HFT Trades

This is a little example of how fast the new liquidity providers (formerly the primary job of market makers and specialists) work and why institutional positions have to be kept quiet as these HFTs are so fat they are predatory on actual institutional trades by front running them and causing an institution to get a horrible price fill once the HFT pings and finds an iceberg (an institutional order that is hidden as it is executed in smaller pieces-the HFT identifies it and front runs it). These HFTs have set a new record that is actually FASTER than the speed of light called Fantaseconds, NANEX who specializes in identifying such anomalies writes about the new barrier in speed, faster than light, how? Read on.

Luckily for us, these are the new scalpers, replacing the former scalpers known as day traders. These HFTs don't tend to be position traders, that's not where their edge is, their edge is in milliseconds or fantaseconds, they could care less about holding a trade from a high to a low over a period of days, weeks or months.

NANEX shows the trading today on the Bernie news over a period of 20 milliseconds (1 millisecond is 1/1000th of a second). Take a look, you might be surprised to see trades executed and timestamped before the bid/offer were even available.

This is 20 milliseconds of trade, NASDAQ bid/ask spread is the shaded grey with actual trades in black dots, the NY-Arca bid/ask is red shades with red dots being actual trades, note how the trades lead the bid/ask.

And we wonder why volatility has picked up intraday.

I personally can't wait for an SEC commissioner to be appointed who sets a rule that every trade must be executed by a human hand and billions of dollars worth of fiber optic cables, mainframes and such find they no longer have any use except as scrap.

My cousin works on a private black box system out of Atlanta, they rented office space next to the major exchanges for incredible sums of money to reduce latency by a few milliseconds, that is how fast this war of speed between these High Frequency trades actually is. Whoever can route the volume (and hitting stops creates volume) collects the volume rebates offered and there's a lot of money to be made there alone, probably even more in front running the printed bid/ask order, fractions of pennies add up when you can create millions of them in a day.