

Citigroup may have caused 1000 point drop, probing rumor of erroneous trade - jfi
http://www.reuters.com/article/topNews/idUSTRE6455ZG20100506

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blhack
Can somebody explain to me how this HFT stuff works? I mean...is there a stock
exchange API? (That is a joke).

Aren't there actual real people executing these trades or is it really just
computers?

If the latter...WTF!? D-:

Any links that explain this?

~~~
lmkg
It's entirely computers. The only thing that real people do is continually
optimize the algorithms.

The way that bid prices and baskets and whatnot turn into financial
transactions of X stocks for Y dollars on the stock exchange is deterministic
and publicly known. If you can look at these data as they come into the stock
exchange, and calculate it faster than the stock exchange, you can effectively
see about 5-10 milliseconds into the future. Using this information, you can
put in a bid yourself and insert an additional transaction with you as a
middleman between two parties that would have been paired up and traded, and
skim a penny per stock by narrowing the spread between the bid price and the
ask price.

Since the concept relies on predicting and performing a transaction while
another nearly-instant transaction is being processed, it's not possible for
this to function with human intervention. Even computers aren't fast enough
unless the data centers are physically located very close to the stock
exchange.

Previous HN story, now paywalled:
<http://news.ycombinator.com/item?id=1007726>

~~~
moe
So let me get this straight. The world-economy runs inside a virtual machine,
the equivalent of second life, with autonomous agents making automatic
decisions based on a set of rules that their creators once programmed into
them?

And at the same time poker-bots are banned?

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andylei
why are traders complaining about clearly mispriced stocks? if you see P&G
fall 40% on NO NEWS, there's a good chance that you're about to make a bunch
of money, because the stock is going to rebound.

old school uncomputerized trading shops like Themis get their asses handed to
them by faster, smarter algorithm developers, and have no choice but to get
regulators to bail them out.

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johnl
Accenture went from 41 to 0.04, back to 41 on twice the previous day's volume.
I guess once the computers stop, the markets get thin really fast.

