High-Frequency Trading And Friday's Job Report

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Includes: DIA, SPY
by: Joel Elconin

Over the last few years, High Frequency Trading (HFT) has expanded exponentially, now accounting for more than 70% of daily trading volume. Not only have the HFT players become a dominant force in the equities markets, but their presence in the futures markets has surfaced as well. Several firms have designed sophisticated algorithms that can instantly process fundamental information and simultaneously take advantage of standing orders in the futures markets.

An excellent example of this piranha-like price activity was exhibited Friday morning as the most recent Jobs Report was released at 8:30 AM ET. In a matter of one second, billions of dollars of market cap in the June S&P 500 futures evaporated as these programs acted on the disappointing news.

For those of you who are interested in understanding this type of activity, below is a video summarizing the breath-taking activity that took place Friday morning. This video should serve as a subtle reminder that if you think it is possible to beat the bots, think again.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.