Someone got the natural gas report 400 ms early

This. The entire reason for having this market is to reward making better decisions about allocating society's resources, not the same decisions imperceptibly faster. The market's clearing system is flawed in ways that reward huge misinvestments in solving the wrong problem.

A simple analogy: you are an advertiser using Facebook. You tell them you want to get 1000 impressions, and facebook gives you a report at the end of the day saying that they gave the number of impressions you paid for.

So you look at yesterday's view count and today's view count and notice that somehow the view count only increased by 900. Something is afoot!

Nanex's argument is tantamount to saying "that means we must have lost 100 organic views today"

My argument is tantamount to saying "I actually bothered to look at our access logs (which we record on our servers) and only saw 900 that we could definitively attribute to real Facebook users. Is it possible that the report is incorrect or falsified?"

Now I bring up this example because this actually did happen with facebook. Quick HN search revealed one such discussion: http://news.ycombinator.com/item?id=667308

Back to the current situation. There are many sources of market data. Each individual exchange generates its own feed, and with the major exchanges (NYSE, NASDAQ, BATS, DirectEDGE, ...) you can colocate in the exchange data centers (NYSE and ARCA are in Mahwah NJ, NASDAQ is in Carteret NJ, and various other exchanges are located in New Jersey and Chicago) and record the data yourself. There is a unified tape (CQS/CTS) which combines and disseminates a combined record (across all exchanges). This is used to determine the "national best bid/offer" -- the prices people are willing to buy/sell at.

The process of CQS generation is fraught with problems, but lots of older traders and academic types use CQS data because its much cheaper to get that data than to get data from individual exchanges directly. However, you are subject to the quirks of the combination process, including subtleties regarding timestamping data (since this data includes trades and quotes from Chicago and from New Jersey, the sequence of events may appear different if you record from chicago or new york or philadelphia or some other place; if you ask the exchanges to timestamp directly, you have to worry about clock delay and skew between the exchanges' servers).

nanex is saying that it is acceptable to depend on that data and any anomalies must have occurred outside of the recording process. I am saying that the recording process can create the types of anomalies that nanex is showing, and that the only way to be sure is to record the data directly and carefully synchronize your recording machines. AND when you do that you see that there really is no anomaly.

Just to emphasize how sloppy the exchanges are with regards to timing: on the BATS exchange they use multiple servers to run trades and generate quotes, and every once in a while you see messages appear to be out of time order because the individual machines weren't properly synchronized (although, if you filter for a single ticker, messages are always in chronological order)

The data are printed with the CME's and NYSE's official timestamps. It would not be unprecedented for the CME's timestamps to diverge from, say, the NYSE's. That would present itself as a consistent temporal dislocation between the CME and NYSE, but would be invisible within each data-set (sort of like your calendar putting itself into the wrong time-zone where - the times are off, but they're consistently off, i.e. spacing between events is preserved).

Instead, we see a signal within each dataset and symmetry between them. It could still be a data aberration, but that would implicate the CME and NYSE of having irregular clocks, a far more serious problem than some twat front-running a government report.

Most likely is that this is a real trading signal, but not one based on insider information.

So I looked at Wikipedia: http://en.wikipedia.org/wiki/Stock_market#Function_and_purpo...

Didn't see anything about rewarding better decisions about allocating society's resources. I did see a lot about raising capital for corporations and for providing an indicator of the general mood of the economy though.

The stock market is effectively a giant casino for pros. If you're not one, you're just plain dumb if you try to play their game by their rules.

And of course, with the sort of thinking you're putting forth, we should obviously OUTLAW that 66 GH/s bitcoin hardware. It's so unfair to everyone else who can only afford a cluster of 8 AMD 7970s, no?

le