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“These aren’t the droids you’re looking for”


Arash Massaudi, FT Alphaville, Millisecond data disputes, part 2.00000000100, here.

That prompted Virtu, a normally low-key high-frequency trading company, to speak out. Virtu argued that Nanex’s data was imprecise and that its own more accurate figures show that equity markets in New York started trading before futures in Chicago by fractions of a second. You know, just as you’d expect, in a world where radio/microwave beams are used to reduce latencies to the millisecond level. (And a world where news organisations are competing to deliver that news in a format that can be read and processed by algos as quickly as physically possible.)

That sent Nanex into a tizzy at the weekend, leading it to publish a post entitled, “Shredding Virtu’s Response with Science,” which challenges the findings from Virtu.

Now, the FIA Principle Traders Group, an organisation representing the interests of a few dozen high-frequency and algorithmic trading companies (including DRW Trading, RGM Trading and Chopper Trading), has waded into the debate.

The FIA PTG believes that the no-tapering decision was most likely released at the same time from multiple servers in the US, which would appear to side with the Nanex — but the organisation steers clear of Nanex’s allegations of impropriety.

Instead, the FIA PTG explains in a release (click here for the pdf), the simultaneity was to be expected:

Nanex ~ 28-Sep-2013 ~ Shredding Virtu’s Response with Science, here.  Ok, when did Nanex stop using the SIP feed timestamps? What was the P&L on the trade in question? What new math is Nanex talking about?

Direct quotes from Virtu’s paper in italics.

  1. Virtu states that their timestamps are accurate and synchronized between NY and Chicago...our clocks in New York and Chicago are synchronized automatically to the same GPS antenna which ensures that the two clocks are synchronized to each other.
  2. Virtu’s timestamp of SPY’s first trade in New York is 0.397 milliseconds after 2pm.Relying on our two sources of market data timestamps, our records show that the first trade immediately following the Fed release at 2 PM in SPY occurred at 2:00:00.000397
  3. Virtu’s timestamp of Gold Futures first trade in Chicago is 2.034 milliseconds after 2pm.The first trade for the December 2013 Gold Future contract on CME was recorded by our system at 2:00:00.002034.
  4. Virtu calculates that news from Washington arrives in Chicago at least 2.1 milliseconds after New York. It would be physically impossible for a reaction in Chicago to occur less than 2.1 milliseconds after New York.The straight line distance from Washington, D.C. to New York is approximately 204 miles. The straight line distance from Washington, D.C. to Chicago is approximately 595 miles. Any signal leaving Washington, D.C. will arrive in Chicago at least 2.1 milliseconds after arriving in New York since that is the time it takes light to travel the additional 391 miles to Chicago.

All we have to do is show that trading begins in Chicago less than 2.1 milliseconds after trading begins in New York. We’ll use Virtu’s timestamps from (2) and (3) above. Times are milliseconds after 2pm.

2.034 market reacts in Chicago
-0.397 market reacts in New York
1.637 milliseconds that Chicago trades after New York.
Thus, Virtu’s accurate, synchronized timestamped data shows that trading begins in Chicago 1.637 milliseconds after trading begins in New York.

1.6 is not greater than 2.1 – unless this is some kind of new math.

FIA Principal Traders Group, here.
Allston Trading
Bluefin Trading, LLC
Chicago Trading Company
Chopper Trading LLC
Consolidated Trading LLC
DRW Holdings, LLC
Eagle Seven LLC
Flow Traders US, LLC
Geneva Trading USA, LLC
Hard Eight Futures, LLC
HTG Capital Partners
IMC Chicago LLC
Infinium Capital Management, LLC
Jump Trading LLC
Ketchum Trading
Liger Investments Limited
Liquid Capital
Marquette Partners, LP
Nico Holdings, LLC
Optiver US LLC
Quantlab Financial, LLC
RGM Trading, LLC
Spot Trading LLC
Sun Trading, LLC
Teza Technologies
Tibra Trading America LLC
Tower Research Capital, LLC
TradeForecaster Global Markets LLC
Traditum Group, LLC
XR Trading LLC
FIA PTG Statement, here. Interestingly, you really end up back arguing Levine’s point from Information Asymmetry of who is being harmed by this possible information asymmetry and what is the actual point of erecting regulatory barriers to prevent the possibility of bleeding out actionable information. Anyone sensible would just do the Robert Almgren trick and simply keep a calendar of when material information is to be released and don’t have open orders at the matching engines at those times, unless for some reason you want to be a muppet. There is tension between acknowledgement that there are information asymmetries and the reason that markets work is information asymmetry yet we do not want the trivial introduction of more information asymmetry. I suppose the idea is something along the lines of the desirability of having a smooth orderly market for information as well as securities. We see that Firms can invest in proprietary information to give themselves an edge in the market but at a certain cost. If you undermine the prices in that information  market then you undermine the prices in the securities market as well. As technology changes the information prices change and the information get redistributed causing security market price changes. Yeah, I can see you would like that process to be smooth. But Nanex, they are still on the Squeezing the Cold Product List,even if they stopped using the SIP feed timestamps.

 Starting in March, accredited media agencies have been given Federal Reserve policy statements in advance under embargo (as opposed to lock-up, as was the case prior to March). These media agencies therefore have not been prohibited from uploading release information to their servers in other geographic locations, which would allow the information to be released simultaneously in multiple financial centers. Since multiple media agencies have distribution points in Chicago and New York, the simultaneous release of the Fed announcement last week at 2:00 pm ET sharp in Chicago and New York (and simultaneous moves in those markets) should have been expected.

On the issue of the release of private non-governmental research (such as the Michigan Sentiment survey), we also believe that transparency is essential. Whatever the method chosen to distribute such information, it is important that it be fully disclosed to all market participants.

We welcome the opportunity to continue to work with regulators, exchanges and market participants to improve transparency, fairness and confidence in the markets.

Zerohedge, Matt Taibbi On the CNBC “Presstitutes”, here. Taibbi picks apart the Money Honey for 16 minutes MST3K style. Interesting as a counterpoint to the Nanex meltdown. We are typically sympathetic to a follow the money  strategy to divine the truth  – but the Money Honey sort of found the laughable extremum of this argument.

The top definition of presstitute according to Urban Dictionary is:

1. presstitute
A member of the media who will alter their story and reporting based on financial interests or other ties with usually partisan individuals or groups.

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