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Someone got the natural gas report 400 ms early

nanex.net

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Re: Someone got the natural gas report 400 ms early

#51

Post by dice »

roc wrote: post #35
smcl wrote: post #5

Or 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.

Couldn't it also just be clock skew on a host or local datacenter which set off a chain reaction?

I mean, I know that traders are probably pretty anal about accurate clocks, but mistakes do happen.

Re: Someone got the natural gas report 400 ms early

#52

Post by niggler »

aidenn0 wrote: post #6
niggler wrote: post #2

After 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.

Interesting, so you are saying that Nanex is wrong about someone trading 400ms before the report?

To give an example of how this could happen (not saying this is what happened, but I've heard this happened before):

Suppose you left ntpd running and automatically adjusting the clock every hour.

If your clock is running faster than pool.ntp.org, and you are synchronizing to it, you may end up adjusting in the middle of an event. Because your clock is running fast, you would jump back in time, breaking the sequence of time (this is somewhat equivalent to what you see during daylight savings time if you aren't intelligent in the way you handle the backwards hour shift)

In this case, if the adjustment was forward in time, there would be a gap.

Re: Someone got the natural gas report 400 ms early

#53

Post by rikacomet »

nanex wrote: post #27
niggler wrote: post #23

Earlier quoted context omitted.

CQS has had issues in the past. You should know this. More importantly, why wouldn't you invest in colocations and collect the data yourself using direct feeds (with GPS clock synchronization etc to validate the data)?

We do. You are grossly misinformed. The charts correctly show the sequence and times of this event. I'm not going to engage this discussion further, though pmail is fine.

Hi, sorry for being off-topic for other reasons, I want to have a personal chat with you, my email is abtocool'at'gmail

please send me a line, when you can. Cheers.

Re: Someone got the natural gas report 400 ms early

#54

Post by [deleted] »

mixedbit wrote: post #20

I 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.

[deleted]

Re: Someone got the natural gas report 400 ms early

#55

Post by lotyrin »

yebyen wrote: post #39
lotyrin wrote: post #17

Earlier quoted context omitted.

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?

I'm not, I'm not certain of that at all.

Re: Someone got the natural gas report 400 ms early

#56

Post by niggler »

madaxe wrote: post #40
mixedbit wrote: post #20

I 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 mid…

Another HN user described this a long time ago: http://news.ycombinator.com/item?id=2828804

Re: Someone got the natural gas report 400 ms early

#57

Post by vannevar »

jrockway wrote: post #42
vannevar wrote: post #28

Earlier quoted context omitted.

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…

They do weird things but it's probably not hurting your returns.

I'm not so sure. The financial system is a nonlinear dynamical system. The hallmark of such systems is that small local perturbations can lead to very large changes in system-wide state. High-frequency trading vastly increases the number of small perturbations, and while most remain local, there is a finite probability that some will percolate upward in scale. So micro-scale trading may increase our exposure to catastrophe.

Re: Someone got the natural gas report 400 ms early

#58

Post by dfc »

I always get a kick out of reading these NANEX reports. Reading a new report usually means I spend 30 or 40 minutes filling in the gaps (giant) in my knowledge. Are there any other organizations that put out similar quality reports?

Re: Someone got the natural gas report 400 ms early

#59

Post by svachalek »

rikacomet wrote: post #34
smcl wrote: post #22

Earlier quoted context omitted.

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 milli…

If your idea of investing involves reacting to news and trading stocks/bonds/commodities/derivatives on internationally automated markets then just donate all your money to a good cause because at least then you'll get a tax deduction out of it.

Re: Someone got the natural gas report 400 ms early

#60

Post by mildavw »

gamegoblin wrote: post #46
mildavw wrote: post #31

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?

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.

Yes, I am admittedly absolutely naive to the inner workings of the market.

So what would happen in the press conference case? You would make your move based on the news knowing that sometime in the next 10 minutes it would be executed. No one else has any advantage so they can't necessarily get it done quicker. The value of short term moves is reduced, so everyone plays with a longer view.

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