61–70 of 83 posts
Is there something like AWS for automated trading? Located extremely close to the exchanges and offering specialized hardware like this?
Earlier quoted context omitted.
I have nothing against HFT but I don't buy your liquidity argument. Liquidity is needed most when markets are falling outside the norm. Any algorithm with a fail-safe or kill switch will immediately shut off when times get bad thereby ending their contribution to liquidity at a time when it is needed most. Please help me understand this better if I'm incorrect. (edited for clarity)
"Liquidity is needed most when markets are falling outside the norm" True but humans have fail-safes and kill switches too, thus this is not a valid argument against HFT in favor of human market makers. At any time, humans could step in and provide liquidity during the flash crash and during other crashes.
Humans can, and do. But algorithms can't and won't.
Earlier quoted context omitted.
I can see from your post that you're very misinformed about how markets operate and the role of high frequency traders (a.k.a. liquidity providers). Read my response to a previous comment: http://news.ycombinator.com/item?id=2164458
Consider a hypothetical stock currently trading at 34.05 bid, 34.06 ask. Trader A puts in a bid for 100 @ 34.06, matching Trader B's ask of 34.06. Normally, B would then sell to A, but thanks to HFT, institute C has the unique and intrinsically unfair position of being able to fulfill A's order. Assuming a moderate holding of stock, you are then able to manipulate the market up and down second-to-second by selectivel…
Explain? Who is institution C? How are they able to violate time priority?
Assuming a moderate holding of stock, you are then able to manipulate the market up and down second-to-second by selectively fulfilling buy or sell orders and so causing supply or demand to pile up temporarily.
This is also very vague...
Earlier quoted context omitted.
I can see from your post that you're very misinformed about how markets operate and the role of high frequency traders (a.k.a. liquidity providers). Read my response to a previous comment: http://news.ycombinator.com/item?id=2164458
I have nothing against HFT but I don't buy your liquidity argument. Liquidity is needed most when markets are falling outside the norm. Any algorithm with a fail-safe or kill switch will immediately shut off when times get bad thereby ending their contribution to liquidity at a time when it is needed most. Please help me understand this better if I'm incorrect. (edited for clarity)
I'll give you the long answer when I get back from work.
Virtually no hobbyist would be able to compete against big financial firms' hardware and algorithms. It might be a smart move for a large high frequency trading firm to put out these sorts of tools for free. An incredibly easy to use free api with good (though not superior) speed would be pretty popular. More subpar competition == more money for them. Though, admittedly, probably nowhere near what they are making now…
I am waiting for one of these shops to open up the opportunity to hobbyists/devs. I would love to try and create my own decision/trade algorithms but dont have the kind of money it would take to mitigate the cost effect of the trade volume (ie, at $8 per trade and making 1000 trades per day with an average return of 2% per day you would need to be working with more than 400K to even cover your tx cost). Strikes me th…
Earlier quoted context omitted.
Consider a hypothetical stock currently trading at 34.05 bid, 34.06 ask. Trader A puts in a bid for 100 @ 34.06, matching Trader B's ask of 34.06. Normally, B would then sell to A, but thanks to HFT, institute C has the unique and intrinsically unfair position of being able to fulfill A's order. Assuming a moderate holding of stock, you are then able to manipulate the market up and down second-to-second by selectivel…
Consider a hypothetical stock currently trading at 34.05 bid, 34.06 ask. Trader A puts in a bid for 100 @ 34.06, matching Trader B's ask of 34.06. Normally, B would then sell to A, but thanks to HFT, institute C has the unique and intrinsically unfair position of being able to fulfill A's order. Explain? Who is institution C? How are they able to violate time priority? Assuming a moderate holding of stock, you are th…
Sources: http://www.nytimes.com/2009/07/24/business/24trading.html http://www.nytimes.com/2009/08/05/business/05flash.html
Note that the SEC has not banned flash trading; it only proposed to do so - as of so far they have not done anything.
The second point - it is the core of how market makers work to provide liquidity, with the added advantage of being able to see orders first. Simple supply/demand dictates that selling stock will drive the market down, since existing sell orders are not filled and slowly pile up at lower and lower prices. Then beginning to buy shares will raise the stock price temporarily, at which point the cycle repeats. Being able to figure out the limits on the buy/sell orders is simply icing.
--- It appears that NASDAQ probably discontinued market front running voluntarily in late '09; I wasn't aware of that. I will have to rethink my positions - HFT as such isn't wrong in my opinion, although being able to make a profit 97% of the time (and having 3 straight quarters of only profitable days) is ridiculous, as is profiting purely from having a connection that is faster than what everyone else has.
Even if this product allowed you to have picosecond processing of market data and generation of trading signals, if you don't have exchange co-location, inherent network latency in your market data from providers and order routing to exchanges will make this thing pretty useless. For a hobbyist, throw leased lines out the door, now a Linode box, even a desktop running Windows XP with full-blown Nagle's algorithm, wou…
Despite all of this, I find the most worrying thing about the recent HFT developments is the simple fact that hobbyists want to get involved. Surely turning amateurs loose in such a necessarily complex world will result in large sums of money being lost. Oh wait... I get it.
It's like playing poker, if you don't know who the sucker is......
Even if this product allowed you to have picosecond processing of market data and generation of trading signals, if you don't have exchange co-location, inherent network latency in your market data from providers and order routing to exchanges will make this thing pretty useless. For a hobbyist, throw leased lines out the door, now a Linode box, even a desktop running Windows XP with full-blown Nagle's algorithm, wou…
The competition is leveling out because most players have gotten the basic tricks; this is just the next logical step in evolution. It has been proved in practice that fpga based trading systems consistently edge out normal cpu based ones(atm anyway). Most likely, in the future, companies will be forced to move to such a solution or get left behind.