The post HFT Shenanigans: Frickin Laser Beams And LULD Exploits appeared first on Floating Path.
With HFT Shenanigans, Floating Path looks to highlight some of the crazier examples of high frequency trading running amok in the markets while bringing to light developments relating to the HFT industry.
High Frequency Trading With Lasers
That’s right, frickin laser beams. Since the speed of light is annoyingly slow, fiber optic wires have already begun to give way to microwave data transmissions, but now thanks to a company named Anova, laser beams will be used to transmit data back and forth between Nasdaq and NYSE data centers in New Jersey.
At this year's Sohn Investment Conference, Dan Sundheim, the founder and CIO of D1 Capital Partners, spoke with John Collison, the co-founder of Stripe. Q1 2021 hedge fund letters, conferences and more D1 manages $20 billion. Of this, $10 billion is invested in fast-growing private businesses such as Stripe. Stripe is currently valued at around Read More
The Anova system will be using technology developed by U.S. defense contractor AOptix, but unfortunately thus far little else is known except for a multi-million dollar price tag and a savings of likely less than one millisecond. The zero sum game continues…
Limit Up Limit Down Exploits
The new HFT game we’ve been highlighting more and more appears to be the manipulation and exploitation of the LULD bands meant to keep the market in check. Rather than helping to provide outer limits on price swings, the bands have merely become targets at which high frequency trading algorithms are aiming day in and day out.
The charts below from Nanex show a flash rise in Spectra Energy (SE) from Monday afternoon.
Zooming in to only 2 seconds, we can see that there are actually two spikes almost exactly 1 second apart. Those green squares to the right of the second spike represent dark pool and internalized trades, where nearly all of retail trades are executed. It is possible the trades were reported late, but it’s also quite likely some folks paid way too much for this stock.
This chart ties it all together thanks to the LULD
targets bands, which of course are there to protect conventional investors. Trades are executed right up to the penny of the Limit Up band.
Here’s another perfect example of LULD targeting in Investment Technology Group (NYSE:ITG) from Friday. The stock suddenly jumps about 11%, only to drop right back down near where it started in less than 4 seconds.
Again, just like in Spectra Energy above, dark pools and internalizers (green squares) are the ones seemingly late to the game as their trades execute all the way down.