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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.
Living With a Nerd
The machine intelligences are communicating through hidden channels in our global network.
Judgement Day is close.
... 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.
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.
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.
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'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.
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.
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
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
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.
Advice: on VPS providers
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 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