The Bots Go Berserk
Stock market trading is mostly done by computers. Watch them go wild! The date is at lower left. In 2000 it took several seconds for computers to make a trade. By 2010 it was milliseconds... or even microseconds. You can see stock market activity become vastly more intense. I can barely see the Flash Crash
on May 6 of that year - also known as the The Crash of 2:45
, when the Dow Jones plummeted 9% in 5 minutes, then bounced back. But on August 5, 2011, when the credit rating of the US got downgraded, activity explodes
This image was created by Nanex, a company that provides market data to traders:http://www.nanex.net/aqck/2804.HTML
The x axis shows the time of day, from 9:30 to 16:00. The y axis... well, it's the number of some sort of activity per unit time, they don't say what. Do you know?
But they say something interesting:
It's not high frequency trading
that they're worried about - that's actually gone down slightly! What's shot up is high frequency quoting
or quote spam
. Can someone explain that? Here's a paper on it:http://www.cass.city.ac.uk/__data/assets/pdf_file/0018/128232/Hasbrouck.pdf
but it doesn't answer the simple question of what's quote spam and why people do it. To make money, obviously, but...
Thanks to +Alexander Kruel
for pointing this out!