixed closing for auctions for whatever reason and for them... implement a silent auction where all bids are held in secret until the end.
The solution is simple -- just tax each trade say one dollar per trade. It's not enough to bother the legitimate trades as all of them are for substantially more than a dollar each, usually thousands of dollars each. This would prohibit using the trading system to make a DOS attack on a competitor. Unless you are prepared to pay the tax.
I have a simpler solution to this: tax transactions. Seriously, the London Stock Exchange does it. You don't even have to tax excessively, simply tax each transaction a fixed amount (say $.25) or a very small % (like 0.005%). Why should high frequency trading even be allowed? This tax would also kill automated frontrunning. If churn is the problem, there are ways to slow things down.
Make sure everyone's vote counts: Verified Voting
It occurred to me when looking at the charts that the stock market quote system is the perfect way to send encoded transmissions- the sender/offering entity is almost impossible to trace back and the receiver can remain entirely anonymous since almost anyone can look at stock pricing charts. Next, the patterns can be nearly impossible to detect, especially if several sources are linked together to make one transmission system, since the system is filled with lots and lots of what amounts to 'random noise' in the millions of non-encoding quotes/trades out there.
A sender would also have a significant amount of bandwidth given the number of different ticker symbols, the frequency of quotes, the rate of change between quotes, the direction of quotes, etc.
Normally, a casual observer wouldn't even notice the signals present at all. In this case, a potentially unrelated event (the flash crash) caused more scrutiny, but, supposing this are encoding signals we're witnessing, we still don't know what they mean or to whom they were sent.
-Ryan
AUWYHSTOT (Acronyms are Useless When You Have to Spell Them Out Too)
I don't see why this is a big deal, though. If you bid $50.00 and it sells to someone else for $50.01, all that happened is that you failed to buy something. For you, that's a neutral outcome, not a bad one. The sniper bought the item they wanted and the seller got a fair price. Everyone either won or broke even. No harm happened to anyone. What's the problem?
"Believe me!" -- Donald Trump
The market has for the past century been government sanctioned gambling. There has been no real business conducted "on the market", and we all end up having to pay off these problem gamblers. These gambling/market robots are just another part of the game so that "the house always wins". The house are the well known and dodgy investment banks, and of course government eager to take their cut^H^H^Htax.
... isn't that the mysterious bidders are "testing" the market to see if anyone is selling or buying at outrageous prices. the problem is that the bids being placed are not placed in good faith -- this is against the law in the USA.
the crazy, high-frequency bids are placed and then cancelled at high speed. they act as place holders waiting in line for the price to move in their favoured direction. however, since the vast majority of the time the bids are cancelled, they never execute. this results in the mirage of liquidity and the inevitable "Flash Crash" where sellers come in and all the buyers instantly disappear.
check out my comic: Essential Tremors
So if you went to the grocery store and as you were about to check out, some guy jumped between you and the register and emptied your cart without you or the cashier asking them to do that, you'd pay him for it?
That's what these HFTs do.
What's the matter with you people? Back in the day, Slashdotters would have figured this out immediately.
It's the *terrorists* using the bid data as an out-of-band *communication protocol* for transmitting *encrypted messages*! Remember? Like they were doing with steganography in eBay auction photos? The brilliance is they are using our own tools against us!
Bear with me a moment, pour yourself a large frosty mug o' xenophobia, and think about all those *overseas programmers* in the financial industry. Why, if we don't stop them, they'll probably code up some *derivative bots* that will f-up the mortgage industry!
Eloi, Eloi, lema sabachtani?
www.fogbound.net
Finally adjudicated? As in bankruptcy?
WTF are you babbling on about?
The * is worth whatever someone will pay for it.
That's right blair1q Enron really was worth all that money way back when (even though it was all fraud).
The money made was green and spent just the same (as long as you were not part of the fraud).
Stocks must be liquid for markets to work at all efficiently.
It's much harder to raise capital for a private corporation vs a public one.
There are several reasons for this but stock liquidity is definitely a feature for all investors (including but not limited to those that get in on IPOs).
It should be noted that most holders of IPO stock were previously holders of private stock (Founders, Angels, Vulture Capitalists etc), not Wall street insiders.
It should also be noted that IPO are 'Initial Public Offerings' not 'Only Public Offerings', companies raise capital with new stock offerings all the time.
I will agree with you that speculators are just gamblers who lower the signal to noise ratio in prices.
I'd tax any market gains from positions held less then a year the same a gambling winnings.
John McAfee 'It was like that time I hired that Bangkok prostitute; to do my taxes, while I fucked my accountant'
... that is, if people are doing this kind of thing to gum up the works for their competition, one answer is to assess a very small fee per trade, less than a penny. This would be completely negligible to a normal investor, but could be quite expensive to those trying to saturate the system for the benefit of their trading algorithm. Market-makers like Goldman Sachs would also wind up paying significant amounts, but given their privileged position which basically gives them a license to print money it's only fair. The fees collected could go into an insurance fund to help cover the next financial meltdown, and if it slows down trading a bit, that may well be a good thing. Complex nonlinear systems have a tendency to go unstable, and damping is one way of decreasing this possibility.
If I cut in front of you in line and buy the last of an item you intended to purchase, I am only causing you a neutral outcome. But it is still rude. Notice that people care somewhat less when they are sniped by a bidder who did at one time themselves have a winning bid, than when sniped by a bidder who showed no interest before the closing moments. This is because we use the number of bids and distinct bidders to gauge interest in an item when determining our own max bids. It's not logical (mostly because of sniping) but if I see bidding has slowed on an item with numerous bidders unwilling to go markedly higher than the current amount I can assume that the final price will be within that same ballpark. When there are fewer bidders taking turns having the highest bid, it is likely that one will wait until the very end to actually input their highest bid, which will generally be significantly more than their previous highest bid.
The intent is to game the system by creating bogus artificial demand-or lack of demand-in large enough quantities to influence trades below. Therefore,because they can do it at such a huge volume, and they know in advance what they are doing, they can use the split they have created to leverage that into a sort of arbitrage all day long. I am *guessing* right now they have to use a partner trader/bot to do the actual "real" trades following the bot shilling. Like secret partners in a poker game.
My opinion, crooked leeches, parasites, this sort of trading should be outright banned. I'd also like to see sales tax put on trades, we simply don't need this high speed trading at all, and that would be the simplest solution to this whole mess.
Would it reduce churn and volatility? Yes it would, not eliminate it, but slow it down enough to make it so actual human beings had to stop and think on what they want to do, and it would force a return to investing in a company, rather than this casino action we have now.
also see this, it's just a high tech variation: http://en.wikipedia.org/wiki/Front_running
I've never really understood the complaints about eBay sniping. Set your maximum bid at the actual maximum that you want to pay. Whether someone snipes or not, if your bid is the highest you will win. If it's not, you won't.
You are right in principle, but...let's say I see something now and decide I'll pay $50 max for it. If it sells for $50.01, well damn, I would have paid $50.01. I might not have paid $60, but one cent more?
It's really hard to find the exact to-the-penny point where your "no, I won't pay that" mode is tripped. Virtually everyone will pay a few cents more than their maximum bid - and hence, snipers flourish and cause angst. It's not a case of paying 20% more - that's obvious - it's a case of paying .001% more. Most people can't focus their "maximum that you want to pay" that finely.
Whenever I bid on ebay, I choose my maximum bid, then add a couple of dollars and a random amount of cents to avoid this. Eg if I would pay about $50, I put a bid for say $53.72. Most people bid whole numbers or the next minimum increment above, so by adding a small "snipe margin" you avoid being irritated. If the final price is higher than this, well the price is higher than you wanted to pay anyway so no problem.
It's only a problem if the item is generally unavailable, and you not having it is standing in the way of an important goal.
Example: you are bidding on a replacement part for an expensive (and no longer supported) piece of machinery which you use to earn a living.
---
"I can't complain, but sometimes still do..." Joe Walsh
These HFT trades are communicating something. We don't know what. It could be collusion among HFT traders. It could be communicating insider trading information. There's enough information in the signals that it could be VO-HFT, which makes sense, knowing that traders have their phone, email and IM communication recorded to assure the SEC that there's nothing illegal going on. The SEC needs to make this HFT sideband stop ASAP. LSMFT.
This is starting to remind me of Charles Stross' Accelerando, and that worries me. XD
Don't just stand there, get that other dog!
Sure, there is a somewhat fuzzy edge between what you consider a fair price and the price at which you're not interested. Also, humans are not particularly rational beings. Combine the two and auctions can easily lead to someone paying over the odds.
You decided that $50 was your top price, but see that someone has bid $50.01. That's not worth losing over; you bid $50.05 (or whatever eBays minimum increment is); your competitor ups hers. This keeps on going for a few rounds (after all if it's worth $50 it's probably worth 20-30c more). But by now you've become emotionally involved: you've invested effort in making these bids, if you back down you'll have the negative feeling of having lost, rather than the neutral feeling of some item costing more than you wanted to pay. Before you started out you might have thought it was worth $50 but not $52. With little time to respond, and in the competitive auction environment, you don't make the same judgements and keep bidding one of you finally wins at $61. It then turns out you could have bought the item from another fixed priced seller for $55.
You see this a lot on eBay; it's good for the seller, but not for buyers. So much more rational to take advantage of eBay's Vickrey auction style proxy bidding. Bid your maximum and if you win you only pay for one increment above the 2nd choice person. Don't choose a round number, if the item is worth about $50 but not $52, pick a random number somewhere in between, say $50.73. If you win, great, if not you don't feel too bad about it -- it's not like the 50 vs 50.01, you've already given yourself a little margin.
In theory this is a good strategy but it doesn't take account of the pool of irrational eBayers, and the outright cheats. If you leave your best bid up a long while before the end, a couple of bad things might happen:
1) shill bidders (the seller, or someone in league with them using another account) may come and bid up the auction so you pay more than you otherwise would. They may even bid past your limit thus finding out your maximum, then cancel the bid and bid to just below your maximum. EBay don't allow it, but it happens where they don't spot it.
2) Someone may come and think it's worth $45, bid that and see it doesn't win. Reason as you did, and bid a little more, then a little more again. Now they're the one's getting emotionally involved and keep bidding thinking "just one more and I might be in the lead", eventually bidding themselves up past you even if they wouldn't have considered the item worth it.
Best to avoid this entirely, bid what you think's a fair price close to the end of auction. If others have done the same, and bid their maximum (you know, just like eBay suggest in to) then they won't be unhappy.
Hence snipping. Perfectly rational, and only a disadvantage to buyers who, for some reason, like to bid up incrementally instead of using the eBay proxy bid system.
I really can't see why buyers complain so much about it. Of course it's not in seller's interest, they benefit when people get carried away bidding.