Tuesday, August 27, 2013
This is why I quit trading II
Thanks to high frequency trading, as I have said before, human beings no longer make markets. I think this is a major systemic weakness.
As one of their trademark order-depth chart (above) shows — click here for detailed instructions on how to read it — orders to buy around 10,000 E-Mini contracts chased the market higher only to disappear without being executed. That’s not the only strange thing, they said in a blog post. Right before consumer confidence data at 10 a.m. Eastern, liquidity evaporated rapidly.
Were the phenomenon unrelated? It’s not clear, but Nanex said the incident was reminiscent of case brought by the Commodity Futures Trading Commission case against Panther Energy Trading in July. The agency ordered the firm and its principal, Michael J. Coscia, to pay $2.8 million in penalties and banned them for trading for one year for “spoofing” in numerous commodity futures contracts.
Spoofing is the practice of using a computer algorithm to place and then immediately cancel potentially thousands of bids and offers. Critics charge HFT firms use the practice to fake out traders.