EP 071: Rigged markets, stealing, and corrupt regulators w/ Eric Hunsader of @NanexLLC

Aaron Fifield Podcast 1 Comment

A big guest on the podcast this week—a man who for many won’t need any introduction, he is; Eric Scott Hunsader.

Eric started out as an algorithmic trader in the early 80’s, soon after became a self-taught programmer, and since then he’s written many software applications for financial data. But today, Eric is the founder of Nanex, a whole market streaming data feed, which transmits 20 billion data points every day.

Well-known for speaking out against the many issues that surround high frequency trading, Eric will tell you straight; HFT firms are stealing money, exchanges have rigged the market, and the regulators that allow this type of activity to continue are corrupt individuals.

Additionally we talk about quote stuffing, mini-flash crashes that occur on a daily basis, and why Eric recently received a $750,000 whistle-blower award from the SEC.

Photograph source: MarketWatch

Lessons learnt in this interview:

  • Eric speaks about how he first got involved with trading in 1984, what lead him to become a self-taught programmer, and how the internet changed everything.
  • About the 25,000 man-hours that went into the initial release of NxCore, the flagship product of Nanex—which transmits 20,000,000,000 data points every day.
  • When Eric first began to notice HFT activity in the data, and how reporting on delayed prices during the Flash Crash took him down an enormous rabbit hole.
  • Eric breaks down the overarching problem with HFT, why the US stock market is effected more so than any other market, and who is allowing this to continue.
  • How HFT firms use ‘quote stuffing’ (a term coined by Eric and his staff) as a tactic to slow down the system and open up an opportunity for grabbing “free money”.
  • Why there are dozens of ‘mini-flash crashes’ occurring each and every day, who benefits, and how the limit up-limit down rule hasn’t fixed the underlying issue.

Links and resources mentioned:

  • Money & Speed: Inside the Black Box – A VPRO documentary Eric features in, you’ll hear (and see) him explain what happened during the ‘Flash Crash’ in 2010.
  • The Wall Street Code – Another VPRO documentary featuring Eric, with the focus being on Haim Bodek‘s high-profile HFT whistle-blowing case.
  • Nanex.net – To learn more about Eric and the NxCore ticker plant, visit the Nanex website. Also, Eric’s independent market structure research is available here.
  • @NanexLLC – Follow Eric on Twitter—you’ll see many brilliant (and extremely granular) visualizations of the US stock and futures markets.

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