I hear that blog posts with sexy titles get read more. I think it’s true; my most popular one is “
The Economic Indicator in Your Pants.” The research continues here.
A single “virgin slut” algorithm sucked up 10% of the capacity of the U.S. stock market on Oct. 8, less than a week after the SEC tech-fest on high-frequency trading,
which you can watch here. (To view it, you’ll have to whip out the old PC, the Feds give you a choice of Flash or Windows Media, so leave that iPad or iPhone in your pocket. It won’t work, but people will think you’re glad to see them.)
The virgin slut algo ran like a bat out of hell on crystal meth with a red bull chaser, to mix a few metaphors. It generated 4% of U.S. stock market quote activity, using up 10% of the communications capacity of our overly wired market – this is the “slut” part. But it stayed a virgin, and didn’t make a SINGLE TRADE, cancelling every order. That is pretty darn weird.
CNBC, in a more dignified report than this one (obviously not testing the filth=readers theory) reported:
“The program placed orders in 25-millisecond bursts involving about 500 stocks, according to Nanex, a market data firm. The algorithm never executed a single trade, and it abruptly ended at about 10:30 a.m. Friday.”
Nanex, the high-end market technology firm that tracks this kind of weirdness as a sideline has links and original research on lots of weird market events, reporting on this one is in the mid-October zone of their chronological listing.
This was likely part of the testing of a firm involved in the “
race to the bottom” in latency. These speed games make markets as safe as drag races on the main commuter route to town. If you know what this contributes to making the market better for average investors, do let us know in the comments. The head of trading research at one of the largest asset managers in the world pointed this as one of the oddest of the odd, and he’s seen ‘em all.
Ten percent of the communications capacity of the market and not a single trade. Millions of quotes. Zero trades. Ten of these guys could use the whole market, and with bad timing, MORE than the whole market at times. Scary stuff.
Source:
Forbes
Nanex Founder Eric Hunsader: How The Increase Of High-Frequency Trading Has Altered The Stock Market
The Virgin Slut Algorithm: Wired Markets Get Even Weirder
