Sorry if this is a question with an obvious answer, but how is the report delivered/obtained?
Someone got the natural gas report 400 ms early
41–50 of 291 posts
Re: Someone got the natural gas report 400 ms early
#42If 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?
We could significantly alleviate the problem by limiting by law the trading frequency. Traders ultimately depend on the law to recognize the validity of their transactions. There is no value to society in high frequency trading. Mandating a full second in a market that operated quite well when slow-reacting humans conducted all the transactions should be more than sufficient.
Will laws work? I imagine the big investment banks will just set up dark pools in countries with favorable laws and just trade there instead. Added benefit: no more taxes!
The solution is to realize that high-frequency traders are playing a different game than you, even though they're on the same playing field. They do weird things but it's probably not hurting your returns. (It wasn't HFT that imploded the big banks, Enron, and Worldcom, right?)
Re: Someone got the natural gas report 400 ms early
#43After 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.
"is plotted with official exchange timestamps" suggests that they are doing it wrong. You can't compare apples to oranges without knowing how the exchanges are timed.
For those who do latency tests, this is a very important point: you should always be on the lookout for what clock is recording the 'start' and the 'stop' and to be sure to consider clock skew.
To get a sense for how far timestamps can diverge, OATS -- the reports that are sent to the Financial Industry Regulatory Authority -- require that machines be synced to within 3 seconds of NIST (which is nearly 7.5x longer than the 400ms quoted).
Re: Someone got the natural gas report 400 ms early
#44Since it takes a while to digest the report after having seen it, chances are that they were in possession of the report far earlier than T-400ms but waited until they were in a time window where they knew the regulators would not come after them. This is how fortunes are made. By taking advantage of loopholes in the regulatory mechanism.
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?
Think this all there is. You could definitely build a real time system. http://ir.eia.gov/ngs/ngs.html
Re: Someone got the natural gas report 400 ms early
#45If 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?
We could significantly alleviate the problem by limiting by law the trading frequency. Traders ultimately depend on the law to recognize the validity of their transactions. There is no value to society in high frequency trading. Mandating a full second in a market that operated quite well when slow-reacting humans conducted all the transactions should be more than sufficient.
trading fast isn't the problem. it's quotes being made with no intent to ever execute them. like someone at an auction making a bid and then saying "just kidding"
Re: Someone got the natural gas report 400 ms early
#46To 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?
This sounds like the type of regulation that people outside of an industry put on the industry with good intentions but really no idea what the consequences would be.
Consider a company who holds a press conference announcing something huge (either positive or negative). Anyone wanting to buy or sell in this tiny window pretty much gets shafted by such a system.
Re: Someone got the natural gas report 400 ms early
#47any idea what kind of profit we talking about here? Perhaps this is just not worth for Federalies to pursue...
Re: Someone got the natural gas report 400 ms early
#48Is there any way to subscribe to these Nanex posts? Couldn't find an RSS read but I'd like to slowly dip into HFT, and they like a good source of trading news.
Re: Someone got the natural gas report 400 ms early
#49Since it takes a while to digest the report after having seen it, chances are that they were in possession of the report far earlier than T-400ms but waited until they were in a time window where they knew the regulators would not come after them. This is how fortunes are made. By taking advantage of loopholes in the regulatory mechanism.
True but I also assume a large part of algo trading is deducing up/down signals from new information and acting quickly. I've heard the bigger reason high-freq algo trading is used is to mask larger moves in position in noisy trade bundles, avoiding price shock.
Re: Someone got the natural gas report 400 ms early
#50Earlier quoted context omitted.
If you saw a bunch of activity happening milliseconds before it should, why would you be the other party to someone you suspect is committing fraud? If no such report had come out milliseconds later, the activity wouldn't be suspect. How could a person (or in this case, given the timeframe, an algorithm) possibly distinguish this spike from a 'legitimate' spike? It doesn't make sense to blame the victim of a fraud wh…
I presume the report didn't just randomly come out at some random time. That is, everyone knew exactly when it was going to come out.
To the millisecond? I suppose it's possible. Even so, rumors drive spikes all the time. Someone could put out a false report, committing fraud in the reverse direction. I still doubt such a fraud could be detected at the time in any remotely reliable way.