Nanex Research


Nanex ~ Clear example of HFT algo increasing short term volatility and wider, less stable bid-ask spreads.
Beginning around January 10, an algo running in a over 80 stocks  turns on at 9:45, then off at 9:58, and back on again at 10:02. When this algo is running, the quote rate increases 10-fold and the occurrence of a locked or crossed NBBO increases significantly. The bid-ask spread also increases. The additional blast of quotes seems to come only from 4 exchanges: Nasdaq, BATS, NYSE and NYSE-Arca. In each of the charts, the occurrence of a locked or crossed market is much higher when the algorithm runs. Note the stark contrast of the 9:58 to 10:02 period (when the algo is off) compared to the time before and after.

FAS on January 20, 2012 (2 second intervals). The NBBO is shaded black for a normal market, yellow for a locked market (bid equals ask) or red for a crossed market (bid > ask).

VTR on January 20, 2012 (2 second intervals). The NBBO is shaded black for a normal market, yellow for a locked market (bid equals ask) or red for a crossed market (bid > ask).

HES on January 20, 2012 (2 second intervals). The NBBO is shaded black for a normal market, yellow for a locked market (bid equals ask) or red for a crossed market (bid > ask).

CAT on January 20, 2012 (2 second intervals). The NBBO is shaded black for a normal market, yellow for a locked market (bid equals ask) or red for a crossed market (bid > ask).

BA on January 20, 2012 (2 second intervals). The NBBO is shaded black for a normal market, yellow for a locked market (bid equals ask) or red for a crossed market (bid > ask).

UNH on January 20, 2012 (2 second intervals). The NBBO is shaded black for a normal market, yellow for a locked market (bid equals ask) or red for a crossed market (bid > ask).

FAS on January 19, 2012 (2 second intervals). The NBBO is shaded black for a normal market, yellow for a locked market (bid equals ask) or red for a crossed market (bid > ask).

FAS on January 18, 2012 (2 second intervals). The NBBO is shaded black for a normal market, yellow for a locked market (bid equals ask) or red for a crossed market (bid > ask).

FAS on January 12, 2012 (2 second intervals). The NBBO is shaded black for a normal market, yellow for a locked market (bid equals ask) or red for a crossed market (bid > ask).

FAS on January 10, 2012 (2 second intervals). The NBBO is shaded black for a normal market, yellow for a locked market (bid equals ask) or red for a crossed market (bid > ask).

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