Egg Syntax: Rogue high-speed traderbots chaffing the market with thousands of nonsensical transactions every second

Tuesday, September 21, 2010

Rogue high-speed traderbots chaffing the market with thousands of nonsensical transactions every second

Rogue high-speed traderbots chaffing the market with thousands of nonsensical transactions every second: "Nanex, a data-services firm, has discovered mysterious high-speed trading bots operating on the major stock exchanges, executing thousands of nonsensical transactions per second (for example, they may offer to buy a stock at a price much lower than the current quote, or to sell it at a much higher price). No one knows what these bots are trying to do: is just just a DoS attack on the exchange? Radar-chaff to prevent other bots from detecting another strategy? Bad code? Some call it 'algorithmic terrorism' though Nanex is calling them 'crop circles.' Perhaps they're merely 'quote stuffing' or 'market spoofing' -- the jargon is delicious.

Here we see a 'flag repeater' being executed on the BATS Exchange, the third-largest equity market after the NYSE and NASDAQ. 15,000 quote requests were made in 11 seconds in a repeating pattern. Each iteration upped the quote a penny until $9.36, and then the algorithm went down the same way, a penny at a time.