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New Revealing paper on High Frequency Trading

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Re: New Revealing paper on High Frequency Trading

#31

Post by msy »

yummyfajitas wrote: post #27
jbarham wrote: post #26

Earlier quoted context omitted.

Try these keywords: "flash crash" HFT

The first page of google results provides no empirical evidence that either HFT involves market manipulation or that HFT caused the flash crash. All it provides is speculation.

and in case that source isn't reliable enough for you, try the FT http://www.ft.com/cms/s/0/b2373a36-b6c2-11df-b3dd-00144feabd...

HFT has chilling associations with the “flash crash” of May 6, when rapid, computer-driven orders were seen as a main culprit in sending the Dow Jones Industrial Average down by 1,000 points in 20 minutes – a fall unprecedented in its depth and speed.

“We want to be able to look them in the eye and say the market is fair. And unfortunately, at the moment it’s quite difficult to do that.”

Re: New Revealing paper on High Frequency Trading

#32

Post by yummyfajitas »

msy wrote: post #30
yummyfajitas wrote: post #27

Earlier quoted context omitted.

The first page of google results provides no empirical evidence that either HFT involves market manipulation or that HFT caused the flash crash. All it provides is speculation.

Ask and ye shall receive. http://www.zerohedge.com/article/its-not-market-its-hft-crop... If detailed, fully sourced graphs, demonstrating deliberate use of quote stuffing to essentially jam markets isn't good enough for you I suggest you consider carefully your own bias.

How do the graphs demonstrate deliberate use of quote stuffing, let alone market manipulation or a link between HFT and the flash crash?

Rather than repeating myself, I'll link to my own comment on that exact article explaining why I'm almost certain those graphs are not deliberate.

http://news.ycombinator.com/item?id=1564445

Also from your FT article: Regulators such as the SEC are still puzzling over exactly what caused the flash crash.

(Full disclosure: I work in HFT.)

Re: New Revealing paper on High Frequency Trading

#33

Post by [deleted] »

msy wrote: post #30
yummyfajitas wrote: post #27

Earlier quoted context omitted.

The first page of google results provides no empirical evidence that either HFT involves market manipulation or that HFT caused the flash crash. All it provides is speculation.

Ask and ye shall receive. http://www.zerohedge.com/article/its-not-market-its-hft-crop... If detailed, fully sourced graphs, demonstrating deliberate use of quote stuffing to essentially jam markets isn't good enough for you I suggest you consider carefully your own bias.

[deleted]

Re: New Revealing paper on High Frequency Trading

#34

Post by msy »

yummyfajitas wrote: post #32
msy wrote: post #30

Earlier quoted context omitted.

Ask and ye shall receive. http://www.zerohedge.com/article/its-not-market-its-hft-crop... If detailed, fully sourced graphs, demonstrating deliberate use of quote stuffing to essentially jam markets isn't good enough for you I suggest you consider carefully your own bias.

How do the graphs demonstrate deliberate use of quote stuffing, let alone market manipulation or a link between HFT and the flash crash? Rather than repeating myself, I'll link to my own comment on that exact article explaining why I'm almost certain those graphs are not deliberate. http://news.ycombinator.com/item?id=1564445 Also from your FT article: Regulators such as the SEC are still puzzling over exactly what c…

Are you kidding me? Are you honestly denying there's no connection between the stuffing of the order book with hundreds of thousands of orders and the crash? Please. As for whether it's deliberate - I think you're right in the sense that something acted in a way which its creators did not intend if you think quote stuffing is a legitimate trading strategy we're clearly poles apart in what purpose we believe markets are meant to serve. I hear a lot of about how HFT creates liquidity and reduces volatility without much reference to quite what time periods they're talking about, what you don't hear them say is what it does to liquidity volatility, particularly in nervous markets and around announcements. I've done HFT too, I understand the game, the difference is I realise it's at best an illegitimate quirk of technology and at worst legalised front-running and the turning of the execution environment into a trading weapon.

Re: New Revealing paper on High Frequency Trading

#36

Post by yummyfajitas »

msy wrote: post #34
yummyfajitas wrote: post #32

Earlier quoted context omitted.

How do the graphs demonstrate deliberate use of quote stuffing, let alone market manipulation or a link between HFT and the flash crash? Rather than repeating myself, I'll link to my own comment on that exact article explaining why I'm almost certain those graphs are not deliberate. http://news.ycombinator.com/item?id=1564445 Also from your FT article: Regulators such as the SEC are still puzzling over exactly what c…

Are you kidding me? Are you honestly denying there's no connection between the stuffing of the order book with hundreds of thousands of orders and the crash? Please. As for whether it's deliberate - I think you're right in the sense that something acted in a way which its creators did not intend if you think quote stuffing is a legitimate trading strategy we're clearly poles apart in what purpose we believe markets a…

Are you honestly denying there's no connection between the stuffing of the order book with hundreds of thousands of orders and the crash?

Perhaps you missed it, but most of the graphs in your link are from July. The flash crash was May 6. So unless you want to assert that the flash crash caused the weird graphs, no, I don't see the connection. That's not to say you couldn't find similar graphs on May 6 - I guarantee that you could. In fact, you can find graphs like this almost every day (pre and post crash) if you look hard enough. And yet, we don't have flash crashes every day. We've only had two (the first was in 1962 http://online.wsj.com/article/SB1000142405274870395760457527... ).

So yeah, I do expect you to do more than point out an everyday occurrence and then assert that it (and not thousands of other things, including things which don't happen every day) caused a once-in-a-lifetime event. I expect, I dunno, correlations at the very least. Maybe even a mechanism, rather than just a theory that "I don't understand everyday event A or once in a lifetime event B, they must be related."

Re: New Revealing paper on High Frequency Trading

#37

Post by msy »

yummyfajitas wrote: post #36
msy wrote: post #34

Earlier quoted context omitted.

Are you kidding me? Are you honestly denying there's no connection between the stuffing of the order book with hundreds of thousands of orders and the crash? Please. As for whether it's deliberate - I think you're right in the sense that something acted in a way which its creators did not intend if you think quote stuffing is a legitimate trading strategy we're clearly poles apart in what purpose we believe markets a…

Are you honestly denying there's no connection between the stuffing of the order book with hundreds of thousands of orders and the crash? Perhaps you missed it, but most of the graphs in your link are from July. The flash crash was May 6. So unless you want to assert that the flash crash caused the weird graphs, no, I don't see the connection. That's not to say you couldn't find similar graphs on May 6 - I guarantee…

I didn't think you were abtuse enough not to read what I linked to. But then it is hard to get someone to understand something when it's not in their interest to do so. http://www.nanex.net/20100506/FlashCrashAnalysis_Part4-1.htm...

Detailed analysis of the precise trading events that led to the crash. With data.

Re: New Revealing paper on High Frequency Trading

#38

Post by yummyfajitas »

msy wrote: post #37
yummyfajitas wrote: post #36

Earlier quoted context omitted.

Are you honestly denying there's no connection between the stuffing of the order book with hundreds of thousands of orders and the crash? Perhaps you missed it, but most of the graphs in your link are from July. The flash crash was May 6. So unless you want to assert that the flash crash caused the weird graphs, no, I don't see the connection. That's not to say you couldn't find similar graphs on May 6 - I guarantee…

I didn't think you were abtuse enough not to read what I linked to. But then it is hard to get someone to understand something when it's not in their interest to do so. http://www.nanex.net/20100506/FlashCrashAnalysis_Part4-1.htm... Detailed analysis of the precise trading events that led to the crash. With data.

Your first link had graphs from July. Your new link has similar graphs from May 6. Also note that your new link agrees with what I said:

"Quote stuffing is also not a rare occurrence and these sequences are seen frequently on a daily basis; they are easy to find once you know what to look for."

Compare that to what I said: "That's not to say you couldn't find similar graphs on May 6 - I guarantee that you could. In fact, you can find graphs like this almost every day (pre and post crash) if you look hard enough."

I've seen Nanex's graphs. I don't see how they come even remotely close to explaining why crop circles (which occur everyday) caused the flash crash. Again, what is the mechanism? A DOS attack? If so, then how come we don't have a flash crash every day?

Re: New Revealing paper on High Frequency Trading

#39

Post by gxti »

jbarham wrote: post #26
yummyfajitas wrote: post #21

Earlier quoted context omitted.

Given there is significant empirical evidence that at least some HFT strategies have involved market manipulation and in one notable example, the temporary total destabilisation of the entire market... [citation (or even a few google keywords) needed]

Try these keywords: "flash crash" HFT

My understanding was that an issue with quotes lagging behind at the NYSE precipitated a kind of "order avalanche" where NYSE's quotes appeared to be better than the rest of the market, thus inviting more order flow, thus pushing their delay even further back until the NBBO spread was big enough to kick a spaceship through.

I'm not an expert but I do love studying all sorts of systems and this seems like an extremely plausible explanation. Pinning it on the HFT bogeyman, less so.

http://www.theatlantic.com/science/archive/2010/08/nyse-tech...

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