Thursday, June 09, 2011

Weird Algo

Last night, someone's trading system reversed the buy/sell signals in the natural gas market in a play to either a) trigger a shedload of limit orders in the market, b) generate increased volatility and/or c) screw with people's heads.

Zero Hedge's Tyler Durden has three articles up on this:

Yesterday, just after 8 pm Eastern we presented a very curious move in NatGas trading on the NYMEX when under very light volume, the NG performed something akin to a sine wave expansion, with about 12 peaks and troughs with ever increasing amplitude, until ultimately it triggered a major sell off when it appeared to touch off an avalanche of limit orders about 3% from the prevailing price, leading to an almost instantaneous 8% drop in Natgas which was promptly recovered. We dubbed this a fractal pattern, and after a follow up with the trade forensics experts at Nanex, it appears this was a very spot on designation, as zooming into the pattern indicates increasing levels of self-similarity and complexity. Yet aesthetic observations aside, this latest algo appears to be nothing more than a limit order-busting market manipulation device, whose sole purpose is to destabilize and generate volatility for the creator of the algo.
Take a look at the market graphs in the linked article(s). There are some weird people programming these things. That or we're seeing rogue AI's, and Skynet really did go live.

No comments: