Submitted by Tyler Durden on 07/08/2011 22:08 -0400
* Bank of England
* Bear Market
* Guest Post
* Latency Arbitrage
* Market Crash
* NASDAQ
* New York Stock Exchange
In a recent article Nanex has shown that quote stuffing can slow down the updating of series of stock prices, bids and asks. The article was less clear about why one might do that. There could be arbitraging opportunities. One of the first games these clowns got into was latency arbitrage. HFTer offers a number of shares for sale at one price, and at the first sign of interest, pulls all of the offers and resubmits them at a higher price. The latency comes into play because as another player send his orders in to fill HFTer, and these orders all find their ways to the market via differing routes, each of which has a different latency (lag time)--so instead of all arriving at once, they arrive singly, giving HFTer time to pull the rest of his bids....Saturating the quotes on individual lines will change the time lags (latency factor) during the intervals the quotes are generated. For Thor to work properly, it has to estimate by observation the precise lag between sending an order and having it arrive on each market. Randomly changing the lags for the different lines would confound RBC's (and others) attempts at ensuring all its orders arrive on all markets at the same time. And curiously all of this comes just days after the CQS decided to increase the cross-system capacity for quote stuffing in the market from 750,000 quotes per second to 1 million.... Almost as if someone is urgently trying to recreate the market instability that sent the Dow plunging by 1,000 points in seconds.
http://www.zerohedge.com/article/guest-post-deconstructing-algos-3-quote-stuffing-means-restoring-arbitrageable-latency-or-cq
Realist - Everybody in America is soft, and hates conflict. The cure for this, both in politics and social life, is the same -- hardihood. Give them raw truth.
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