if the market was architected to be fair, all data releases would happen at midnight london time. it just isn't and will never be...
Someone got the natural gas report 400 ms early
241–250 of 291 posts
Re: Someone got the natural gas report 400 ms early
#242Earlier quoted context omitted.
The HFT boys are creating vast amounts of liquidity and squeezing the spread down to unprecedented lows. The volatility created by their trading is essentially invisible to a retail investor who observes the markets day-to-day rather than minute-to-minute. It seems to me that people are fixated on volume, which is essentially an irrelevant figure - holding a big position for a couple of milliseconds has no meaningful…
If a flash crash triggers a stop loss order and I lose my position in a stock, would that be considered relevant?
It just means that your stop-loss order is working on unsmoothed millisecond-resolution data when it should be working on smoothed minute-resolution data.
Re: Someone got the natural gas report 400 ms early
#243It is worth pointing out that the EIA Natural Gas Report comes out weekly (every Thursday at 10:30) and the market reacts within a few milliseconds. Since it's not the report producer's job for investors' computers to rapidly parse it, they should have some fun in phrasing and presenting the information in different ways each time. If nothing else, it could lead to an explosion in NLP and content parsing technology ;…
The fuckers will keep it all secret anyhow - or worse, patent it. Zero net benefit for the world.
Re: Someone got the natural gas report 400 ms early
#244Earlier quoted context omitted.
If a flash crash triggers a stop loss order and I lose my position in a stock, would that be considered relevant?
It just means that your stop-loss order is working on unsmoothed millisecond-resolution data when it should be working on smoothed minute-resolution data.
When your stop-loss order executes, it's not going to execute at a smoothed minute-resolution price. It's going to execute at a price that's currently in the book. That means that it's not going to stop your losses if you trigger it with smoothed minute-resolution data. Twenty years ago, it would have. But today it won't, because anybody who took your smoothed minute-resolution price would be giving you an exploitable arbitrage opportunity.
I'm not claiming HFT causes securities market price crashes; maybe it does or maybe it doesn't. I'm claiming that, if a security is crashing, HFT gives it the chance to crash in milliseconds or less, rather than minutes.
Re: Someone got the natural gas report 400 ms early
#245Earlier quoted context omitted.
The HFT boys are creating vast amounts of liquidity and squeezing the spread down to unprecedented lows. The volatility created by their trading is essentially invisible to a retail investor who observes the markets day-to-day rather than minute-to-minute. It seems to me that people are fixated on volume, which is essentially an irrelevant figure - holding a big position for a couple of milliseconds has no meaningful…
If a flash crash triggers a stop loss order and I lose my position in a stock, would that be considered relevant?
Stop-market orders, which turn into a market order when the stop is breached, are obsolete. Worst case one should set a stop-limit order, which "becomes a limit order that will be executed at a specified price (or better)" when the stop is triggered. "The benefit of a stop-limit order is that the investor can control the price at which the order can be executed" [1].
Your asset manager should know this and broker advise you of it. Then again, I don't think retail traders should have such unrestricted, unsupervised access to the exchanges.
Re: Someone got the natural gas report 400 ms early
#246Re: Someone got the natural gas report 400 ms early
#247Earlier 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?
Betfair offers exchange sports betting. There, you always have 5 seconds to cancel an order even after it's match, and they suspend trading near a major event, like a goal in a football match. This seems to work quite well.
Re: Someone got the natural gas report 400 ms early
#248http://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…
Information can cause one of three price reactions: up, down, or flat. Prices stay the same if the market accurately anticipated the information. Chances are, though, that the information will change prices. One thus knows that when an EIA report comes out, ceteris paribus, prices are more likely to spike or dive than stand still.
"Veteran" traders set up limit orders so that if prices rose they'd buy and if prices fell they'd sell. It's a momentum trade. Unfortunately, they were sloppy, submitting orders before the data came out. Arbitrageurs realised that these lazy limit orders could themselves be cannibalised by nudging the price around to see if it triggers any hidden orders prematurely. The order's premature execution would then create a tiny, temporary momentum effect that the arbitrageur could ride. This is called banging the beehive.
The trader pushed out was setting up information-less standing orders before the report released. The trader adding information to the market, e.g. through unique analysis, is not concerned by pre-release volatility.
It is possible, here, that a massive lazy limit was prematurely triggered and subsequently mis-interpreted. It's tough to say. With limited information I'd caution against Nanex's assumption of the low prior probability insider information hypothesis.
Re: Someone got the natural gas report 400 ms early
#249any idea what kind of profit we talking about here? Perhaps this is just not worth for Federalies to pursue...
A rough approximation off the graph: volume before the announcement ~190,000. The announcement pushed the price down by ~$0.30/share, so by trading before the announcement, they avoided losses of ~$57,000.
Re: Someone got the natural gas report 400 ms early
#250Earlier quoted context omitted.
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?
Betfair offers exchange sports betting. There, you always have 5 seconds to cancel an order even after it's match, and they suspend trading near a major event, like a goal in a football match. This seems to work quite well.
So cancellations made immediately before e.g. a goal are rolled back? Otherwise that sounds exploitable, as the probability of a goal increases dramatically before the goal takes place.