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The article titled "It's Not A Market, It's An HFT 'Crop Circle' Crime Scene" [zerohedge.com] describes some recently discovered but irrefutable evidence of "quote stuffing" on the US stock market, a manipulative technique (similar to DDOS) that High Frequency Trading (HFT) systems use to try to overpower each other.

Around the time of the spectacular May 6 Flash Crash, the stock market anomaly during which about $1 trillion market value temporarily evaporated, it seems thousands of cancelled quotes reappeared, about each second and with a definitive periodicity and regularity. For instance, on July 12, over 56,000 quotes appeared in less than 10 seconds, all with same ask price, while the ask size increased or decreased by 1 until almost 40,000.

Next to some obvious non-ethical motives, there is actually an aesthetic side to these algorithmic commands: I could not stop myself admiring the data graphs that are presented as proof (and if you like them too, you can find some more at the bottom of the page here). One can only hope the programmers behind these operations will not augment their operations with some clever randomness patterns...

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3 COMMENTS

Funny enough, I wrote about this exact same thing over the weekend, how some of this graphs are quite appealing :)

http://www.javiertordable.com/blog/2010/07/31/high-frequency-trading-art

Tue 03 Aug 2010 at 2:48 AM

@Javier: Great minds think alike... ;)

Tue 03 Aug 2010 at 4:23 AM

I'm even still holding a bullish stock portfolio altogether. It is just a matter of time when the market starts swinging around. Remember when a bull market starts, we don't even realize it until it is already six months old.

Sat 09 Oct 2010 at 7:50 AM
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