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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

#171

Post by niggler »

noname123 wrote: post #163
apaprocki wrote: post #104

http://invezz.com/news/alternative-investments/625-uk-report... "Veteran traders would usually wait in anticipation for the weekly report of gas-inventory figures by the U.S. Energy Information Administration released on Thursday at 10.30 AM and then dive into the busiest trading window of the week. This is no longer true as most traders are now staying out of the market due to the HFTs new strategy - sending floods…

Commodity futures is not my specialty but I looked into the lagging quotes from leveraged natural gas ETFs and from natural gas producers. It's well known that tracking index for gold (GLD) correlates to the tracking index of gold producers (GDX) and they diverge and converge. People would do pair-trading on GLD-GDX pairs to bet on convergence. Given that there's a binary catalyst event for natural gas, I wonder if t…

"I wonder if there's a spread between IV in UNG options and in the futures market to do a calendar or ratio spread."

UNG is implemented via futures. They announce roll dates every month http://www.unitedstatesnaturalgasfund.com/ung-rolldates.php and the futures traders definitely arb the fund's roll.

Re: Someone got the natural gas report 400 ms early

#172

Post by snowwrestler »

lifeisstillgood wrote: post #157
apaprocki wrote: post #104

http://invezz.com/news/alternative-investments/625-uk-report... "Veteran traders would usually wait in anticipation for the weekly report of gas-inventory figures by the U.S. Energy Information Administration released on Thursday at 10.30 AM and then dive into the busiest trading window of the week. This is no longer true as most traders are now staying out of the market due to the HFTs new strategy - sending floods…

At what point will HFT drive out the proper functioning of a Market? Have there been any studies on this? If human traders mostly reacted to "real" news (the Orange juice crop is bad this year) then human trading was mostly linked to actual changes that affect the price mechanism But if large volumes of trades are speculative, or even worse, are directed at affecting the behaviour of other large Market players, is th…

It won't. High frequency trading slices the gap between offer and purchase into an enormous number of tiny slices, and HFT companies compete to see who can collect the most number of slices. But that does not affect the underlying factors that lead to most offers and purchases of stock.

For example you could offer OJ futures at improperly high prices a billion times per second, but that does not mean anyone will buy them. I'm not aware of any evidence that Amazon's weird million-dollar books have affected the price of popular new books.

In addition, I wonder by what criteria one would evaluate how "properly" the markets are functioning. Who decides what is proper? For example, based on the business fundamentals it seems ludicrous to me that Apple would have a lower P/E ratio than GM--but it currently does.

Re: Someone got the natural gas report 400 ms early

#173

Post by runT1ME »

lifeisstillgood wrote: post #157
apaprocki wrote: post #104

http://invezz.com/news/alternative-investments/625-uk-report... "Veteran traders would usually wait in anticipation for the weekly report of gas-inventory figures by the U.S. Energy Information Administration released on Thursday at 10.30 AM and then dive into the busiest trading window of the week. This is no longer true as most traders are now staying out of the market due to the HFTs new strategy - sending floods…

At what point will HFT drive out the proper functioning of a Market? Have there been any studies on this? If human traders mostly reacted to "real" news (the Orange juice crop is bad this year) then human trading was mostly linked to actual changes that affect the price mechanism But if large volumes of trades are speculative, or even worse, are directed at affecting the behaviour of other large Market players, is th…

I've been wondering if an exchange that prevented HFT would prosper in the current climate. I'm sure that plenty of companies aren't a fan of their market cap being at the whim of an algorithm and the large number of swings it would undergo.

Wouldn't they prefer an exchange that offered liquidity in minutes or even hours, opposed to fractions of a second?

Re: Someone got the natural gas report 400 ms early

#174

Post by joecurry »

josh2600 wrote: post #165
lifeisstillgood wrote: post #157

Earlier quoted context omitted.

At what point will HFT drive out the proper functioning of a Market? Have there been any studies on this? If human traders mostly reacted to "real" news (the Orange juice crop is bad this year) then human trading was mostly linked to actual changes that affect the price mechanism But if large volumes of trades are speculative, or even worse, are directed at affecting the behaviour of other large Market players, is th…

I think that HFT is responsible for over 70% of the volume on the major exchanges these days. Very little of what happens on the exchanges anymore is directly attributable to long positions. I'm not sure how current this is, but the average time a stock is held is roughly 20 seconds [1] and that's definitely not long-term value investing. I think we're already a long ways away from Kansas Dorothy, and I don't think w…

I read this morning in Nate Silver's new book (recommended by Fred Wilson and published September 2012) "The Signal and the Noise" that the average time a stock was held was 6 years a few decades ago, recently the average is closer to 6 months.

Re: Someone got the natural gas report 400 ms early

#175

Post by nathan_f77 »

niggler wrote: post #43
swalsh wrote: post #36

Earlier quoted context omitted.

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 --…

You do seem to know a lot about this topic, but I don't think you should draw any conclusions based on speculation.

Re: Someone got the natural gas report 400 ms early

#176

Post by lostlogin »

joering2 wrote: post #47

any idea what kind of profit we talking about here? Perhaps this is just not worth for Federalies to pursue...

Is cost/return a factor in these things? I'd hope not. If expense stops prosecution, the offender can learn where the cut off lies, and just offend below the benchmark. Somewhat like the way I drive (speed camera goes at 10kmh above limit, I drive at just under this).

Re: Someone got the natural gas report 400 ms early

#177

Post by noname123 »

niggler wrote: post #144
scott_s wrote: post #138

Earlier quoted context omitted.

As a bystander who does not have the background necessary to evaluate either of your claims at face value, I would really like to hear your explanation for why you disagree with his explanation.

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 m…

There's quote feed solutions that do co-location at the exchange servers and deliver the quotes to you in individual channels (ARCA/BATS/EDGX-A etc) and also SIAC feeds.

http://www.limebrokerage.com/services/marketdata/citrius

Re: Someone got the natural gas report 400 ms early

#178

Post by niggler »

nathan_f77 wrote: post #175
niggler wrote: post #43

Earlier quoted context omitted.

"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 --…

You do seem to know a lot about this topic, but I don't think you should draw any conclusions based on speculation.

There is no "speculation" here:

When you measure latency, you always have to be careful about clock issues at the point where you measure the start and the point where you measure the end. This is old-hat for sysadmins and others who deal with these types of issues. This is why round-trip latency numbers are easier to work with: both the start and the end times are taken on the same clock.

It's clear, given nanex's responses, that they depended on someone else to give the timestamps. Before concluding that someone had inside information ahead of time, they should check their processes. It's like someone claiming they built a perpetual energy machine because they confused power with energy (i want to say it was paul newman but the name escapes me -- this actually happened)

Re: Someone got the natural gas report 400 ms early

#179

Post by goodcanadian »

runT1ME wrote: post #173
lifeisstillgood wrote: post #157

Earlier quoted context omitted.

At what point will HFT drive out the proper functioning of a Market? Have there been any studies on this? If human traders mostly reacted to "real" news (the Orange juice crop is bad this year) then human trading was mostly linked to actual changes that affect the price mechanism But if large volumes of trades are speculative, or even worse, are directed at affecting the behaviour of other large Market players, is th…

I've been wondering if an exchange that prevented HFT would prosper in the current climate. I'm sure that plenty of companies aren't a fan of their market cap being at the whim of an algorithm and the large number of swings it would undergo. Wouldn't they prefer an exchange that offered liquidity in minutes or even hours, opposed to fractions of a second?

They'll still be traded over the counter elsewhere at high frequency, so I think the end result would be widening spreads on the new exchange to cover the variation over a time tick (whatever length that is), and no one (even long term investors) would actually use the new exchange.

Re: Someone got the natural gas report 400 ms early

#180

Post by niggler »

noname123 wrote: post #177
niggler wrote: post #144

Earlier quoted context omitted.

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 m…

There's quote feed solutions that do co-location at the exchange servers and deliver the quotes to you in individual channels (ARCA/BATS/EDGX-A etc) and also SIAC feeds. http://www.limebrokerage.com/services/marketdata/citrius

That looks like a hardware product. You still need to purchase market data access to the relevant exchanges to get that data, and those are expensive (NASDAQ costs, for example, run upwards of 20K/mo to get the lowest-latency data)

They should just spring for the data before making accusations -- the problem is that when you cry wolf all the time no one will take them seriously when a real case comes around.

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