High Frequency Traders (HFT) jam thousands of quotes in MasterCard stock at the millisecond level on May 16, 2012.
From Eric Hunsader – Nanex
Entire video shows about 5 seconds of time, slowed so you can see what goes on at the millisecond level.
Each box represents one exchange. The SIP (CQS in this case) at the bottom shows the National Best Bid/Offer.
Watch how much Best Bid/Offer changes in a fraction of a second. The shapes represent quote changes which are the result of a change to the top of the book at each exchange. The time at the top of the screen is the time of the last quote or trade update in Eastern Time HH:MM:SS:mmm (mmm = millisecond).
Every exchange must process every quote from the others — for proper trade through price protection. This complex web of technology must run flawlessly every millisecond of the trading day, or arbitrage (HFT profit) opportunities will appear. If any of the connections are not running perfectly, High Frequency Traders can profit from the price discrepancies that result. It is easy for HFTs to cause delays in one or more of the connections between each exchange.
Colin Twiggs is a former investment banker with almost 40 years of experience in financial markets. He co-founded Incredible Charts and writes the popular Trading Diary and Patient Investor newsletters.
Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.
Focusing on interest rates and financial market liquidity as primary drivers of the economic cycle, he warned of the 2008/2009 and 2020 bear markets well ahead of actual events.
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