Daily Speculations

The Web Site of Victor Niederhoffer & Laurel Kenner

Dedicated to the scientific method, free markets, deflating ballyhoo, creating value, and laughter;  a forum for us to use our meager abilities to make the world of specinvestments a better place.

 

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7/14/04
Victor Niederhoffer on Software Bugs and other Animals

A reader queries whether just looking at the price on a screen can help one make money . i.e. hoping a stock along. It seems at first glance ridiculous. But things are seldom what they seem, in markets and life.

The reader Mr. D.F. a sophisticated computer entrepreneur and programmer writes as follows

It almost seems that I can push a stock price up by looking at it. This would be apparent by looking at the difference between the broker's min to max price when the volume is not changing (i.e. no trades). It seems that when you stare at the price, the brokers up their min-max by some type of formula.

Mr. Corso's response. A classic

Well, I can't speak to influencing stocks by staring at a screen, but there was an interesting case . . .

. . when Enron-on-line first started up, folks were worried about Enron "knowing everyone's positions" if it became the dominant B2B energy portal [Enron-on-line wasn't a broker, Enron was the counterparty to every transaction]

While that was a normal enough worry, being an old APL guy, I was wondering what went on behind under the covers at Enron-on-line, I wanted an API so that I could get a feed from Enron-on-line, and wouldn't have to point and click [I had this fantasy of developing a kind of automated gamma scalping thing on natural gas basis]

I inquired of Enron, and they ultimately declined, but not before I talked to some of their programmers and one of 'em mentioned "dots".

That worried me, so I performed an experiment, at about 1am I merely PASSED MY CURSOR OVER AND HOVERED OVER BUT DID NOT CLICK the offer price of 3am electricity, a time that no-one should have been concerned about . . . I then called up my Boston office, got the watch engineer on the line, and asked them to do the same thing [Enron on line registered my NY and Boston office as 2 different customers]

so 2 different customers "almost" but didn't quite in fact lifted the offer . . . and low and behold, after about the 3rd hovering of the cursor, the offer ticked up 25 cents a megawatt . . . in the middle of the night, on a block of time that no-one could care about Enron-on-line wasn't just waiting for you to click, it was tracking your cursor movements and checking to see if you hovered over a price.

Enron-on-line was spyware

So we never used it