Algorithmic trading, the use of pre-programmed computer
codes to place orders and execute trades, is supposed to be the fastest,
smartest way to trade in today's stock market. But sometimes the
"bots," as they are affectionately called, get buggy. That's what
Nanex, a market research firm, told BI it has noticed is happening today.
An algorithm placing orders in WPCS International
Incorporated (WPCS), a communications infrastructure company, has sent/canceled
1.4 million orders since 11am when it turned on.
That's a rate of 200 orders per second. That means that of
all 7771 in the United
States ' National Market System, WPCS has had
the 6th most quotes of the day and is making up 0.62% of all quote volume.
And this is all stemming from one algorithm. Imagine a
Roomba carpet cleaner with a bug in it, backing up and hitting the same spot on
a wall over and over again. Now imagine it doing that 200 times a second.
The kicker is, there have only been 9 trades executed in
this stock all day. "It's just 9
trades. This stock is very inactive. Well, except for the 1.7 million canceled
orders," Nanex CEO Eric Hunsader told Business Insider. "The algo
places a buy order at $0.47 which makes
it best bid. Then it cancels - which brings CBOE's top bid back down to $0.46
and changes the best bid. 200 times a second.".
Read all about it at http://www.businessinsider.com/what-a-stupid-algorithm-looks-like-2013-1
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