It's Probably Nothing

Cyber warefare? Sign of things to come?

That's not a trading algo, that's a denial of service attack.

or.. a test.

@ marc ...a test for what ?

Are we getting into foil hat territory or what?

I admit i don't know the first thing about algo's or the stock market even though i buy alot of stocks every month through my investment company!!

a little help is appreaciated.

Sounds like something George Soros would do...

True marc, could be a test to see how much they can slow the system down. Could also be trying to move the market in support of a pre-made position, short or long.

Could be the Chicoms trying to break something.

The one thing I don't believe is that the SEC doesn't know who it is. They know which rack in which server room is running the algo, never mind who owns it.

I don't know, Phantom, the SEC seems oblivious to exceedingly high profile criminal behavior even after they're told a problem exists, e. g., Madoff, subprime mortgage derivatives. Or, is their intimate knowledge of stock market systems why they missed the high profile disasters.

paul in calgary,

A test to know the limits of their algorithm's capability. They weren't in it for the money, "yet", it may be to stop or slow the trade desk down, or to see what limits are really in place within the Exchange to stop or slow the trading process. I don't know the unknowns here.

But as The Phantom said, the folks inside will know where the algorithm came from. On that note, it may have been in place simply to see if the algorithm can be put in place, or put in place without being detected for some time period, or to see what sort of trail it leaves behind.

Yes I know I've got a lot of "or's" in the water here. Who knows until it all grinds to a halt, or... simply software writers testing code. For fun. They're a twisted bunch. ;)

This is nothing new. Zerohedge has been reporting, off and on, about the manipulation of markets by HFT algos for nearly two years. What's disturbing is their ability to create and cancel bids and offers in milliseconds; they use this to sniff out what other market participants are willing to buy/sell at. Unfortunately, by the time a human responds to one of these offers, it's been withdrawn.

I won't trade in a market that supports HFT's; I can't be sure that there's any real liquidity there.

Wasn't the bad guy plot of Die Hard 4, to use computers to basically transfer everything over to a private account before anything could be done about it?

Imagine waking up one morning and the stock market is zero.

Why don't they enforce a 3-second lag time or something to stop the lightening fast transactions?

A classic example of fragility.

It might be an al Quaida probe. Maybe there is a second bin Laden who wants to bring down the US
(some of the bin Ladens own and run one of the largest construction firms in the world, so they would be able to obtain the technical expertise).

Dollars to donuts it was a test. As to the purpose, who knows except that it would not be a surprise if a fortune cookie came with alg.

Basic computer hacking was was basically getting in and out of a system that was "off limits". Getting an algerythm in and out of something that is a basic foundation of capitalism without being caught is quite a coupe. This might be the start of an "economic stuxnet worm".

Smells like a DoS test. The basic functionality was field tested. Increase the volume/frequency of the algorithm and all other trading essentially stops.

The 'unknown' aspect I believe is BS - I doubt very much that I could lash up some machine and software gadget and just hang it off the trading system. I would need credentials, and vetting through a certification process. Hence, my identity would be well established.

Who benefits from having demonstrated a viable DoS mechanism?