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Someone got the natural gas report 400 ms early

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Re: Someone got the natural gas report 400 ms early

#181

Post by robbiep »

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…

For the most part HFT just decreases or eliminates arbitrage opportunities, or price discrepancies between what a piece of information says the price will be and what the price currently is. Arbitrage has always been a 'feature' of the market and although there are increased barriers to entry for arbitrage, economic theory says that by eliminating arbitrage opportunities through trading the difference away the market is being made more efficient

Re: Someone got the natural gas report 400 ms early

#182

Post by [deleted] »

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?

[deleted]

Re: Someone got the natural gas report 400 ms early

#183

Post by alexmchale »

dclowd9901 wrote: post #164
benpbenp wrote: post #160

A fun thought experiment. Suppose someone invents a time machine that gives the correct price of all securities at all future points in time. 1) Would it be against current rules to trade on this information? 2) If someone did use this machine surreptitiously to their own gain, how quickly will they approach owning 100% of everything? 3) If the entire data set of future prices were made publicly available, what would…

I'll bite. Chances are, the existence of a perfect trader would cause enormous shifts in how a market handles trading. This trader would, by default, be barred from trading, because her influence on the market would be staggering to the effect that it would influence the market itself. Even Warren Buffet has to temper things he says, so as not to accidentally push the market around. But , assuming the FTC just decide…

If I were the trader with perfect information, I'd program my trading algorithms to lose (or at least not be guarenteed to win) 40% of the time. This would make you look merely like a incredibly fortunate trader, and not a perfect one. Just make sure that your algorithm guarantees an X% return per year.

Re: Someone got the natural gas report 400 ms early

#184

Post by josh2600 »

joecurry wrote: post #174
josh2600 wrote: post #165

Earlier quoted context omitted.

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.

Yeah, I could see a long position being held 6 months, but frankly almost all trades are microseconds now.

This is one of my favorite charts on the subject, also from NANEX: http://imgur.com/DxWer

Check that out, it gave me a new appreciation for the changes in volume and volatility we're seeing.

Re: Someone got the natural gas report 400 ms early

#185

Post by vincefutr23 »

"There is the old story about the market craze in sardine trading when the sardines disappeared from their traditional waters in Monterey, California. The commodity traders bid them up and the price of a can of sardines soared. One day a buyer decided to treat himself to an expensive meal and actually opened a can and started eating. He immediately became ill and told the seller the sardines were no good. The seller said, "You don't understand. These are not eating sardines, they are trading sardines."

Re: Someone got the natural gas report 400 ms early

#186

Post by thedaveoflife »

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…

where there's smoke there's fire... unless someone has a smoke machine

Re: Someone got the natural gas report 400 ms early

#187

Post by niggler »

ig1 wrote: post #167
analog wrote: post #134

Earlier quoted context omitted.

So news organizations get this financially sensitive information before traders? Seems an almost too obvious way to make a quick buck.

Yes, but they have strong motivation not to abuse it. I've seen one case where an news org broke an embargo due to fat fingering a release, that news org lost early access privileges for a year as did every sister company that belonged to the same news group. If you specialize in financial news losing numbers is a huge deal, you'll lose thousands of customers over it. And when those customers are often $1000/month su…

R.R. Donnelly is still kicking even though they released google's earnings early: http://www.reuters.com/article/2012/10/18/us-google-results-...

Re: Someone got the natural gas report 400 ms early

#188

Post by incision »

tedunangst wrote: post #84
parfe wrote: post #71

Why would trade relevant data be released while trading is open? Seems like it could screw tons of people with open orders who can't react within seconds of new information.

If the release of information could affect you, don't trade until after its released. You are free to pretend the market is closed whenever you like. And it's not like this risk isn't there anyway. Earthquakes rarely coordinate their timing with market hours, to name one example.

>Earthquakes rarely coordinate their timing with market hours, to name one example.

When speaking of trading and earthquakes, it's hard not to mention Nick Leeson.

The beginning of the end occurred on 16 January 1995, when Leeson placed a short straddle in the Singapore and Tokyo stock exchanges, essentially betting that the Japanese stock market would not move significantly overnight. However, the Kobe earthquake hit early in the morning on 17 January, sending Asian markets, and Leeson's trading positions, into a tailspin. Leeson attempted to recoup his losses by making a series of increasingly risky new trades (using a Long-Long Future Arbitrage), this time betting that the Nikkei Stock Average would make a rapid recovery. However, the recovery failed to materialize.

Leeson left a note reading "I'm Sorry" and fled Singapore on 23 February. Losses eventually reached £827 million (US$1.4 billion), twice the bank's available trading capital. After a failed bailout attempt, Barings was declared insolvent on 26 February.

http://en.wikipedia.org/wiki/Nick_Leeson

Re: Someone got the natural gas report 400 ms early

#189

Post by ig1 »

niggler wrote: post #187
ig1 wrote: post #167

Earlier quoted context omitted.

Yes, but they have strong motivation not to abuse it. I've seen one case where an news org broke an embargo due to fat fingering a release, that news org lost early access privileges for a year as did every sister company that belonged to the same news group. If you specialize in financial news losing numbers is a huge deal, you'll lose thousands of customers over it. And when those customers are often $1000/month su…

R.R. Donnelly is still kicking even though they released google's earnings early: http://www.reuters.com/article/2012/10/18/us-google-results-...

I'm talking about government figure releases (employment, inflation, etc and the like).

In that case it was probably just a contractual issue between Google and their printer, to the wider market it would have been the same as if Google had accidentally released their numbers early.

(Actually even in the governments case it's still a contractual issue, it's just that governments have huge power by withdrawing early access rights)

If RR traded on those numbers they would have violated criminal insider trading law.

Re: Someone got the natural gas report 400 ms early

#190

Post by andylei »

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…

> 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.

this isn't the same as being 70% of price movement. HFT is comprised mostly of market makers, who have books that, over the course of the day, are close to net zero. they do a lot of buys, but they also do a lot of sells.

most price moves over the course of a day are actually driven by people who take positional views, and buy or sell large positions. so actually, we're not really that far from kansas

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