John Bates
09-08-2010 03:49 PM As regulators continue to look into the causes of the May 6th flashcrash, some high frequency trading approaches are coming under scrutiny. Inparticular the concept of “quote stuffing”, where algorithms send so manyorders into the order book that the market cannot possibly respond, has comeunder fire from market participants and the press.
The SEC, having reportedly decided that quote stuffing probably didnot have a major role in the flash crash, is now taking aim at the practice tosee if it puts some investors at a disadvantage by distorting stock prices (http://tinyurl.com/264kr3o).The CFTC is looking at data from database developer Nanex and mulling how toaddress quote stuffing in futures markets (http://tinyurl.com/3a7w7sv).
Meanwhile, concerning incidents continue to happen in the market. Asrecently as last week there was an incident that caused Christopher Steiner atForbes to write a story called “Didwe dodge another flash crash on September 1st?” The story describes how onSeptember 1st at 10am quote volumes ballooned - as they did on May 6th.In fact quotes reached 275,000 per second, as opposed to 200,000 on May 6th.Unlike the flash crash though there wasn't a dramatic fall in prices. However,the bids and offers did cross for a time - leading to high frequency traderstaking advantage of arbitrage opportunities. This data was exposed again byfirm Nanex - and left the market wondering if quote stuffing by high frequencytraders was behind the spikes.
The world is waking up to the fact that high frequency and algorithmictrading have quietly become part of the market fabric, and the world does not seemto be too happy about it. HFT and algorithms are being "demonized"said the FT article, and I agree. I also think the hype is overblown.
Once trading became automated, trading strategies naturally morphedto take advantage of the available technology and higher speeds. High frequencystatistical arbitrage techniques can also mean more order cancellations, someof which may - wittingly or unwittingly - fall into the quote stuffingcategory. Those involved in intentional quote stuffing as a strategy need to beheld to task. But to demonize all strategies or call for banning them is a stepbackward. What is needed is a framework by which to police them - and toprevent them from going wrong. The technology to do this is already available.For example, an area I've had a lot of experience in is the use of complexevent processing to provide a platform for high frequency, multi-venue marketsurveillance. With such a system quotes can be monitored to determine how manyquotes per second there are on each ticker symbol, the ratio of quotes totrades, when large spikes are emerging and many other interesting real-timeanalytics and patterns that it's useful to track in real-time.
But regulation of high speed trading practices has fallen short todate. Regulators have not had the funds, the technology, the power or theexpertise to follow and control high speed trading. However, it is good to seethat progress is now being made. CFTC commissioner Bart Chilton wrote last weekin an article entitled Reinin the cyber cowboys: “There maybe some cyber cowboys out there and they could be giving respectable traders abad name”. His colleague CFTC commissioner Scott O'Malia told Reuters last weekthat, if traders are flooding the market with orders with the intention ofslowing others down, the regulator would consider addressing quote stuffingunder new rules in the financial regulation bill that deal with disruptivetrading practices.
It is possible that quote stuffing is causing more problems that justslowing down the natural flow of trades. Trading behavior patterns suggest thatthese quotes are a distraction to other traders. There are patterns evidentwhere the quote "stuffer" continuously traded first - possibly bydistracting others. And the disruption can cause the bid and offer to cross -providing a nice arbitrage opportunity for those who are not distracted! All ofthis needs to be looked into further. I fully support the CFTC and SEC'sefforts to get to the bottom of not just the flash crash, but HFT andalgorithmic trading practices. They are now integral in the equities andfutures markets, and increasingly so in FX, fixed income and energy. What weneed is better policing of the markets to protect the honest ranchers from thecyber cowboys.
Hi All
I am simulating a problem in the production where i faced a situation.
Please find the following example program which i simulated.
#include<stdio.h>
#include<stdlib.h>
#include<string.h>
int main()
{
char str1; (3 Replies)
