HFT Breaks Speed-of-Light Barrier, Sets Trading Speed World Record.

More evidence that High Frequency Trading platforms co-located with the exchanges are ripping everyone that's not off. First a little background,Nanex has done some of the best work and produced some of the best evidence of market manipulation by HFT schemes since before the May '10 "Flash Crash". Here's what they have to say about some anomalous trading of Yahoo stock (YHOO) on September 15th of this year.

HFT has reached speeds faster than the speed-of-light, allowing time travel into the future. Up to 190 milliseconds into the future, or 0.19 fantaseconds is the record so far. It all happened in just over one second of trading, the evidence buried under an avalanche of about 19,000 quotations and 3,000 individual trade executions. The facts of the matter are indisputable. Based on official exchange timestamps, there is unmistakable proof that YHOO trades were executed on quotes that didn't exist until 190 milliseconds later!

From Nanex

More evidence that the large financial institutions are above the law. The NBBO (National Best Bid and Offer) system supposedly ensures that when you attempt to buy or sell a stock you get the best price listed on all exchanges. There have been tons of accusations that institutions practicing HFT are stealing pennies billions of times day by jumping in front of legitimate bids and offer. Also there have been allegations of quote stuffing to run stops and limit orders causing execution of trades a couple of tics higher or lower than they should have been. Nanex has been doing yeoman's work in documenting these things.

To be honest such schemes probably don't affect a long term investors positions very much, those investors are still being stolen from as they buy and sell, but probably in amounts that either aren't noticeable or are comparable to the commissions they are paying. Who this really affects are traders and institutions that do not practice HFT. This may be a day trader or a mutual fund buying large amounts of stock that is filled through multiple lots.

Right now, the Casino industry is better regulated and better policed than our largest exchanges. Not that I have a lot of money to piss away in either a Casino or trading right now, but I'd much rather risk my money in a regulated casino that I know the odds are always tilted toward the house, than trade in an exchange that claims to have an equal playing field for all but where certain players have permission to cheat.

Regulation NMS is pretty clear that direct exchange feeds are prohibited from having a speed advantage over the UQDF data feed. UQDF computes the NBBO after all. So how does one ensure trade-through price protection if the price being protected hasn't even occurred yet? The NBBO lies at the heart of Regulation NMS (Reg. NMS) and is the key concept that assures investors are getting the best price when buying or selling stocks.

I am pretty amazed about the whole thing.

I am surprised we even got to hear about it in the first place. Stuff like this tends to remain buried I would expect.

Also, does the SEC have any idea who is behind it? I can't find anything on that.

Supposedly the prior issues were addressed.

Proof that it's all scripted written in digital stone.
My mind is officially blown

In addendum too and shamelessly bumping my thread I have these further thoughts.

Crap like this is a perfect reason to institute either a minimum hold time for all trades ( I'm not adverse to this) the minimum time should be long enough for the exchange to report the bid/offer, a human to see the bid/offer, and for the action initiated by human to be reported back to exchange. I dunno what that would be, maybe 5-10 seconds? That would put an instant end to the HFT games. One of the greatest charges against them is that they are moving the bid/offer by putting in thousands of bids/offers that have no intentions of being filled, letting the price move and cancelling trade before it get's filled.

Another solution ( I'm less fond of this one but hell it's better than being ripped off like now) institute a $.01 per trade tax on all trades.

Or even better than the above two. Apply and enforce existing rules. Who the hell wants to invest or trade in a market that is more about fake liquidity provided by algorithms designed to steal from you than about actual price discovery? Can anyone who believes in Capitalism, Rule of Law, or general human decency explain how actions like that described in my OP should be able to happen without any type of enforcement?

As I was posting this, I stumbled across this nice little display of synchronicity.
The $300m cable that will save traders milliseconds--from the Telegraph

Of course, verifiable figures are elusive and estimates vary wildly, but it is claimed that a one millisecond advantage could be worth up to $100m (£63m) a year to the bottom line of a large hedge fund......And, he says, customers from hedge funds, currency dealers and exotic proprietary trading firms are queuing up for the switch-on in 2013.

I

derilection of duty by the sec?and tptb want us to give up social security and jump on the 401k bandwagon,only a fool.

No wonder the electronic financial system is doomed.

Total meltdown is not that far away. A large percentage of the population are very close to losing all faith in a completely fraudulent and manipulated system.

Why is everybody believing this ? its clearly nonsense. My guess, if there is any truth to this at all then it is just an error in the recorded times.They trade shares in a split second using programs that work out if the share is to rise and fall by monitoring the market direct from the exchange. The closer your super computer is to the exchange the quicker your computer gets the info to decide the trade. It cant get the info before its been sent that would be impossible. They are receiving data not sending until the computer has worked out in a split second to buy or sell. Watch this fascinating video on the subject.

High Frequency Trading (HFT) is unbiased, it just further lowers values that fall and raise values that raise. However, HFT has no positive effects on the economy at all - there is no reason not to stop it.
As someone pointed out a flat transaction charge fee would, depending on how high it is, stop HFT or at least draw some profit from it into public pockets.

Uhh time traveling traders, eh?

Oookay, and we're just going to accept it.

reply to post by Ha`la`tha


The point of me posting the story isn't so much to show proof of time traveling traders, but to highlight just one of the problems of HFT. I also made it a point to at least mention other concerns like "quote stuffing". High Frequency Trading is an issue that regulatory authorities including the exchanges, the SEC, and the DoJ have ignored. The only argument for allowing it as practiced now is liquidity. I personally would like to see what volume and volatility would look like without the machines right now, after two major market crashes within a decade.

It's a relatively easy problem to fix too. It only requires either a minimum time for all quotes (I'm hearing that as little as 2 seconds would suffice), or a small tax applicable to all market participants with each trade. You could probably even exempt the little guy by making the tax only applicable after say 20 trades in a 24 hour period.

The events of the past few years have scared a generation away from the market and with good reason. BS mark to model accounting, machines moving price whichever way they want it, and don't forget the private profit public loss theme from all the bailouts over the past 3 years; have soured me on investing much less trading right now. Unfortunately, the extremely low rate on savings forces many to seek yield in riskier assets that is gonna lead to tears sooner or later. The low rates would be fine if deflationary forces were allowed to take hold, but we're getting low rates and high inflations.

The first thing that needs to be done to stop this is to slap a unique identifier on every share of stock in existence. Then tax all one day or less trades at 90%. Doing so would also eliminate much of the fraudulent short selling that occurs each day. The problem is that the people making all the money, make the rules. Things won't change until they end up destroying themselves and the economy along with it..

reply to post by sligtlyskeptical


I don't disagree with the need to stop naked short selling. It's an issue like HFT that has been woefully neglected by regulatory bodies. I do think day hold times like you propose are entirely too long though. There are several good reasons to allow very short hold times: liquidity mainly, many traders do not like to hold overnight because of event risk, you could temporarily hedge a position while anticipating news, and I'm sure others. Minimum hold times should definitely be measured in seconds or above not milliseconds though. Something where a human has a chance of filling on any published quote.

It's important that any attempts to address HFT or Naked Shorting not exempt certain institutions. Such concessions would only make the situation worse. I am on the fence on whether Market Makers should be able to Naked Short a stock that they make a market on, I need to read up on that again. I suppose if they are required to find the shares in a certain time frame that might be alright temporarily.

So when do we travel to the past and wheel in the guillotine. Some old fashions are long overdue for a comeback.