the 6 may 2010 cascading flash crash, page-4

Ah, the games we play... at least, you know what youre dealing with...

3 major recommendations from Nanex* to solve the outcome of the 6 May 2010 flash crash:

1. Quote (buy) and trade (sell) data must be time stamped by the exchanges at the time it is generated. This will ensure delays can be detected by everyone.


2. *Quote-stuffing be banned.



3. Add a simple 50 millisecond quote expiration rule: a quote must remain active until it is executed or 50ms elapses.


*Quote-stuffing: a manipulative technique that high frequency computer systems are using to try to overpower each other.

At issue is whether the practice could artificially torpedo stocks' prices or help make it appear that there is more trading volume in a stock than there really is, allowing sellers to profit when demand for the stock appears elevated.


Quote-stuffing is when large numbers of orders are placed. In these cases, what's unusual is that the orders are priced in increments as small as one-tenth of a cent and far away from the actual price at which a stock is trading. Such orders, known as "sub-penny pricing," are used to manipulate the market, which would be illegal.



Nanex* is the creator and developer of NxCore.

NxCore (pronounced n'core) is a real-time streaming datafeed (ticker plant) that brings the whole market to a workstation or desktop computer. Nanex was founded in the year 2000 by Eric Scott Hunsader and is based in Winnetka, IL, a suburb of Chicago, USA.

NxCore delivers and databases all the quotes and trades transmitted by the exchanges.

http://www.tradersnarrative.com/was-the-flash-crash-caused-by-quote-stuffing-4315.html

and

September 1, 2010 SEC Probes Canceled Trades www.wsj.com