Momentum Ignition Detection

Elise Fleischaker Product Features

The Momentum Ignition Detection model identifies behavior designed to initiate rapid market movement at the expense of other participants.

Igniters and Directional Manipulation

Momentum ignition is a trading practice that attempts to create, or exacerbate, highly directional price movement and capitalize on the result. The practice has been linked to numerous disruptive market events and is considered a form of market abuse by all major exchanges. Generally speaking, momentum ignition is done by initiating a series of aggressive executions over a short period of time in an attempt to trigger resting stop orders. This practice is often done in conjunction with pre-positioned orders or laddering that attempts to profit from the resulting price movement.

Momentum ignition is particularly challenging to detect using traditional surveillance methods as the event can last a few milliseconds, or several minutes, which can frustrate the parameters of rule-based surveillance tools.

The Neurensic Momentum Ignition Detection model searches for specific patterns of fill activity after an aggressive order by the same entity.  By searching for behaviors that indicate both an attempt to move the market and an attempt to capitalize on such movement, the model can identify problematic trading, regardless of its success, and can do so for both low-latency and high-frequency trading strategies.

See Also: Momentum Ignition: Arson for Financial Markets

Regulatory Links

CME Group Exchange Rule 575 – Disruptive Practices Prohibited

If the conduct was intended to create artificially high or low prices, this may also constitute a violation of Rule 432.H.

CME Rule 432: General Offenses

ICE Canada’s Q&A on Disruptive Trading Practices