Talk:Quote stuffing

NPOV

The sentence "While some in the financial industry describe quote stuffing as a deliberate tactic designed to gain a competitive edge in trading, others have argued that the phenomenon is merely a software error that results in large orders flooding the market" gives the false impression that reasonable minds consider it an acceptable practice. The idea that quote stuffing is ever acceptable is one that departs significantly from the prevailing or mainstream view. As WP:PROFRINGE notes, "if the only statements about a fringe theory come from the inventors or promoters of that theory, then various "What Wikipedia is not" rules come into play." Also we have blogs used as sources in the HFT voices section, but nothing from or even mentioning Nanex / Eric Scott Hunsader e.g. http://www.nanex.net/aqck2/4670.html (and http://www.nanex.net/aqck2/4594.html)? --Elvey^(t•c) 01:10, 7 November 2014 (UTC)

I see your point and tried to improve on the quoted sentence. I also added a Reuters reference mentioning Nanex. Kristina451 (talk) 16:19, 7 November 2014 (UTC)

I think you addressed the problem. Removing the tag now. Kudos. --Elvey^(t•c) 22:22, 24 November 2014 (UTC)

Trillium case

Reading the FINRA release on Trillium, the case seems to be more an instance of spoofing and layering. It may be better suited for layering (finance) than here. Kristina451 (talk) 16:28, 7 November 2014 (UTC)

I agree wholeheartedly. The market manipulation involved did not cause parties to have decreased trading latency, but rather caused confusion about the real price due to non-bona fide orders. Isaacsanders (talk) 13:09, 22 February 2016 (UTC)

Links/Format

The introduction is a little hard to read and sections should be established. There are also link issues to address.Tangledupinbleu chs (talk) 01:22, 20 August 2015 (UTC)

Debate / Regulatory action sections

I indicated in this previous talk page section about some link issues, which I'll address here for review (the issues deal with WP:RS and WP:SYN):

The HFT-associated voices and Independent voices sub-sections are cited by resumes and/or blogs of people. They are in general just commentary and opinions on the topic. Example reference links include:

8. http://zacharydavid.com/about/

9. http://zacharydavid.com/2014/04/on-hft-part-ii-bugs-features-and-aggressive-incompetence/

10. https://www.chrisstucchio.com/work/resume.pdf

11. https://www.chrisstucchio.com/blog/2014/quote_stuffing_is_a_software_bug.html

12. http://blogmaverick.com/2014/04/03/the-idiots-guide-to-high-frequency-trading/

These are not considered reliable sources with editorial oversight and are questionable sources. I removed them and much of the content associated with them in previous edits, example and example. I couldn't find other third party reliable sources to substantiate the content, but I left this part on the page. In essence, it's an abridged version of what was there because I do believe that the information serves some purpose for readers to understand how insiders explain quote stuffing and what the evidence proves. See below:

"Quote stuffing is often described as a deliberate tactic to gain an unfair advantage over slower participants by flooding the market with large quantities of non-bona fide orders. HFT industry people argue that the phenomenon could be a software error. According to those in the industry, the term is referred to as “flickering”, which caused by feedback loops. Its suggested that investors who engage in quote stuffing "puts his own capital at risk" and increases "liquidity" for buy side investors. However, researchers David Diaz and Babis Theodoulidis presented analysis contrary to the claim that HFT firms use the tactic to provide liquidity. It was rather shown that the potentially abusive and manipulative behavior known as quote stuffing is able to increase the gap of best bid and ask prices, thereby increasing costs for ordinary investors. Researchers also found that more than 74% of U.S. listed equity securities received at least one quote stuffing event during the 2010 Flash Crash."

I condensed the information to not include unimportant industry people and/or opinions to what is readable and pertinent in regards to the debate on quote stuffing. I left the Academic research information because the case study was researched and published on a third party site. I also cited another independent research paper to support the bolded sentence.

The Regulatory action section contains links that are also problematic. The information about Citadel Securities LLC is not supported by the corresponding links. Reference links below:

15. https://www.nasdaqtrader.com/content/marketregulation/NASDAQ/DisciplinaryActions/CDRG_NQ_2014.pdf

16. http://www.reuters.com/article/2014/08/05/citadel-fine-finra-idUSL2N0QB2SE20140805

17. http://www.valuewalk.com/2014/08/finra-fines-citadel-documents-reveal-extent-issue/

18. http://www.finalternatives.com/node/27869

I searched each article for a mention of quote stuffing and did not find the term used in any of the links. What I can gather from the articles is that Citadel Securities LLC engaged in a trading issue that caused the fine addressed in one of the paragraphs on the page. The current article appears as the synthesis rule with quote stuffing not explicitly stated. I looked through a number of pages of search results in Google in relationship to Citadel Securities LLC and quote stuffing to make the synthesism valid and could not find one reliable source to substantiate the information. For these reasons, I removed the mention altogether, which you can see here.

I added much more information to elaborate on this whole page that was also removed. I can provide my edit summaries below for the substantiating research, but this section pertains to the information and reasoning (seen in my edit summaries) for some of my previous edits. Tangledupinbleu chs (talk) 00:59, 25 August 2015 (UTC)

Update: Each indicated edit (noted above) using the reasoning mentioned follows. I can discuss anything pertaining to the above edits in this section if there are issues. Tangledupinbleu chs (talk) 02:42, 27 August 2015 (UTC)

Debate / Regulatory action sections (more information)

I'm opening this discussion pertaining to other previous edits within this section, these include adding more information to the Debate and Regulatory action sections.

For the introduction to quote stuffing debate, I added more information to open the section about the effect of the Flash Crash and attention drawn to the topic afterwards. Edit example. See below:

"Due to its potential effect on the 2010 Flash Crash, quote stuffing has been debated by financial researchers, industry advocates and the media, including in Fox Business, Wall Street Journal, CBS Money Watch, RISK, and The New York Times."

Reference links include:

5. http://video.foxbusiness.com/v/4327881/what-is-quote-stuffing/?#sp=show-clips

6. http://www.wsj.com/articles/SB10001424052748704358904575477921338633984

7. http://www.cbsnews.com/news/market-rigging-is-nothing-new/

8. http://www.risk.net/risk-magazine/news/1811246/quote-stuffing-blame-flash-crash-berman-insists

9. http://dealbook.nytimes.com/2010/09/02/s-e-c-said-to-look-at-quote-stuffings-role-in-crash/?_r=1

The information displays the notability of quote stuffing through major press coverage and introduces both the term as debated by multiple parties. There is more information that can be substantiated from these reference links, but other editors can deem what information and corresponding quotes are suitable to mention.

My other additions are related to the Regulatory action section. Just my opinion, but I think "Reception" (as a heading) serves the article better as a catch-all for anything related to the response by the media, academics and regulatory agencies about quote stuffing. I altered the text example and example in previous edits. If there's a better proposed term or reasoning to use the existing, please note.

I found that the SEC information was nearly a copyright violation, so I added quotations around some of the verbatim text. I also expanded a little information based on the used Wall Street Journal reference pertaining to regulatory reception and subsequent action about quote stuffing.

"In 2010, the Securities and Exchange Commission (SEC) began looking at the practice of quote stuffing in relation to the Flash Crash. The agency started assessing whether the practice violated "existing rules against fraudulent or other improper behavior" or caused a disadvantage through distorted stock prices. SEC chairman Mary Schapiro said the agency would assess whether traders must hold orders open for minimum periods of time and other changes to financial trading. In September 2010, Business Insider reported that Trillium Capital had received a $1 million fine by the Financial Industry Regulatory Authority for trading strategies that were considered quote stuffing and market manipulation. The Financial Industry Regulatory Authority later clarified that the fine was for layering and market manipulation."

The last thing I added from the above was about Trillium Capital as I found some references during looking at the SEC response. In my opinion, these articles note a relevant reception based on the SEC looking into quote stuffing. Reference links include:

13. http://blogs.wsj.com/marketbeat/2010/09/13/high-frequency-trader-fined-quote-stuffing-crackdown-afoot/

14. http://www.businessinsider.com/huge-first-high-frequency-trading-firm-is-charged-with-quote-stuffing-and-manipulation-2010-9

15. http://blogs.reuters.com/felix-salmon/2010/09/14/trillium-wasnt-quote-stuffing/

This was the last of my edits to the Debate / Regulatory action. I'll open a separate discussion for edits to other sections. Tangledupinbleu chs (talk) 04:50, 28 August 2015 (UTC)

Update: Each indicated edit (noted above) using the reasoning mentioned follows. I can discuss anything pertaining to the above edits in this section if there are issues. Tangledupinbleu chs (talk) 01:16, 2 September 2015 (UTC)

Definition. Expunged: $800 million Citadel fine paid for quote stuffing.

The definition of quote stuffing in the article that Tangledupinbleu chs ("TUIB") added at the top of the article is not accurate. Suggest we use NANEX's. Or FT's: "quote-stuffing — placing and then almost immediately cancelling large numbers of rapid-fire orders to buy or sell."

I see the removal of the Citadel information as problematic. The case in question is the poster boy for quote stuffing; see the chart at the first URL in my first post to this page - it says, "The events that triggered the Citadel fine are in the labelled box." in the "The Quote Stuffing Trading Strategy" page.

Yet, TUIB has

REMOVED:

In June 2014, Nasdaq posted a disciplinary action against the high-frequency trading firm Citadel Securities LLC due to several rule violations that included quote stuffing. Citadel was found to have “failed to prevent the strategy from sending millions of orders to the exchanges with few or no executions.” It was further pointed out that Citadel “sent multiple, periodic bursts of order messages, at 10,000 orders per second, to the exchanges. This excessive messaging activity, which involved hundreds of thousands of orders for more than 19 million shares, occurred two to three times per day.”
While Citadel did not admit or deny wrongdoing, it accepted the fine of $800,000 imposed by U.S. regulators for trading violations. The HFT firm was ordered to pay $420,000 of the fine to Nasdaq, $160,000 to NYSE, $170,000 to BATS, and $50,000 to FINRA. According to John McCrank of Reuters, the sanctions came as regulators clamp down on issues related to high-frequency trading that had received greater scrutiny since the release of the Michael Lewis book Flash Boys.

This is crazy; as the removed text states, NASDAQ noted: Citadel “sent multiple, periodic bursts of order messages, at 10,000 orders per second, to the exchanges. This excessive messaging activity, which involved hundreds of thousands of orders for more than 19 million shares, occurred two to three times per day.” If you have read this article and yet don't understand that this means quote stuffing was occurring, you shouldn't be substantively editing the article. This claim is false, "The information about Citadel Securities LLC is not supported by the corresponding links." On top of that, the 4670.html URL and the chart therein certainly also substantiate the relationship between Citadel Securities LLC and quote stuffing.--Elvey^(t•c) 22:10, 3 October 2016 (UTC)

References