HFT Shenanigans: Odd Lots And Crossed Markets

This article first appeared on Floating Path.

Every week Floating Path looks to highlight some of the crazier examples of HFT running amok in the markets while bringing to light developments relating to the high frequency trading industry.

Odd Lots

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As we covered last week, odd lots (trades of less than 100 shares) began reporting to the public data feeds on Monday, December 9th. Nanex broke down the opening day data, and according to them 17.4% of all trades for the day were odd lots.

One stock saw 100% of its trades on December 12th  in odd lots.

The small dot all the way to the right of the chart above represents the symbol FAUS. The following charts from Nanex show an odd behavior in trading (that is similar to manipulation that led to regulatory action in 2012) which they do a great job discussing in detail, and basically boils down to the following..

Green squares on top of light gray shading: aggressive buying,
Green squares on bottom of light gray shading: aggressive selling

Zooming out you can see the pattern occurred more than once.

The next day, December 13th, the same pattern was visible in FTW.

Crossed Markets

In conjunction with the odd lot reporting (though not yet proven related) was a serious jump in crossed markets. A crossed market occurs when the highest bid is actually higher than the lowest offer, a situation that seemingly makes no sense. The EdgeX exchange led the way in the spike in these switched quotes.

Of late, twitter conversations on these topics have become quite educational. For anyone interested, no matter the opinion, @nanexllc, @dlauer, @obrienedge, @themissal and @remcolenterman all offer spirited debates for everyone to observe.