Algorithmic and HFT strategies are still not clearly defined and easily discernible on the various exchanges. Intuitively, it is assumed that in the main tasks of regulators enter the effective counteraction of opportunities for traders' manipulative use of algorithms, but most markets are still far from exact distinction.
Despite conventional explanation, numerous experts, for example, argue that Flash Crash (6 May 2010) can not technically been activated by HFT. They say that HFT - the effect applies only to induction of high volatility. Against these opinions and point out radically different studies that prove statistically that high-frequency transactions actually reduce volatility. Total However observation that HFT gives the best results in terms of high volatility and narrower spreads. Opinions remain sharply divided, but the preconditions for algorithmic price manipulation actually exist.
Baseline characteristics of HFT's high speed order entry and execution of transactions. Research on trade on the NASDAQ and Direct Edge from 2014 - 2015, split weighted average active time frame for a HFT-order between 1ns to 100ms, after which the contract most often or is repealed or modified. On this basis can separate opportunities for deliberate systematic impact on stock prices.
One possibility is the massive introduction of many very small (but with great frequency) Long orders on an uptrend, which creates a picture of the huge investor interest in the respective asset. In such visual interventions we can talk about the so-called. "Hunt no-HFT traders." (Let us note that according to the same research, orders are not HFT - generated an active time frame of at least 10sec.) "Hunting ..." is speculative as "inflation" of the market in a predetermined asset when frequency by increasing volume Procurement is driven a sharp rise in price and after a split second is a huge sale at the highest level (or vice versa). Add the scheme, called "pre-molded Trading". When this tactic is necessary preliminary arrangement of individual counterparties simultaneously placing orders at the same price with the same (or proportional) volume through harmonized and related algorithmic parameters in the software of the individual participants.
All these circuits generate Trade signals which are not arranged in a sequential series, and typically saturated single space, which greatly influences the cost.
On a similar principle based and possible price manipulation when HFT by introducing cross-orders (Short at the highest price and Long at the lowest). Programmed in such internal and external ratio proportion to the actual current volumes as to form sought by the program new equilibrium price. The objectives of the strategy can be: to establish over kratosrochen price range of the manipulated market position at the expense of other market; to "redistribute" the price at ekspiratsiya (expiration price) of derivative instruments; or to influence the closing price. Here we must note that the closing price is essential to participating in the market because it is used to determine: seasonal performance of the shares, the valuation of brokerage turnover, estimated net assets in mutual funds, the prices of stock indices summarize market sentiment of the relevant trading day and so on.
Another possible strategy is HFT enhancer spoofing. ("Spoofing" is a hacker term meaning to gain access in a misleading way through imitation.) The approach is meeting as "painting the tape". In this aspect variants spoofing can be: introduction of fictitious orders (ordering in a market, followed by the closure of similar positions in another market and cancellation of the first according to the result achieved in other market, and vice versa); bid - ASA layering (typical for brokers where client requests are listed according to price / volume targets and the creation of false sentiment among as possible a large number of real market participants to affect the volumes of the instrument); limited rows of instant changes in the priorities of the orders (eg. the withdrawal of orders immediately before reaching implementation and introduction of new orders with exactly the same parameters, which modeled the wrong idea about the liquidity and depth of the market). And finally, HFT is thus able to clog the market with quantities requests that no-HFT traders suddenly confronted with problems such as delayed execution or failure to fully implement their orders.
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