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but simply algorithms behaving in ways their creators did not expect That's possible, but if the owner of the algorithm doesn't monitor it or shut it down, som

but simply algorithms behaving in ways their creators did not expect That's possible, but if the owner of the algorithm doesn't monitor it or shut it down, someone should and the owner should be punished for the behavior of the algorithm. Currently, that doesn't seem to be happening, which means this becomes a pretty good excuse for letting your algorithm behave like this on purpose.

yummyfajitas 16y ago
The owner should be punished? What for? Who is harmed by a visible "crop circle" in the trade data? Also, I don't understand why you think the owners would allow their algorithms to behave like this; a "crop circle" doesn't make money and it does expose you to risk. Incidentally, if your algorithm spams the exchanges too much (i.e., your fill rate goes way below 1%), your broker will shut you down. So while there may be crop circles out there, no one person is responsible for more than a few of them.
- Confusion 16y ago
  Because of the first paragraph of the article: [..] quote stuffing by HFT algorithms in tens of stocks, in which thousands of cancelled quotes would reappear each second with a definitive periodicity and regularity, [..]. Aside from the fact that it is illegal to indicate a quote without a trade intent, this form of quote stuffing is in fact manipulative when conducted by HFT repeaters in specific "shapes" as it actually moves the NBBO actively higher or lower, in cases pushing the bid/offer range up to 10% higher without even one trade ever having occurred, [..] Incidentally, if your algorithm spams the exchanges too much (i.e., your fill rate goes way below 1%), your broker will shut you down Except that that doesn't happen if you essentially are the broker, as is the case with large enough institutions. JP Morgan's broker isn't going to shut them down.
  - yummyfajitas 16y ago
    All quotes on an exchange have trade intent, since if the exchange fills you, a trade occurs. You don't have the ability to back out after your quote is accepted. If the NBBO moves around on a thinly traded stock and no trade occurs, so what?The bid ask spread on some thinly traded stock fluctuated for a few minutes, and no one bought or sold stocks? Oh noes, the horror! If we don't put a stop to this, someone might offer to sell a coke bottle on ebay for $10000 and no one will buy it! Also, if you are a broker, the exchange imposes similar requirements on fill rates. The matching engine gains nothing if you place lots of unfilled orders, and if they allow too much of it, customers who do make trades (i.e., the people who actually pay them) are likely to switch to other matching engines or dark pools.
    - Confusion 16y ago
      You don't have the ability to back out after your quote is accepted. But you have the ability to back out on a majority of your quotes, if you submit so many that they couldn't possibly be fulfilled in the time before you cancel them. Despite the fact that they are cancelled, they still have their effect. http://www.zerohedge.com/article/how-hft-quote-stuffing-caused-market-crash-may-6-and-threatens-destroy-entire-market-any-mom http://www.zerohedge.com/article/how-hft-quote-stuffing-caus... Also, if you are a broker, the exchange imposes similar requirements on fill rates Then why aren't these algorithms being banned?

yummyfajitas 16y ago

The owner should be punished? What for? Who is harmed by a visible "crop circle" in the trade data? Also, I don't understand why you think the owners would allow their algorithms to behave like this; a "crop circle" doesn't make money and it does expose you to risk. Incidentally, if your algorithm spams the exchanges too much (i.e., your fill rate goes way below 1%), your broker will shut you down. So while there may be crop circles out there, no one person is responsible for more than a few of them.

Confusion 16y ago
Because of the first paragraph of the article: [..] quote stuffing by HFT algorithms in tens of stocks, in which thousands of cancelled quotes would reappear each second with a definitive periodicity and regularity, [..]. Aside from the fact that it is illegal to indicate a quote without a trade intent, this form of quote stuffing is in fact manipulative when conducted by HFT repeaters in specific "shapes" as it actually moves the NBBO actively higher or lower, in cases pushing the bid/offer range up to 10% higher without even one trade ever having occurred, [..] Incidentally, if your algorithm spams the exchanges too much (i.e., your fill rate goes way below 1%), your broker will shut you down Except that that doesn't happen if you essentially are the broker, as is the case with large enough institutions. JP Morgan's broker isn't going to shut them down.
- yummyfajitas 16y ago
  All quotes on an exchange have trade intent, since if the exchange fills you, a trade occurs. You don't have the ability to back out after your quote is accepted. If the NBBO moves around on a thinly traded stock and no trade occurs, so what?The bid ask spread on some thinly traded stock fluctuated for a few minutes, and no one bought or sold stocks? Oh noes, the horror! If we don't put a stop to this, someone might offer to sell a coke bottle on ebay for $10000 and no one will buy it! Also, if you are a broker, the exchange imposes similar requirements on fill rates. The matching engine gains nothing if you place lots of unfilled orders, and if they allow too much of it, customers who do make trades (i.e., the people who actually pay them) are likely to switch to other matching engines or dark pools.
  - Confusion 16y ago
    You don't have the ability to back out after your quote is accepted. But you have the ability to back out on a majority of your quotes, if you submit so many that they couldn't possibly be fulfilled in the time before you cancel them. Despite the fact that they are cancelled, they still have their effect. http://www.zerohedge.com/article/how-hft-quote-stuffing-caused-market-crash-may-6-and-threatens-destroy-entire-market-any-mom http://www.zerohedge.com/article/how-hft-quote-stuffing-caus... Also, if you are a broker, the exchange imposes similar requirements on fill rates Then why aren't these algorithms being banned?