To make shenangins more obvious, what if 1 minute were the maximum resolution that any trade could happen? Say, every order gets a random number of seconds between 0 and 60 added to it before it is executed. Or even longer. What would happen if everyone gets 10 minutes to digest any news?
Someone got the natural gas report 400 ms early
31–40 of 291 posts
Re: Someone got the natural gas report 400 ms early
#32After seeing some of their posts earlier and comparing it to live data I record at the colocations, I've concluded that they have clock issues which makes these types of anomalies appear frequently. Or they have a bad data vendor. Interestingly enough, even the regulators don't have good (only millisecond-resolution) trade data.
(I don't know a whole lot about the intricacies of trading) Is there a minimum standard "resolution" for trades, or is everything sort of a best effort based on the speed of the computing hardware involved?
Each exchange is implemented differently. Some have much lower round trip latency times, but currently latency numbers are in the microsecond range.
The quotes themselves are provided with resolution from 1msec to 1nsec (depending on the exchange and on the type of data you wish to receive)
Re: Someone got the natural gas report 400 ms early
#33If we can't solve this problem, with the rise of machine driven microtrading, is there really any reason to place any faith in the stock market as a private investor?
It's not like it's the only of our concerns: http://www.zerohedge.com/news/2013-01-18/did-tim-geithner-le... . I'd love a blog that explained how investing in stocks with all this irregularity can be done consistently well. I imagine it gets harder and harder. Just look at LIBOR.
Small investors can only buy on bad news and long where applicable (i.e good company). Bad news and poor technical performance even if for a period is guaranteed almost to be driven down by HFT. And sometimes HFT over does it (maybe on purpose to let the suckers flood back in). I.e. Apple going to 430, Netflix to mid 50s after similar shorts/run ups and battle of machines.
We all will be using HFT soon via proxy or already are. I would say this, possibly in the long run it is better as there will always be HFT algorithms that buy on the dip and take into account technical input as well as human input. Humans are irrational but machines only take a part of that into the algorithm, relying heavily on technicals, futures and news in addition.
But there will also be massive shorting efforts as this used to be a tenured skill, but now a machine can match anyone on shorting. Flash crashes are now always possible but also recover quickly. The only way to change this is to charge more for trades and throttles, then there will always be inequality there as well. This also sort of lessens run away bull runs as well as the machines will always pull back first or buy first if past thresholds are met and futures line up.
Re: Someone got the natural gas report 400 ms early
#34Earlier quoted context omitted.
and of course that also is only possible, when they know the exact time of when the news would go out. So that, they can time their activity just milliseconds before that, using tech.
Well it seems to be known that the report is due for 10.30am, so it is possible. Just an additional possibility, though nanex are far more experienced in explaining odd activity in the markets than I am :)
yes, I saw that, but think it in this way, that its a very unreasonable way, to give the time in advance. Its better for investers to have some luck with this, if the time is not given in advance, just the day roughly. The news will drop at any time during the 12 hours before or after the given day.
This would cut the advantage those hardwired trading machines have, that do tons of trades in few seconds or even milliseconds.
This should be one of the reforms against such things, in the interest of common folk investors.
Re: Someone got the natural gas report 400 ms early
#35Or someone got the report a few hours early, didn't want to be seen to jump the gun (insider trading, and all that) and kicked off a new trading strategy 400ms earlier than they intended...
Which begs the question of whether it was accidentally early.
It may well be that the 'early' trader knew they weren't the only one with early access to the data and intentionally set their trades to be a tiny bit early, to increase their chances of getting out ahead of the people who schedule their trades for just-after the scheduled announcement.
Which may well indicate a larger problem than one guy with a tip.
Re: Someone got the natural gas report 400 ms early
#36After seeing some of their posts earlier and comparing it to live data I record at the colocations, I've concluded that they have clock issues which makes these types of anomalies appear frequently. Or they have a bad data vendor. Interestingly enough, even the regulators don't have good (only millisecond-resolution) trade data.
400 ms is an eternity of time. I can't imagine they'd be off by that much.
Re: Someone got the natural gas report 400 ms early
#37So is this evidence of insider-trading ? Why would they not prosecute or at least investigate ?
Re: Someone got the natural gas report 400 ms early
#38If we can't solve this problem, with the rise of machine driven microtrading, is there really any reason to place any faith in the stock market as a private investor?
This was futures, not stocks, but I see where you're going.
Market makers aren't competing with buy-and-hold investors. Price fluctuations like this don't affect people that are investing in the fundamental performance of the underlying company. The price may swing by a few percent randomly in either direction, but in the long run, a growing company will have a growing stock price.
Equities make up much of my portfolio and I haven't been disappointed. As cynical as everyone is about how "big companies suck", they have historically done a pretty good job creating value. And I think that will continue for some time.
Re: Someone got the natural gas report 400 ms early
#39Earlier quoted context omitted.
I don't know the way these reports are structured, but is it regular enough where there's even a possibility that a bot could digest, analyze, and act on the information there in near real time?
The thing is (supposedly and based on this chart) that this order was placed faster than that, even. Edit to clarify.
How can you read this chart, and infer from it that the activity is due to having already read the report?
Surely everyone knew that the report would be released at 10:30, and they had strategies (or hedged positions) that were not as likely to be influenced by the contents of the report as by the market forces surrounding their orders?
Re: Someone got the natural gas report 400 ms early
#40I don't think that increased trading activity supports a conclusion that the report leaked. People may have anticipated increased trading after the rapport release and may have prepared algorithms to try to gain during this event. The algorithms may have started working before the release. I'm not saying this was actually the case, but my theory is as well supported as the claim in the post.
You'd only stick algos to automatically sell at a given time if you were mad (as you'd act on a move, not a time) - and the down and half-up tick indicate straddles set around the position.
This may have been a single rogue performing an initial sell, causing a drop which caused all the other pre-set strategies held by folks with very close to the exchange links to also sell, and then subsequently buy back to the midpoint.