Hacking The Market

Zero Hedge documents a case this afternoon where quote stuffing – a denial of service attack based on overloading the exchange’s network to exclude other traffic – was used to push the stock market higher.

Sure enough, at just after 3:19 pm we saw an epic spike in empty packets on the NYSE, which set off red flags and immediately prompted us to observe the move in ES, which naturally confirmed that an HFT driven coordinated buy order (no block) was going through and pushing the ES well on its way to VWAP. Market manipulation no longer needs anything more than a coordinated packet stuffing dump, as what happened on May 19.

Basically, the quote stuffing hack was used to deny access to the exchange to anyone else while the hacker took all the offers and drove prices higher. In this way the hacker (HFT) could pick a time when there were a limited number of offers (sellers) and take them without having to absorb additional offers which would interfere in the process of driving the price up.

Since the SEC is just lawyers, there is no hope that they will grasp this simple hack or understand how poisonous and illegal it is.

Both comments and trackbacks are currently closed.
%d bloggers like this: