Nanex, the top tracker of high frequency trading activity on Wall Street, reported today that a single mysterious computer program made up 4% of all quote traffic on the stock market last week. The bot also accounted for 10% of the allowed trading for the day. The program placed orders in batches of 200, then 400, then 1000 – then cancelled the millions of orders that it had placed. The orders were placed in 25-millisecond bursts and affected 500 stocks. The algorithm never executed a single trade and abruptly stopped about 10:30 AM ET on Friday.
Eric Hunsader, head of Nanex, sounded the alarm:
“Just goes to show you how just one person can have such an outsized impact on the market. Exchanges are just not monitoring it.”
Nanex believes that the mysterious program was testing latency on the market network and possibly attempting to “gum up the system” in order to slow down the serving of quotes. They noted that high-frequency traders are doing anything to “tip the odds in their favor”.
The orders were routed from Nasdaq where computer traders have co-located servers on site.
