Quote Spamming And The Latest HFT Shenanigans

APC 600x400 Quote Spamming And The Latest HFT ShenanigansRight before the close on Friday, the S&P 500 dipped 1.4 points in the blink of an eye. This may not have caught the attention of many, but was unusual given the rally underway into the closing bell. In that eye blink, Anadarko Petroleum’s stock (APC) dropped in a huge way, explained here by Eric Hunsader of Nanex.

On May 17, 2013, in the final seconds of trading, the stock of Anadarko Petroleum Corporation (symbol APC, market cap $45 Billion) traded from $90 down to $0.01 in 45 milliseconds. Oops. This may just be a record – losing $1 Billion per millisecond. That’s a rate of $1 Trillion per second.

The highspeed algorithms were at it again as they seemingly placed erroneous quotes very far away from the current price. The HFT outfits are able to place bids and offers at a mind-bending speed. With this advantage they can place the orders at absurd prices and in exteme volumes to manipulate the stock in a given direction, albeit for possibly a millisecond.

The charts below show the growth of what has been dubbed “quote spam” as well as the lack of growth in actual trades. The x-axis represents the time of day, while the y-axis measures the number of quotes (or trades on lower chart). The lines are color-coded based on chronology, dating back to 2007. Each gap between color segments is a time when system capacity has been upgraded and the number of quotes instantly jumped to fill that new capability.

As shown, quotes have now reached a level of nearly 1.6 million per second around noon time while actual trades hover around 200,000 per second throughout the day. According to a conversation with Eric, the quote traffic will double in October as network capacity will build to 3 million per second. So while the current levels seem too high to fathom, they’re only that “low” simply because the networks cannot handle more message traffic at the moment.

Quote Spam 350x560 Quote Spamming And The Latest HFT Shenanigans

Quotes via Nanex

trades 350x560 Quote Spamming And The Latest HFT Shenanigans

Trades via Nanex

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