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Crude Halted info from CME 2_13-2012
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Crude Halted info from CME 2_13-2012

  #11 (permalink)
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I just got an email from MBTrading the other day that said they will start charging a fee for excessive order modifications that do not end up in any fills. Maybe they should implement something of that nature for these algo guys... You broke it, you bought it!

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  #12 (permalink)
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monpere View Post
I just got an email from MBTrading the other day that said they will start charging a fee for excessive order modifications that do not end up in any fills. Maybe the exhcanges should implement something along those lines to regulate these algo guys... You broke it, you bought it!

That's scandalous that MBTrading would be going after us lowly retailers on this, because you know nobody with significant coin is trading via MBT, in 'regular' mode or API mode. Meanwhile, altering hundreds of existing and filled orders is a key part of the HFT shops that co-locate with the exchanges, and I'm unaware of any meaningful rumblings being directed towards them. I am though aware of some MT4 shops that have targeted EAs and other script routines that use too much CPU time and/or order modification, but a lot of that is to do with it impacting their profitability and/or ability to deal against their customers, using a purposefully less than robust server infrastructure.

EDIT: Am reading elsewhere from a MBT source that this applies to what they call ultra-high frequency FX trading. Apparently, "this is an NFA fee associated with trade reporting cost, not an MBT fee and we are merely passing it through. The high frequency message fee only applies to clients who have less than 10% executions of the total messages sent and further that send in excess of 100 requests per symbol per day. These requests include: New, cancel, and change/replace order messages. This new fee is .005 per request sent that day on symbols meeting the high frequency message criteria. Thus for every 200 messages, the charge is $1.00."

And, what the NFA does for the broker and/or liquidity provider who may be getting some more traffic from a particular user - who is independently responsible for all server & infrastructure costs, is beyond me. Sounds like a police speed trap, that has no case or concern for a driver's safety, but rather solely increases the police force municipality's revenue base.


Last edited by Beljevina; February 13th, 2012 at 06:58 PM.
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Either quote stuffing gone wrong or a problem with the matching algorithms.

The finger print below shows clearly that it was an algorithmic problem.

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  #14 (permalink)
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I'm sure nanex will be all over this within a day or two, but just in case, here are some preliminary captures of T&S in the minute preceding today's very curious crude oil complex halt from CME, which looked to several trained observers like an algorithm-induced grand mal seizure while attempting to arb the USO exchange traded fund.

It started at 14:02:06 when someone targeting the Z exchange (BATS) tried to bring the bid to 38.53 and succeeded for approximately 15 seconds (beige screens show quotes with no trades; high frequencies of repeated quantities at the same price from the same exchange are the signature of an algo.


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But at 14:02:22, price got away from Z, and the halt came 98 seconds later.


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The BATS offer for ~ 38000 shares which repeated during the initial quote burst was attempting to sell $1,487,258 worth of USO each fraction of a second during which the quote was repeated. On the CL at that moment, that would have been roughly 15 contracts worth ($100.38 * 1000 barrels * 15 = $1,505,700). The arb, presuming those figures, would have been worth a target range centered on $18,442 if it could have covered the shorted USO a penny or a fraction lower, while dumping longs against CLH2 a penny higher. Most of the volume spike at 14:02 traded at 38.54 and .55, which could explain the desperate attempt to lower the bid to 38.53 - it was going against. If the algo got trapped on the halt, it may still have made out, since the USO bent up against a large short position but never halted, allowing an escape, perhaps at 38.54-55 two minutes later (USO) while the leveraged CL long made jackpot. Though it is also possible the long CLs got cancelled or never filled. Just wishfully thinking.

Or the USO quote burst could have been unloading longs purchased at 11:16am at a .13 cent profit, while attempting to short the CL with any order type other than GTD[today]. Since the last high volume spike of USO coincided with the CL halt, it's up in the air whether the CL shorts got filled. If they did, that would really be a shame for some poor unjustly treated HFTer.

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Fat Tails View Post
Either quote stuffing gone wrong or a problem with the matching algorithms.

The finger print below shows clearly that it was an algorithmic problem.

Yeah, and the oscillation range was an exact 16 ticks during the last 3 minutes before halting at 14:04.57 . And when the market was opened again at 15:15, the price oscillated the same 16 tick range for about 30 sec before breaking loose a bit. It was a weird experience to see all that happening real time, not a typical HFT outburst you see occasionally.

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This is the second time the NYMEX went down in what, six weeks?

** Dec 20th - I had to go back & look. So that's two complete shut-downs in less than two months.

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Here is an analysis of what happened today by Nanex:

Nanex ~ NYMEX Black Swan

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First NANEX Analysis

If I a look at the Nanex comments, it looks more like a technical problem of NYMEX:

"On February 13, 2012, starting 13:59:57, quotes for crude oil began queuing. At 14:00:35, all of the queued quotes were sent at once. Again at 14:01:08 the same 38 second block of quotes sent earlier was sent again -- old timestamps and all plus a few new quotes. Again at 14:01:18, all quotes since 13:59:57 were sent again. This repeated 12 times. From a programmer's perspective, it looks like a system problem caused a blast of quotes that corrupted a memory queue causing the software to believe the queue was full all the time."


Seems that the same quotes (bids) were sent again and again, thus producing something like resonance. That would mean that the activity of arbitrageurs trying to profit from the CL 03-12 / USO spread was triggered by the technical problem.

In that case the interruption would just be a case of operational risk - not market risk - , comparable to a down-time of your internet connection or the server of your broker.


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