Is Anyone Going To Stop The Abuse by HFTs?

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Courtesy of Karl Denninger, The Market Ticker 

Nanex continues to do yeoman’s service in chronicling the latest and greatest abuse of the markets which takes place under the general rubric of "quote stuffing" in the exchanges.  The latest is on "ASIA":

In this chart we plot trade and quote prices/sizes. Note that during the decline a massive quote-size algo was running on NSDQ. Quote sizes were so large they flatten everything else in the size chart:

The fact of the matter is that this has been going on for more than a year and yet there has been exactly zero in the way of enforcement.

These events still go on each and every day.

The scheme is simple – drive quote volume for bids and offers you have no intent to execute and by doing so overload the systems so that you can then arb between different venues.

This can, and often does, produce "mini flash crashes" and "mini flash rallies" in various issues.  And while it has yet to reflect into an all-on market collapse, the fact remains that under long-standing law any pattern of orders intended to manipulate the price of a security, as opposed to actually buy or sell it, is illegal.

So where are the prosecutions?  More to the point, how can you possibly buy or sell a stock and have any reasonable expectation that you’re getting the best price?

You can’t.  It makes it entirely impossible for you, as a retail investor, to have any sort of confidence in the markets.  You cannot use stop orders on your positions because they are subject to being raped by these mini-moves when in fact there was no actual buy or sell pressure at the price where your stop got triggered.

This has been well-documented now for more than a year and I’ve been writing on it since the Flash Crash and Nanex’s debut of their reports, along with my quickly-infamous report over the July 4th weekend last year (in 2010.) 

More than a year on, this raw abuse has not been stopped.  Our so-called "regulators" have not demanded that this quote stuffing end nor have they taken a very simple action that would make it unprofitable – charge a small fee – a fraction of a cent – for each quote transmitted,…