Comments on: HFT Liquidity – Not at the Open /2012/07/26/hft-liquidity-not-at-the-open/ Fri, 27 Jul 2012 13:16:44 +0000 hourly 1 http://wordpress.org/?v=3.3.2 By: Nate Rock /2012/07/26/hft-liquidity-not-at-the-open/#comment-1984 Nate Rock Thu, 26 Jul 2012 17:08:43 +0000 /?p=1192#comment-1984 You guys point out one of the major problems with relying on HFT algos to provide "liquidity". We at Nanex have been profiling liquidity during major news events and we see similar patterns. If you read "Broken Markets" written by Joe Saluzzi and Sal Arnuk, they make a similar argument. If you check some of our latest research in mapping depth of book as a heat map over time (DepthMap) you can see the liquidity dry up (blue) before major news announcements. http://www.nanex.net/Research/EMini3/Emini3.html http://www.nanex.net/Research/EMiniCPI/EminiCPI.html HFT algos like nice predictable, sub penny scraping fluctuations so they can jump the book and salami slice. As soon as they sense massive volatility (as soon as their predictions are outside of the 99.998% error tolerance) they retract out of the markets like the plankton feeding Christmas Tree Worms that they are. http://www.youtube.com/watch?v=eS8OYF7isCU&feature=related -rOck Nate Rock, Nanex LLC. You guys point out one of the major problems with relying on HFT algos to provide “liquidity”. We at Nanex have been profiling liquidity during major news events and we see similar patterns. If you read “Broken Markets” written by Joe Saluzzi and Sal Arnuk, they make a similar argument.

If you check some of our latest research in mapping depth of book as a heat map over time (DepthMap) you can see the liquidity dry up (blue) before major news announcements.

http://www.nanex.net/Research/EMini3/Emini3.html
http://www.nanex.net/Research/EMiniCPI/EminiCPI.html

HFT algos like nice predictable, sub penny scraping fluctuations so they can jump the book and salami slice. As soon as they sense massive volatility (as soon as their predictions are outside of the 99.998% error tolerance) they retract out of the markets like the plankton feeding Christmas Tree Worms that they are.

http://www.youtube.com/watch?v=eS8OYF7isCU&feature=related

-rOck

Nate Rock, Nanex LLC.

]]>