Posts Tagged ‘trading algorithm’

Inside the Flash Crash Report

Pam Martens points out that in patching up May 6th’s market meltdown by breaking certains trades, “busts” only applied to trades occurring between 2:40 p.m. and 3 p.m. when the stock had moved 60% or more from its 2:40 p.m. price.  "The busts that were allowed covered 5.5 million shares and two-thirds of these trades had been executed at less than $1.00…  half of the share volume in these bizarre trades came from just two firms and half the time they were exclusively trading with each other."  The report – amazingly – never names these firms which had their own bad trades undone by that controversial decision that left average investors with large losses. - Ilene 

Inside the Flash Crash Report

By PAM MARTENS, originally published at CounterPunch

high frequency trading The breathlessly awaited government report that promised to shore up public confidence by explaining why the stock market briefly plunged 998 points on May 6, with hundreds of stocks momentarily losing 60 per cent or more of their value, was released last Friday, October 1.  Its neatly crafted finger-pointing to a small Kansas mutual fund firm which has been around since 1937, was immediately embraced as mystery solved by the stalwarts of the corporate press.  This was done with only slightly less zeal than bestowed on the story of Saddam Hussein’s weapons of mass destruction spun out of the George W. Bush administration.

The New York Times headlined with “Single Sale Worth $4.1 Billion Led to Flash Crash.” The Washington Post went with “How One Automated Trade Led to Stock Market Flash Crash.” The Wall Street Journal led with “How a Trading Algorithm Went Awry.”  Hundreds of similar headlines followed in similarly expensive media real estate.  But as with the rush to war on bogus intel, the corporate press may be further damaging its credibility with the American people by ignoring the dangerous market structure that emerges in a closer reading of this report.

The so-called Flash Crash report was the product of the Commodity Futures Trading Commission (CFTC) and Securities and Exchange Commission (SEC) and consists of 104 pages of data that is unintelligible to most Americans, including the media that are so confidently reporting on it.  It names no names, including the firm it is fingering as the key culprit in setting off the crash.  Earlier media reports say the firm is…
continue reading


Tags: , , , , , , , , , , , , ,




Rogue Algorithms And Other Mutually Assured Destruction Program Trading Alternatives

Click here for a FREE, 90-day trail subscription to our PSW Report!

Rogue Algorithms And Other Mutually Assured Destruction Program Trading Alternatives

destruction, high frequency program tradingCourtesy of Tyler at Zero Hedge

Why Institutional Investors Should Be Concerned About High Frequency Traders

By Sal L. Arnuk and Joseph Saluzzi of Themis Trading

A Themis Trading LLC Mini White Paper
 
It is now generally understood that high frequency traders (HFTs) are dominating the equity market, generating as much as 70% of the volume.
 
HFTs are computerized trading programs that make money two ways, in general.  They offer bids in such a way so as to make tiny amounts of money from per share liquidity rebates provided by the exchanges.  Or they make tiny per share long or short profits.  While this might sound like small change, HFTs collectively execute billions of shares a day, making it an extremely profitable business.
 
Why should institutional or retail investors care?  After all, aren’t HFTs adding liquidity?  That’s what they and the exchanges, who court their business, say.
 
There’s a lot to worry about.
 
1.  HFTs provide low quality liquidity.
 
In the old days, when NYSE specialists or NASDAQ market makers added liquidity, they were required to maintain a fair and orderly market, and to post a quote that was part of the National Best Bid and Offer a minimum percentage of time.  HFTs have no such requirements.  They have no minimum shares to provide nor do they have a minimum quote time.  And they could turn off their liquidity at any time.  When an HFT computer spots a real order, the HFT is not likely to go against it and take the other side.  The institution is then faced with a very tough stock to trade.
 
2.  HFT volume can generate false trading signals.
 
This can cause other investors to buy at a higher price, or sell at a lower price, than they would otherwise.  A spike in HFT volume can cause an institutional algorithm order based on a percentage of volume to be too aggressive. A spike can attract momentum investors, further exaggerating price moves.  Seeing such a spike, options traders can start to build positions, which, in turn, can attract risk arbitrage traders who believe there’s potential news that could affect the stock.
 
3.  HFT computer servers are


continue reading


Tags: ,




 
 
 

Phil's Favorites

Antigen tests for COVID-19 are fast and easy - and could solve the coronavirus testing problem despite being somewhat inaccurate

 

Antigen tests for COVID-19 are fast and easy – and could solve the coronavirus testing problem despite being somewhat inaccurate

Antibodies are incredibly good at finding the coronavirus. Antigen tests put them to work. Sergii Iaremenko/Science Photo Library via Getty Images

Courtesy of Eugene Wu, University of Richmond

In late February, I fell ill with a fever and a cough. As a biochemist who teaches a class on viruses, I’d been tracking the outbreak of...



more from Ilene

Biotech/COVID-19

Antigen tests for COVID-19 are fast and easy - and could solve the coronavirus testing problem despite being somewhat inaccurate

 

Antigen tests for COVID-19 are fast and easy – and could solve the coronavirus testing problem despite being somewhat inaccurate

Antibodies are incredibly good at finding the coronavirus. Antigen tests put them to work. Sergii Iaremenko/Science Photo Library via Getty Images

Courtesy of Eugene Wu, University of Richmond

In late February, I fell ill with a fever and a cough. As a biochemist who teaches a class on viruses, I’d been tracking the outbreak of...



more from Biotech/COVID-19

ValueWalk

Boeing cuts thousands more jobs than originally said

By Michelle Jones. Originally published at ValueWalk.

Boeing’s job cuts are going deeper than initially said. The aerospace giant is cutting over 12,000 jobs in the U.S., which is thousands more than it originally planned to cut. The job cuts come as Boeing restructures and seeks to deal with the fallout from the coronavirus pandemic without a government bailout after years of share buybacks.

Q1 2020 hedge fund letters, conferences and more

Boeing job cuts number 12,000

Boeing said this week that the 12,000 job cuts include 6,770 involuntary layoffs. The company also said it's planning "several thousand remaining layoffs" in the coming months...



more from ValueWalk

Zero Hedge

Ted Cruz Accuses Twitter Of Violating Sanctions Against Iran, Demands DoJ Probe

Courtesy of ZeroHedge View original post here.

We've mentioned in nearly every single one of our posts about this week's dustup between the president and Twitter that the Ayato...



more from Tyler

Kimble Charting Solutions

Tech Indicator Suggesting A Historic Top Could Be Forming?

Courtesy of Chris Kimble

Tech stocks have been the clear leader of the stock market recovery rally, this year and since the lows back in 2007!

But within the ranks of leadership, and an important ratio may be sending a caution message to investors.

In today’s chart, we look at the ratio of large-cap tech stocks (the Nasdaq 100 Index) to the broader tech market (the Nasdaq Composite) on a “monthly” basis.

The large-cap concentrated Nasdaq 100 (only 100 stocks) has been the clear leader for several years versus the ...



more from Kimble C.S.

The Technical Traders

M2 Velocity Collapses - Could A Bottom In Capital Velocity Be Setting Up?

Courtesy of Technical Traders

M2 Velocity is the measurement of capital circulating within the economy.  The faster capital circulates within the economy, the more that capital is being deployed within the economy to create output and opportunities for economic growth.  When M2 Velocity contracts, capital is being deployed in investments or assets that prevent that capital from further circulation within the economy – thus preventing further output and opportunity growth features.

The decline in M2 Velocity over the past 10+ years has been dramatic and consistent with the dramatic new zero US Federal Reserve interest rates initiated since just after the 2008 credit crisis market colla...



more from Tech. Traders

Lee's Free Thinking

US Southern States COVID19 Cases - Let's Give Credit Where Due

 

US Southern States COVID19 Cases – Let’s Give Credit Where Due

Courtesy of  

The number of new COVID 19 cases has been falling in the Northeast, but the South is not having the same experience. The number of new cases per day in each Southern state has been rangebound for the past month.

And that’s assuming that the numbers haven’t been manipulated. We know that in Georgia’s case at least, they have been. And there are suspicions about Florida as well, as the State now engages in a smear campaign against the fired employee who built its much praised COVID19 database and dashboar...



more from Lee

Chart School

Is this your local response to COVID 19

Courtesy of Read the Ticker

This is off topic, but a bit of fun!


This is the standard reaction from the control freaks.








This is the song for post lock down!







What should be made mandatory? Vaccines, hell NO! This should be mandatory: Every one taking their tops off in the sun, they do in Africa!

Guess which family gets more Vitamin D and eats less sugary carbs, TV Show



...



more from Chart School

Digital Currencies

Blockchains can trace foods from farm to plate, but the industry is still behind the curve

 

Blockchains can trace foods from farm to plate, but the industry is still behind the curve

App-etising? LDprod

Courtesy of Michael Rogerson, University of Bath and Glenn Parry, University of Surrey

Food supply chains were vulnerable long before the coronavirus pandemic. Recent scandals have ranged from modern slavery ...



more from Bitcoin

Members' Corner

Coronavirus, 'Plandemic' and the seven traits of conspiratorial thinking

 

Coronavirus, 'Plandemic' and the seven traits of conspiratorial thinking

No matter the details of the plot, conspiracy theories follow common patterns of thought. Ranta Images/iStock/Getty Images Plus

Courtesy of John Cook, George Mason University; Sander van der Linden, University of Cambridge; Stephan Lewandowsky...



more from Our Members

Insider Scoop

Economic Data Scheduled For Friday

Courtesy of Benzinga

  • Data on nonfarm payrolls and unemployment rate for March will be released at 8:30 a.m. ET.
  • US Services Purchasing Managers' Index for March is scheduled for release at 9:45 a.m. ET.
  • The ISM's non-manufacturing index for March will be released at 10:00 a.m. ET.
  • The Baker Hughes North American rig count report for the latest week is scheduled for release at 1:00 p.m. ET.
...

http://www.insidercow.com/ more from Insider

Promotions

Free, Live Webinar on Stocks, Options and Trading Strategies

TODAY's LIVE webinar on stocks, options and trading strategy is open to all!

Feb. 26, 1pm EST

Click HERE to join the PSW weekly webinar at 1 pm EST.

Phil will discuss positions, COVID-19, market volatility -- the selloff -- and more! 

This week, we also have a special presentation from Mike Anton of TradeExchange.com. It's a new service that we're excited to be a part of! 

Mike will show off the TradeExchange's new platform which you can try for free.  

...

more from Promotions

Mapping The Market

How IPOs Are Priced

Via Jean Luc 

Funny but probably true:

...

more from M.T.M.





About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

Learn more About Phil >>


As Seen On:




About Ilene:

Ilene is editor and affiliate program coordinator for PSW. Contact Ilene to learn about our affiliate and content sharing programs.