Monday, 26 June 2017

Finra ATS Tier 1 statistical update

As a few things are afoot, it may be handy to get our heads around the current anatomy of the US ATS market. Let's meander through this dark corner.

We'll just look at the statistics for tier one stocks as these are the most timely reports.

There is no change to the relatively stable rankings of the top three pools. UBS's ATS and CS's Crossfinder remain way out in front. DB had a poor week with its position at #3 in the greatest peril for some time with both JP Morgan and Barclays being the closest to DB for some months.

Goldman Sach's transition to their new ATS has largely been completed with their newer platform rising ten places to #11 this week. KCG dropped three places to #14. LiquidNet H20 gained 4 spots. NYFX Cowen Exec Services dropped 6 places to #21.

In ATS news this week it was announced that Instinet is purchasing State Street's ATS. You can see Instinet's current pool is ranked tenth with 105M shares traded with State Street ranked twentieth. If they were combined, which is not being suggested yet, they would have rank of #9. The big difference between the two is that State Street's pool has an average trade size of 12,482 shares as compared to 229 for Instinet's current CBX pool.

DealerWeb (360,125) and LiquidNet (40,853) lead the average trade block sizes.

Luminex's paltry 5.3M shares traded, and fifth last ranking, clearly demonstrates that markets require diversity. Markets work despite the motivations of the participants. That's their ultimate beauty. Diversity matters and homogeneity risks growth. Luminex only managed 162 trades for the week. I'm not sure you need technology beyond a notebook and pen for that. At least the average block size at 32,879 was high, being the third largest. This emphasises that liquidity is a carefully orchestrated dance of mutual benefits. A dance of offer, parry, hedge, replenish. Quite the tango that is oft misunderstood as war rather than for being the carefully calibrated artistry that it truly is.


Rank ATS ATS T1 share % Volume Avg trade size
1 UBSA UBS ATS 17.61 486.2 M 172
2 CROS CROSSFINDER 13.97 385.6 M 189
3 DBAX SUPERX 7.14 197.2 M 195
4 MSPL MS POOL (ATS-4) 6.64 183.4 M 260
5 JPMX J.P. MORGAN SECURITIES LLC 6.53 180.3 M 212
6 LATS BARCLAYS ATS ("LX") 5.90 163.0 M 214
7 EBXL LEVEL ATS 5.59 154.4 M 208
8 MLIX INSTINCT X 5.01 138.2 M 228
9 BIDS BIDS TRADING 4.47 123.5 M 788
10 ICBX INSTINET CONTINUOUS BLOCK CROSSING SYSTEM (CBX) 3.81 105.2 M 229
11 SGMT GOLDMAN SACHS & CO. LLC 3.48 96.1 M 203
12 ITGP POSIT 3.47 95.9 M 308
13 KCGM KCG MATCHIT 3.31 91.3 M 184
14 MSTX MS TRAJECTORY CROSS (ATS-1) 2.15 59.3 M 177
15 XSTM CROSSSTREAM 1.58 43.6 M 391
16 DLTA DEALERWEB 1.45 40.0 M 360,125
17 IATS INTERACTIVE BROKERS LLC 1.17 32.4 M 290
18 CXCX CITI CROSS 1.13 31.2 M 230
19 LQNA LIQUIDNET H2O 0.92 25.5 M 17,565
20 BLKX STATE STREET GLOBAL MARKETS, LLC 0.91 25.2 M 12,482
21 NYFX COWEN EXECUTION SERVICES LLC 0.88 24.4 M 427
22 LQNT LIQUIDNET ATS 0.86 23.7 M 40,853
23 XIST INSTINET CROSSING 0.64 17.8 M 5,196
24 PDQX CODA MARKETS, INC. 0.50 13.8 M 230
25 CBLC CITIBLOC 0.31 8.6 M 19,651
26 MSRP MS RETAIL POOL (ATS-6) 0.26 7.0 M 186
27 LMNX LUMINEX TRADING & ANALYTICS LLC 0.19 5.3 M 32,879
28 WDNX XE 0.05 1.3 M 1,636
29 AQUA AQUA 0.02 0.6 M 6,488
30 BCDX BARCLAYS DIRECTEX 0.01 0.2 M 29,471
31 USTK USTOCKTRADE SECURITIES, INC. 0.00 0.0 M 56

(click to enlarge)

The top 5 pools represent over half the ATS volume traded. The top ten pools collective share has been steadily rising to the current accounting of three quarters of all ATS volume. This was assisted by IEX's dark pool transitioning to being the SEC's first dark public exchange which corresponds to the short period of the largest rise.

(click to enlarge)


The average trade size of the top 15 pools mainly resides in the minimal 100-300 shares per trade range with only XSTM CrossStream and BIDS being the consistent larger exceptions. The largest pool, UBS, typically has the smallest average trade size as you may see in the following chart. You may note the strange red line in the bottom right of the chart representing the new Goldman Sachs platform leaping into life.

(click to enlarge)

That previous chart makes it a bit hard to see if any of the top pools, apart from BIDS, have increased their average trade size. An alternative view of the top ten pools below shows their average trade size for the week compared to their average trade size over time, to make it easier to see variations in size compared to their own normal:

(click to enlarge)

Well, the size variation was meant to somewhat easier to understand in that chart for some strange definition of easier.

There does seem too many pools and exchanges. I can't help but wonder if there shouldn't be tighter policing of the proliferation by treating the NMS space more like radio spectrum and considering the venue space as a scarce resource. The bad old days of NYSE dominance showed one exchange to rule them all was not the best idea, but surely the US does not need more than forty exchanges and ATS pools.

I also remain of the belief that the SEC should carefully consider the two types of pools we see in this ATS mix. There is quite a different utility to a large block trading pool and a pool with a small average trade size. They are different beasts. Perhaps the SEC needs to explicitly partition their rule space for such species.

I'm not sure a small average trade sized pool with lots of volume should exist for many years if it is not a public exchange. I'm biased against such such parasitic pools due to their lack of participation in price discovery. Parasitic pools, like index funds, may have some utility but it should be clearly articulated what their efficiency or utility really is. It is not always clear what such low average trade size pools offer apart from being an embryonic step to being a public exchange. If there are some benefits gained by the low trade sized ATS pools due to easier rule enforcement then perhaps the rules for exchanges should be changed to allow the same efficiencies. If such rules aren't suitable for a public exchange, then perhaps they have no place for an ATS either.

Perhaps time limited ATS licenses should be granted for the low average trade sized ATS? Go big, or go home. Be an exchange in five years or stop clogging up NMS plumbing. All systems need a cleanse from time to time.

Happy trading,

--Matt.

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OTC Transparency data is provided via http://www.finra.org/industry/OTC-Transparency and is copyrighted by FINRA 2017

Thursday, 22 June 2017

IEX MM-Peg follow up

It has been pointed out to me by more than one person that though they are not fans of IEX they would like to see the MM-PEG order allowed as submitted. I poured scorn on this order type here, "IEX's new order's unintended consequences."

My scorn stands but I understand the dilemma best captured by Mr Adam Nunes here,


The issue that this order type is addressing is having a continuous presence in the market. This is the rather ridiculous requirement set to a one hundred percent obligation for official market makers in the US.

Now, this order type is not really ever expected to trade. It is close to a spoof in that regard except for the idea that you'd be happy if it did trade. Such a happy intention takes it away from being a spoof, but the silliness remains. That is, buying 8% below the NBBO or selling 8% above the NBBO would likely be welcome.

The issues around the timing of the order are real in that it may bake in a systemic advantage or disadvantage at that price level, far from the market where it doesn't really matter. This may then set a precedent allowing IEX to extend such a latency problem all the way to the BBO which would be a bigger problem.

The right answer would be for the SEC to only require market making obligations for some high but not crazy percentage of the time, say 95%. Then this order type, that is never expected to trade, would not be required. We need to fix the issues rather than skirt around the edges with such MM-Peg artifices.

I do wish we could stick to a small set of atomic primitives from which all order types may be created. Then participants could ignore the more complex order types if they chose to. Until then, we'll all have to be "puzzle masters."

Happy trading,

--Matt.

Tuesday, 20 June 2017

IEX's new order's unintended consequences

IEX offered up for the SEC's consideration a new order type last week, "Proposed rule change to introduce a new market maker peg order."

The new Market Maker Peg Order, or MM-Peg, is not an unreasonable order type. I've long been on the record as opposing unnecessary order types and this fits that category. It is similar to order types on other exchanges. The innovation is limited. However, MM-Peg adds to the order proliferation pollution problem that IEX has long promised it would avoid. Here is an excerpt from Flash Boys concerning the puzzle masters,

(click to enlarge)

Back in 2014, IEX was promoting the idea of simple order types,
"Only four types of orders – IEX eschews certain types of orders that were created to accommodate the HFT crowd, such as the Post-Only order and “Hide Not Slide” order. Instead it offers only four basic types of orders – market, limit, Mid-Point Peg, and IEX Check (Fill or Kill). The Mid-Point Peg gives the investor a price between the current bid and offer for the stock."
Well, we've moved on from there with the Discretionary Peg and its complex conditions and changing formulae with its high false positive rates. The crumbling quote factor as been added to the Primary Peg. And now we behold the MM-Peg, a displayed peg that has priority over non-displayed. Not a big deal in itself as it is just a small incremental extension. A bit of an outhouse, really. IEX is simply replicating the same utility payoff for order type development that has got us into this NMS order type mess in first place. All may make sense in isolation but who wants to fly in such an NMS Rube Goldberg contraption?



IEX is no different from other exchanges with such order type development. The market order proliferation problem needs some kind of "start" agreement where these arms are controlled. The only real beneficiaries of the current proliferation are the sophisticated market participants that have the resources and skills to puzzle out all the order puzzles and apply them to their problems as solutions. HFTs might just fit into that category. IEX's biggest traders are HFTs. This may be the outcome they are looking for.

So, this little bit of hypocrisy on IEX's part cuts a little deep to their core values. This order proliferation has long been something the "puzzle masters" have protested loudly against. Not a big deal as a piece of incrementalism but, nevertheless, surprising as order type proliferation is a real problem to which IEX is succumbing. Why is it surprising? Well IEX has rallied against a number of things such as rebates and co-location, both of which may actually benefit markets and yet on order types - they continue to transgress on their values. Curious.

The big issue


The main issue I see with the MM-peg is that it may bake in a strategic advantage in latency to particular types of customers, "The Market Maker Peg Order would be limited to registered market makers" [page 6].

I read it that the repricing still has to go through some guise of 350-microsecond delay, perhaps even the original magic shoe box,
"Furthermore, pursuant to Rule 11.190(b)(13), each time a Market Maker Peg Order is automatically adjusted by the System, all inbound and outbound communications related to the modified order instruction will traverse an additional POP between the Market Maker Peg Order repricing logic, and the Order Book."
However, this isn't the problem directly. The problem is how the latency may compare to co-located access from NY5 where the POP is. That is, how does it compete against the exchange's own customers?

The exchange's network architecture should have reasonably good/low jitter due to it being 10G Ethernet. It is hard to do that really badly, so let's assume IEX haven't stuffed that up. The latency difference between customers in NY5 on the customer facing side of the POP and the internal MM-Peg repricing mechanism may then be implied to be significant for all or some set of customers. That is, significant in terms of expected jitter. That difference may be advantageous or disadvantageous due to those reified architectural differences. That is, the timing is largely baked in.

If MM-Peg was to have a benefit in terms of latency, that would be bad as you are forced to use it and eschew other order types, but only if you can. You may not be a registered market maker and be at a structural disadvantage. The other side of the coin is a baked on disadvantage implying you never want to use an MM-Peg. Then again on some day, it may magically improve due to some technical rejigging. What if it changes without you knowing and suddenly your trading is at a surprising disadvantage? I'm imagining Haim Bodek breathing fire. I agree with him. This is a poor situation.

Either faster or slower is problematic for IEX's customers. It is a no-win situation - caveat emptor.

And, just to add fuel to the fire, SIP customers may be notified of the requotes before the IEX customer waiting at the IEX pop.

Happy trading,

--Matt.


________

Note: much to do about nothing. This is all about an order type that lives "at least" 8% (IEX rule 11.151(a)(6)) away from the BBO if it is an S&P500 or Russell1000 name. Busy work that is an unprincipled precedent. You have to wonder why they'd bother with it.

PS: Kipp Rogers points out that it was only three order types back in the Flash Boy daze of 2014: 



Wednesday, 14 June 2017

Rebate trafficking

The mass debates around rebates are coming to the point where the tumult paints rebates more akin to drug trafficking than a sensible approach to attracting custom.

This cult-like lack of economic argument is centred around the Franken-pool of IEX. Mr Katsuyama was quoted by Nicole Bullock in her June 1 FT article, "IEX chief sticks to principles in battle for presence",
“At the end of the day, this conflict between brokers getting paid a rebate by the exchange or getting the higher quality execution for their client — that conflict is going to come to a head and we’ll be the beneficiary of that,” says Mr Katsuyama, who insists that IEX gets better executions for clients.
It's not a rational argument and a typical misdirection from IEX. The argument is often accompanied by incendiary language referring to rebates as kickbacks. For example, here is Mr Elvis Picardo writing in Investopedia, as replicated by Forbes, from April 2014, "How IEX Is Combating Predatory Types Of High-Frequency Traders",
"No kickbacks or rebates – IEX does not offer any special kickbacks or rebates for taking or making liquidity. Instead it charges a flat 9/100th of a cent per share (also known as 9 mils) for buying or selling a stock."
IEX has referred to rebates as kickbacks, "..it's a kickback.." [4:05]. Kickbacks are normally associated with illegal behaviour. It is not a term that should be used lightly, just as front-running is also criminal and poorly used by IEX. Such aspersions are why the debate gets heated on both sides leading to a lack of rational rationale. IEX fail to recognise that zero pricing for lit at IEX would meet their own description of a kickback as a kickback is a remunerative, not monetary, exchange. Giving something away for free, such as an order execution, might also be considered a kickback; as may something for a discount. So if rebates are kickbacks, then IEX is also offering kickbacks. It becomes a matter of degree. Loss leaders at a store would also be a kickback. It's a silly, shameful argument. Perhaps an exchange offering rebates will sue Mr Katsuyama?

I've written on the subject previously in 2015, "Trading rebates - a choice, not an evil." It is a tired debate. It's really not worth dredging up again, yet here we are. Rebates are often paid for posting prices, sometimes for taking as per inverted exchanges, some charge zero, and some charge flat fees. IEX's dark orders have the highest fees in the industry with 0.0018 per round trip.

There has been much experimentation and it continues. BATS not only offers both maker-taker and taker-maker inverted pricing but has introduced low flat fee pricing at one of its exchange platforms (EDGA) with 0.0003 a side or 0.0006 cost per round trip. May the innovation continue.


Higher rebates!


Fees, and rebates by implication, were capped by Reg NMS in 2005 at 0.003 per share. I'm not a true blue believer but I can make an uneasy fair dinkum argument for higher fees and rebates that I think is not completely stupid.

Part of the modern problem with PFOF and dark liquidity is that they skin the restrictive sub-penny rule in a way that cannot be approached with penny oriented quotes. I've written about this previously in "Sub-pennies rule!" The supply and demand at a public market are a careful balance of what can be earned in the nett spread which is the sum of the spread, transaction costs, rebates, and other amortised expenses. Changes to transaction costs and rebates affect the desirability of market makers, in particular, to trade at the exchange. If the costs were 0.005 on both sides with an average gross spread of just a cent, 0.01, you wouldn't bother trading there as you couldn't earn any money. That's not completely true as maybe you could pay the 0.005 and do the other side at another exchange earning the cent spread, giving you a positive nett, but you get the idea.

Now if you think about it, a rebate of 0.005 with a cost of 0.005 for the other side, or other 0.005 permutations, could give you the equivalent of a mid-point pricing for trading if you consider a 0.01 spread typical. That could be an argument that holds water for as to why the 0.003 ceiling is currently too low. That is, an argument for a more permissive cap to accommodate innovation is not completely lacking. I don't buy it, yet. I prefer the direction promoted by some at EMSAC that advocate for lowering the 0.003 cap, but I'm not totally convinced.

There may be other ways that exchanges could use fees to combat the advantage that PFOF and dark orders have in skirting the sub-penny rule. For example, imagine that when you submit your order instead of just price, time priority, you pay for a priority level at the price. That price could be negative - a rebate. It would partially change the time priority to that where the priority has a market mechanism, a price. You could make a strong argument for such a beast. I'm not sure how the market would react, but I suspect the exchanges would likely make a lot more money in fees which could be partially rebated back to the customers to maintain a competitive advantage. It is not sub-penny pricing but it is a close cousin. Such a scheme may allow public exchanges to compete more vigorously against the incursion of PFOF and dark orders with their micro-cent fills. I'm not sure I like the thought of this innovation but it has some merit, as do higher rebates.

Overall, I'm agnostic on rebates. I could take them or leave them. Rebates have a useful role in innovation and perhaps there is more innovation yet to come. I do think the current discretion within the 0.003 fee cap is a pretty good balanced result for now. There is certainly merit to both a higher and a lower cap, but crass arguments about kickbacks have no role in the debate.

Happy trading,

--Matt.

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Update: Mr Osman Awan correctly pointed out on Twitter that it is only fees, not rebates, capped by Reg NMS. There is no reason why a rebate could not be 0.005 today except for the long-term necessity for profit. That is, a rebate cap is implied, not required.



Thursday, 1 June 2017

IEX statistics for May: the devil is in the details

A reader may know by now that I'm not a huge fan of the IEX hubris and hypocrisy emanating from their general direction concerning their speed-bump. The smart HFT will continue to worry that such market structure debauchery will harm the market in the longer term even if it provides opportunity in the short term. HFTs rely on healthy markets. IEX's Dark Fader does not promote market health.

As you can see in the following table, IEX's dark and expensive share restaurant continues to darken. Not one day in May had over twenty percent of displayed volume trading as a proportion of total shares handled.


Lit / total handled
May 17.5%
April 18.7%
March 19.8%

IEX had an improved, albeit small, market share in May of around 2.2%. The devil is in the detail and in the following chart, the May detail devils are highlighted for your amusement or apprehension.
May details are devilish
(click to enlarge)
You'll see that in the unlikely event that a linear relationship was to hold, you would expect IEX to be completely dark if it was to grow to 8% of the market. This may be a consequence the SEC did not intend.

A more traditional view of lit volume traded versus total shares handled is the following chart:

(click to enlarge)


To me the surprise is not why IEX lit activity is below twenty percent, it is why investor naivety is such that IEX trades at all.

Sunshine continues to be a great disinfectant. Let's all hope for the sunrise as the IEX dark moon rises.

Happy trading,

--Matt.


_________________________

Older IEX related meanderings:



Saturday, 20 May 2017

Submarine communications on VLF protecting Earth from space radiation

We briefly chatted about Very Low Frequency (VLF) communications and how such comms may travel long distances, go through a bit of soil and water, and are used for communication to submarines in "Lines, radios, and cables - oh my."

Well, interesting news on that front this week. NASA is reporting submarine communications are having a positive effect by creating a somewhat protective bubble around planet Earth.




The effect is noted as small in the paper, "Anthropogenic Space Weather" [Gombosi, T.I., Baker, D.N., Balogh, A. et al. Space Sci Rev (2017)], at least from what I can parse. I found some of the communications history very interesting in this paper, so I'd thought I'd share some of that history verbatim here for the curiously like-minded curious people.

--Matt.

___________________

Excerpts from "Anthropogenic Space Weather" [Gombosi, T.I., Baker, D.N., Balogh, A. et al. Space Sci Rev (2017)]

8 Space Weather Effects of Anthropogenic VLF Transmissions


8.1 Brief History of VLF Transmitters


By the end of World War 1, the United States military began use of very low frequency radio transmissions (VLF; 3–30 kHz) for long-distance shore to surface ship communications (Gebhard 1979). Since very high power can be radiated from large shore-based antenna complexes, worldwide VLF communication coverage was feasible, and along with LF and HF systems (300–30 MHz) these bands carried the major portion of naval communications traffic before later higher frequency systems came online. Early experiments also showed that VLF could penetrate seawater to a limited depth, a fact realized by the British Royal Navy during World War I (Wait 1977). Given this realization, when the modern Polaris nuclear submarine era began in the 1950s, the US Naval Research Laboratory conducted a series of thorough radio propagation programs at VLF frequencies to refine underwater communications practices (Gebhard 1979). Subsequent upgrades in transmission facilities led to the current operational US Navy VLF communications network, and other countries followed suit at various times. For example, Soviet naval communication systems were likely brought online in the late 1920s and 1930s during the interwar expansion period, and high power VLF transmitters were later established in the late 1940s and 1950s for submarine communications and time signals. These included Goliath, a rebuilt 1000 kW station first online in 1952 which partly used materials from a captured German 1940s era megawatt class VLF station operating at 16.55 kHz (Klawitter et al. 2000).

Table 2 of Clilverd et al. (2009) lists a variety of active modern VLF transmitter stations at distributed locations with power levels ranging from 25 to 1000 kW. These transmissions typically have narrow bandwidths (<50 Hz) and employ minimum shift keying (Koons et al. 1981). Along with these communications signals, a separate VLF navigation network (named Omega in the US and Alpha in the USSR) uses transmissions in the 10 kW range or higher (Inan et al. 1984, e.g. Table 1 of) with longer key-down modulation envelopes of up to 1 second duration.

8.2 VLF Transmitters as Probing Signals


Beginning in the first half of the 20th century, a vigorous research field emerged to study the properties of VLF natural emissions such as whistlers, with attention paid as well to information these emissions could yield on ionospheric and magnetospheric dynamics. Due to the high power and worldwide propagation of VLF transmissions, the geophysical research field was well poised to use these signals as convenient fixed frequency transmissions for monitoring of VLF propagation dynamics into the ionosphere and beyond into the magnetosphere (e.g. Chap. 2 of Helliwell 1965; Carpenter 1966). This was especially true since VLF transmissions had controllable characteristics as opposed to unpredictable characteristics of natural lightning, another ubiquitous VLF source. Beginning in the 1960s and continuing toT.I. Gombosi et al. the present, a vast amount of work was undertaken by the Stanford radio wave group and others (e.g. Yu. Alpert in the former USSR) on VLF wave properties, including transmitter reception using both ground-based and orbiting satellite receivers. These latter experiments occurred both with high power communications and/or navigation signals and with lower power (∼100 W), controllable, research grade transmitter signals.

The transmitter at Siple Station in Antarctica (Helliwell 1988) is worthy of particular mention, as the installation lasted over a decade (1973–1988) and is arguably the largest and widest ranging active and anthropogenic origin VLF experiment series. Two different VLF transmitter setups were employed at Siple covering 1 to ∼6 kHz frequency, with reception occurring both in-situ on satellites and on the ground in the conjugate northern hemisphere within the province of Quebec. Of particular note, the second Siple “Jupiter” transmitter, placed in service in 1979, had the unique property of having flexible high power modulation on two independent frequencies. This allowed targeted investigations of VLF propagation, stimulated emissions, and energetic particle precipitation with a large experimental program employing a vast number of different signal characteristics not available from Navy transmitter operations. These included varying transmission lengths, different modulation
patterns (e.g. AM, SSB), polarization diversity, and unique beat frequency experiments employing two closely tuned VLF transmissions. Furthermore, the ability to repeat these experiments at will, dependent on ambient conditions, allowed assembly of statistics on propagation and triggered effects. These led to significant insights that were not possible for studies that relied on stimulation from natural waves (e.g. chorus) that are inherently quite variable.

Several excellent summaries of the literature on VLF transmission related subjects are available with extensive references, including the landmark work of Helliwell (1965) as well as the recent Stanford VLF group history by Carpenter (2015). As it is another effect of anthropogenic cause, we mention briefly here that a number of studies in the 1960s also examined impulsive large amplitude VLF wave events in the ionosphere and magnetosphere caused by above-ground nuclear explosions (e.g. Zmuda et al. 1963; Helliwell 1965).

Observations of VLF transmissions included as a subset those VLF signals that propagated through the Earth-ionosphere waveguide, sometimes continuing into the magnetosphere and beyond to the conjugate hemisphere along ducted paths (Helliwell and Gehrels 1958; Smith 1961). Ground based VLF observations (Helliwell 1965) and in-situ satellite observations of trans-ionospheric and magnetospheric propagating VLF transmissions were extensively used as diagnostics. For example, VLF signals of human origin were observed and characterized in the topside ionosphere and magnetosphere for a variety of scientific and technical investigations with LOFTI-1 (Leiphart et al. 1962), OGO-2 and OGO-4 (Heyborne et al. 1969; Scarabucci 1969), ISIS 1, ISIS 2, and ISEE 1 (Bell et al. 1983), Explorer VI and Imp 6 (Inan et al. 1977), DE-1 (Inan and Helliwell 1982; Inan et al. 1984; Sonwalkar and Inan 1986; Rastani et al. 1985), DEMETER (Molchanov et al. 2006; Sauvaud et al. 2008), IMAGE (Green et al. 2005), and COSMOS 1809 (Sonwalkar et al. 1994). VLF low Earth orbital reception of ground transmissions have been used also to produce worldwide VLF maps in order to gauge the strength of transionospheric signals (Parrot 1990).

...........
...........

9 High Frequency Radiowave Heating


Modification of the ionosphere using high power radio waves has been an important tool for understanding the complex physical processes associated with high-power wave interactions with plasmas. There are a number of ionospheric heating facilities around the world today that operate in the frequency range ∼2–12 MHz. The most prominent is the High Frequency Active Auroral Research Program (HAARP) facility in Gakona, Alaska. HAARP is the most powerful radio wave heater in the world; it consists of 180 cross dipole antennas with a total radiated power of up to 3.6 MW and a maximum effective radiated power (EFR) of ∼4 GW. The other major heating facilities are EISCAT, SURA, and Arecibo. EISCAT isT.I. Gombosi et al. near Tromso, Norway and has an EFR of ∼1 GW. SURA is near Nizhniy Novgorod, Russia and is capable of transmitting ∼190 MW ERP. A new heater has recently been completed at Arecibo, Puerto Rico with ∼100 MW ERP. There was a heating facility at Arecibo that was operational in the 1980s and 1990s but it was destroyed by a hurricane in 1999. The science investigations carried out at heating facilities span a broad range of plasma physics topics involving ionospheric heating, nonlinear wave generation, ducted wave propagation, and ELF/VLF wave generation to name a few.

During experiments using the original Arecibo heating facility, Bernhardt et al. (1988) observed a dynamic interaction between the heater wave and the heated plasma in the 630 nm airglow: the location of HF heating region changed as a function of time. The heated region drifted eastward or westward, depending on the direction of the zonal neutral wind, but eventually “snapped back” to the original heating location. This was independently validated using the Arecibo incoherent scatter radar for plasma drift measurements (Bernhardt et al. 1989). They suggested that when the density depletion was significantly transported in longitude, the density gradients would no longer refract the heater ray and the ray would snap back, thereby resulting in a snapback of the heating location as well. However, a recent simulation study using a self-consistent first principles ionosphere model found that the heater ray did not snap back but rather the heating location snapped back because of the evolution of the heated density cavity (Zawdie et al. 2015).

The subject of ELF wave generation is relevant to communications with submarines because these waves penetrate sea water. It has been suggested that these waves can be produced by modulating the ionospheric current system via radio wave heating (Papadopoulos and Chang 1989). Experiments carried out at HAARP (Moore et al. 2007) demonstrated this by sinusoidal modulation of the auroral electrojet under nighttime conditions. ELF waves were detected in the Earth’s ionosphere waveguide over 4000 km away from the HAARP facility.

VLF whistler wave generation and propagation have also been studied with the HAARP facility. This is important because whistler waves can interact with high-energy radiation belt electrons. Specifically, they can pitch-angle scatter energetic electrons into the loss cone and precipitate them into the ionosphere (Inan et al. 2003). One interesting finding is that the whistler waves generated in the ionosphere by the heater can be amplified by specifying the frequency-time format of the heater, as opposed to using a constant frequency (Streltsovet al. 2010).

New observations were made at HAARP when it began operating at its maximum radiated power 3.6 MW. Specifically, impact ionization of the neutral atmosphere by heater-generated suprathermal electrons can generate artificial aurora observable to the naked eye (Pedersen and Gerken 2005) and a long-lasting, secondary ionization layer below the F peak (Pedersen et al. 2009). The artificial aurora is reported to have a “bulls-eye” pattern which is a refraction effect and is consistent with ionization inside the heater beam. This phenomenon was never observed at other heating facilities with lower power (e.g., EISCAT, SURA).