My pitiful TLDR summary of Stucchio's work combined with some other observations
Stucchio presents a fairy tale, picture perfect world that doesn't exist. Stucchio forgot to mention Brutus' algo which comes along and offers 20.01 for a stock, but cancels it 1 milliseconds later, then offers 20.00 for 1 ms, then 19.99, then 5,000 random prices between 18.00 and 20.00 for the next 800 milliseconds. Sometimes at the top of the book, sometimes not. All to confuse order routers or destroy latency tables in Thor like programs.
When Brutus sees an order coming in on Exchange A, his algo quickly backs off on the other exchanges because it knows that over time, it results in slightly higher profits.
Brutus also knows that exchange B will delay by X microseconds when the total # of messages in symbols A-C exceed 20,000. So if a delay is needed in ABC, just jam the other stocks in that group with useless quotes
How High Frequency Trading Harms Even Long Term Investors
1. Investors are warned against using market orders and stops because HFT can and
will
suddenly withdraw their quotes.
This alone should tell you something is rotten at the core.
2. Some universities, such as Georgetown, can no longer afford to buy TAQ market data for
their professors or students to analyze. This will lead to less academic oversight,
guidance and involvement, as well as students who are less prepared for careers
on Wall Street. Data has become prohibitively expensive because of all
the excessive quotes generated by HFT.
4. Misleading price quotes
interferes with price discovery, one of the core functions of a stock exchange.
5. Mis-allocation of resources, both human and technological.
6. If left unchecked by regulators, traders who want to process quotes, will soon need super-computers, 10 gigabit connections and their own engineering
staff to have the same basic level of trading information they needed in 2006.
7. HFT generated so much Quote Spam in the flash crash, that it took 5
months for the SEC to assemble the data.
8. During the flash crash, excessive quotes from HFTs overloaded quote data feeds, causing severe delays:
stock quotes from some exchanges were behind
over 30 seconds during the height of the flash crash.
Only if you are in it for day-trading profits. And if you are, well, you deserve to be beaten senseless by some HFT algorithm.
If you're a long term investor, with a time horizon of many decades, this doesn't matter. For example, I have a stock I bought 15 years ago. It has gone up by around 3X in that time. HFT makes no difference to me when I've held a stock over many years or decades. The exact microsecond it sells doesn't matter to me after a period of decades.
Let me ask you something. Would you recommend homeowners ditch their fire or title insurance then? Because you have about the same chance of getting burned when the time comes when you need to sell that stock, as you have of a major fire. Might as well save on the premiums.
Seriously. I've talked to quite a few people who have been caught up in an "event" where they had to sell (for tax reasons, for financial reasons, etc.) and they just happened to pick the wrong moment of time to trade. And there have been thousands of such "bad times" so far this year.
Back in the late 80's I wrote a hurricane tracking program called Hurricane (what else) and released it as shareware. I also obtained hurricane data back to 1886 from NOAH and by overlapping every storm track and summing the affected area with wind speed, I found that a section of Florida from Tampa, south to Sarasota, had the least cumulative wind speed. Actually that is the safest area in the southern U.S. when it comes to hurricanes.
I purchased Apple stock back in 2000 when it was selling for less than the cash it had in the bank. That is, the brand was worth less than zero. This was right around the height of the internet bubble, and Apple had no "internet play". I bought the stock because I was starting a new company that would consume all my time and wouldn't have time to look at my "portfolio". So I bought Apple, because, get this, it was about the "safest" play out there. Because Apple had a lot of cash in the bank and net income, I figured the worst thing that could happen is it would remain about where it was.
..and the phone in your pocket makes Kirk's look like a pile of crap.
Um, Kirk's had this special "light" that would make people disappear. Sometimes even heat up rocks in a frozen wasteland. And it could call Enterprise. Just saying.
The problem is that there will be "exceptions" for certain groups. This is how its always been, and it always seems to go to the groups causing the.. um.. exceptions.
They were watching it. Like a hawk. But it was another executable causing the problems that they didn't realize was running. I'm sure this will all come out eventually.
I have no idea if this is even possible, but what if they impregnated the magnets with a foul taste? Maybe babies/toddlers don't swallow everything that goes in their mouths right away, and a foul taste would help them make the right decision and spit them out.
Slashdot Mirror
Warning, you have left the reality distortion field. Please return immediately.
Um, that wall street job? It's going to consume far more than 60-80 hours per week. And with far more stress. Just sayin..
Bravo! Well done!
Nanex
Kudos. The most succinct, illuminating post on the subject!
nanex
They knew what they were doing
At least twice a day, it would stop for about 5 minutes. Probably to upgrade software.
Tell me the stock and date, and I'll get the event into the hands of people who can do something about it.
The SEC has plenty of staff and $. They are also completely owned by Wall Street. And that is a fact.
As the author of those points, I have to write: awesome presentation of them!
Eric Hunsader
Nanex
Anyone from Knight Capital want to comment?
Or just depressurize the cabin and wait for everyone to pass out.
If you want the real story try Stucchio's blog series beginning at: http://www.chrisstucchio.com/blog/2012/hft_apology.html
My pitiful TLDR summary of Stucchio's work combined with some other observations
Stucchio presents a fairy tale, picture perfect world that doesn't exist. Stucchio forgot to mention Brutus' algo which comes along and offers 20.01 for a stock, but cancels it 1 milliseconds later, then offers 20.00 for 1 ms, then 19.99, then 5,000 random prices between 18.00 and 20.00 for the next 800 milliseconds. Sometimes at the top of the book, sometimes not. All to confuse order routers or destroy latency tables in Thor like programs.
When Brutus sees an order coming in on Exchange A, his algo quickly backs off on the other exchanges because it knows that over time, it results in slightly higher profits.
Brutus also knows that exchange B will delay by X microseconds when the total # of messages in symbols A-C exceed 20,000. So if a delay is needed in ABC, just jam the other stocks in that group with useless quotes
I could go on all night.
From a recent post I made
How High Frequency Trading Harms Even Long Term Investors
Only if you are in it for day-trading profits. And if you are, well, you deserve to be beaten senseless by some HFT algorithm.
If you're a long term investor, with a time horizon of many decades, this doesn't matter. For example, I have a stock I bought 15 years ago. It has gone up by around 3X in that time. HFT makes no difference to me when I've held a stock over many years or decades. The exact microsecond it sells doesn't matter to me after a period of decades.
Let me ask you something. Would you recommend homeowners ditch their fire or title insurance then? Because you have about the same chance of getting burned when the time comes when you need to sell that stock, as you have of a major fire. Might as well save on the premiums.
Seriously. I've talked to quite a few people who have been caught up in an "event" where they had to sell (for tax reasons, for financial reasons, etc.) and they just happened to pick the wrong moment of time to trade. And there have been thousands of such "bad times" so far this year.
Back in the late 80's I wrote a hurricane tracking program called Hurricane (what else) and released it as shareware. I also obtained hurricane data back to 1886 from NOAH and by overlapping every storm track and summing the affected area with wind speed, I found that a section of Florida from Tampa, south to Sarasota, had the least cumulative wind speed. Actually that is the safest area in the southern U.S. when it comes to hurricanes.
But here's hoping for some change on that
I purchased Apple stock back in 2000 when it was selling for less than the cash it had in the bank. That is, the brand was worth less than zero. This was right around the height of the internet bubble, and Apple had no "internet play". I bought the stock because I was starting a new company that would consume all my time and wouldn't have time to look at my "portfolio". So I bought Apple, because, get this, it was about the "safest" play out there. Because Apple had a lot of cash in the bank and net income, I figured the worst thing that could happen is it would remain about where it was.
..and the phone in your pocket makes Kirk's look like a pile of crap.
Um, Kirk's had this special "light" that would make people disappear. Sometimes even heat up rocks in a frozen wasteland. And it could call Enterprise. Just saying.
Whatever happens, let's all agree to keep Wall Street Software guys from getting into this field.
USB will copy files, but not identical copies. Firewire is better.
But the best/cheapest solution, is a Dell MD-1000. It will take 2tb generic drives.
200 times a second?
For 29 minutes straight?
Why did some stocks end up with 10s of thousands of wash sales, and other stocks result in principal positions?
Or a "You read my mind" moderation.
The problem is that there will be "exceptions" for certain groups. This is how its always been, and it always seems to go to the groups causing the.. um.. exceptions.
Stupid Article.
They were watching it. Like a hawk. But it was another executable causing the problems that they didn't realize was running. I'm sure this will all come out eventually.
Or require pi to be just 3 and not some crazy non-repeating non-ending number.
Steve Balmer has led microsoft to a point where they no longer have this luxury.
You must be new here.
We don't venture outside.
I have no idea if this is even possible, but what if they impregnated the magnets with a foul taste? Maybe babies/toddlers don't swallow everything that goes in their mouths right away, and a foul taste would help them make the right decision and spit them out.