HFT Shenanigans: Spoofing eMinis; Apple Inc. (AAPL), The Procter & Gamble Company (PG), And NASDAQ Composite (.IXIC)’s Weak Excuse

This past week NASDAQ Composite (INDEXNASDAQ:.IXIC) released an explanation, based on preliminary investigating, for the 3 hour exchange darkness the week before. Essentially continuing in its immediate response that the fault lies with NYSE-Arca, the exchange found that large message traffic of over “26,000 quote updates per-port, per second as it attempted to reconnect” caused the SIP to malfunction. A glaring question resulting from this reasoning surfaces as we realize that this level of traffic is not too uncommon and has never before resulted in an exchange blackout.

since 2003, there have been 411 instances where a single stock (one port) had 20,000 or more quotes in one second and in 62 of those instances there were 26,000 or more quotes in a second. In almost every case, the exchange sending this high quote traffic was NASDAQ Composite (INDEXNASDAQ:.IXIC).

In fact, Nanex has cataloged every event and even produced this video showing one example of 28,000 quotes per second being sent by Nasdaq. So while it appears the SIP breakdown was caused by a glitch in NASDAQ Composite (INDEXNASDAQ:.IXIC)’s software, causing an hour’s worth of old data to be resent as new data in only 3 seconds and therefore self-inflicted, their reasoning holds little water and only raises more questions.

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