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Wall Street’s ‘Private Rooms’

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Re: Wall Street’s ‘Private Rooms’

#151

Post by dkjaudyeqooe »

hayst4ck wrote: post #90
gruez wrote: post #55

>They’re offering what are dubbed private rooms, gated venues that take the core benefit of a dark pool — the ability to hide big equity deals so they won't impact prices — and add exclusivity, specifying exactly who can partake in any trade. I'm not sure what all the consternation is about. Even without dark pools you could always do direct trades[1] with a party of your choosing, which is even more private and excl…

> won't impact prices I strongly suspect that wall street has looked at 401k's/index funds as a giant money filled piñata. It is a huge pile of money following a well understood algorithm which makes it vulnerable to attack. I suspect that this is the absolute core of "dark pool" strategy. Any trade that happens behind closed doors that "doesn't impact prices" means that an index fund is buying or selling at a price…

> functionally a wealth transfer from grandma to an institutional trader

This makes no sense. Grandma can only lose money if she sells, most are not actively trading in the market.

Also large trades are in both directions. Some are trying to unload large holdings and some are trying to build large holdings. These pools are merely trying to find other large transactions to be the counterparty, the net effect is to reduce volatility in the open market, which is the whole point: price stability for their transaction.

Re: Wall Street’s ‘Private Rooms’

#152

Post by chii »

concordDance wrote: post #149
solatic wrote: post #141

Earlier quoted context omitted.

It's insider trading, just with a different class of insiders (i.e. first level of insiders are people associated with the company itself, and the second level of insiders are Wall Street traders with access to non-public pricing signals). Insider trading is illegal because it undermines faith in the fairness of the public market. If insider trading is legal, then market actions by insiders are almost guaranteed to r…

> The end result is that nobody wants to buy or sell shares anymore (since they will get the raw end of the deal) and the market collapses as a result. Finance noob question here: has this actually happened? And related, don't non-pro traders basically always lose money on trades but still exist? (I've been genuinely unsure why insider trading by non-decisionmakers is banned, always seemed like it would result in mor…

> And related, don't non-pro traders basically always lose money on trades but still exist?

by the same token, gamblers also on average lose money, but still exist.

Re: Wall Street’s ‘Private Rooms’

#153

Post by rcxdude »

oangemangut wrote: post #24
Nifty3929 wrote: post #10

It is not clear to me what nefarious things people believe are going on there that we should be worried about. All the article says is that people are doing things we don't know about, but implies that somehow we should feel not-okay about this. I don't know what's going on in my neighbor's house either, and it could certainly be bad stuff, but that's doesn't mean that it is bad or that I should start spying on them.

If you look up RegNMS the goal is to make public markets fair by having rules that have to be met in order to trade. Dark pools allow participants to 'hide' information that's not public. It is mostly about the order books. If dark pool sell order for 1B of TSLA stock goes on the order book, only other members of the pool get that information. The dark pools are required to still follow RegNMS rules for trade prices,…

>In your neighbor's house example, it would be like if there was a street market auction for trading cards happening in your neighbor's front yard, but in the house your neighbor and another neighbor had gotten together to trade 100x the average #of cards using the prices they hear from outside, and the people outside only see the deal they made after it's done.

I mean, that's literally what happens with trading cards. It's super common to base face-to-face deals (whether for cash or trades) on internet pricing, including very big ones. (the trading card market is a lot less liquid, though, so it's also common for there to be a fairly big discount or premium on those prices in the deal for various reasons)

Re: Wall Street’s ‘Private Rooms’

#154

Post by quanto »

> a New York-based minority-run brokerage [...] wants to trade with similarly minded businesses, so it uses a private room provided by the ATS operator OneChronos. “It’s about exercising control, what liquidity a broker wants to interact with” Carlos Cabana, head of equity sales and trading at CastleOak, dubs the room a “diversity pool,” because the participants are all minority-operated brokerage firms. While in this instance CastleOak doesn’t know specifically who is on the other side of every trade, it knows it will be one of about 10 counterparties who meet certain eligibility criteria related to ownership and investment goals.

The fact that, under this mechanism, one can quite literally choose the skin-color of the counterparty trader, under the banner of "diversity" and "similarly minded"-ness, is quite fascinating regardless of politics or morality.

Re: Wall Street’s ‘Private Rooms’

#155

Post by modderation »

JumpCrisscross wrote: post #147
whatshisface wrote: post #109

Earlier quoted context omitted.

Instead of demanding that your counterparty be uninformed, why not do a market open/close auction every minute?

> why not do a market open/close auction every minute? Reality moves faster. That means whoever can price closer to the auction can incorporate more information.

I think it's an interesting thought experiment. What would happen if the stock market were quantized to a blind one trade per-minute granularity?

I suspect this would put everyone on more even footing, with less focus on beating causality and light lag, placing more focus on using the acquired information to make longer-term decisions. This would open things up to anyone with a computer and a disposable income, though it would disappoint anyone in the high-frequency trading field.

Re: Wall Street’s ‘Private Rooms’

#156

Post by JumpCrisscross »

modderation wrote: post #155
JumpCrisscross wrote: post #147

Earlier quoted context omitted.

> why not do a market open/close auction every minute? Reality moves faster. That means whoever can price closer to the auction can incorporate more information.

I think it's an interesting thought experiment. What would happen if the stock market were quantized to a blind one trade per-minute granularity? I suspect this would put everyone on more even footing, with less focus on beating causality and light lag, placing more focus on using the acquired information to make longer-term decisions. This would open things up to anyone with a computer and a disposable income, thoug…

> What would happen if the stock market were quantized to a blind one trade per-minute granularity?

Like one share of stock trades each minute in each name? Or one trade randomly executes?

If the former, you stop trading the stock and start trading something pointing at it. If the latter, the rich get to trade.

> less focus on beating causality and light lag

You’d have to ban cancelling orders, otherwise you bid and offer and then cancel at the last minute. Either way, you’d be constantly calculating the “true” price while the market lags and settling economic transactions on that basis. (My guess is the street would settle on a convention for the interauction model price.)

If you’re upset about stock markets looking like casinos, the problem isn’t the fast trading. It’s the transparency. Just don’t report trades until the end of the day.

If you aesthetically don’t like HFT, that’s a tougher problem as the price of the stock points at something tied to reality, and reality runs real time.

Both ideas sort of look like the private markets.

Re: Wall Street’s ‘Private Rooms’

#157

Post by blitzar »

JumpCrisscross wrote: post #148
ajsnigrutin wrote: post #20

Ban high frequency trading, ban instant transactions (put them on hold for some time before buying/selling (hours minmum, longer for larger quantities), make the held transactions public, and tax the profits on a time-owned scale. This would turn "investments" into investments again... you really believe that company XY will do something good? Buy stocks and keep them for few years until they grow. Politican John Bob…

> Ban high frequency trading, ban instant transactions (put them on hold for some time before buying/selling (hours minmum, longer for larger quantities), make the held transactions public, and tax the profits on a time-owned scale. This sounds like a pitch written by a Wall Street lobbyist trying to go back to the minimum-tick days. (Holding large orders is just pure profit for arb firms.)

Make 1/16ths great again!

Re: Wall Street’s ‘Private Rooms’

#158

Post by superzamp »

whatshisface wrote: post #109
JedMartin wrote: post #98

Earlier quoted context omitted.

It's actually the other way around. As a big fund looking to trade a large number of shares in the public market, you'll quickly realize that the market tends to move away from you, and statistically, you're more likely to get a bad deal than a good one. Even if you try to be smart about execution by splitting your orders into chunks, randomizing order sizes, and similar tactics, there is still a huge information asy…

Instead of demanding that your counterparty be uninformed, why not do a market open/close auction every minute?

Attempts at doing this are effectively already existing, the IEX [1] exchange being an example, albeit on a less ambitious scale than your idea:

> It's a simple technology: 38 miles of coiled cable that incoming orders and messages must traverse before arriving at the exchange’s matching engine. This physical distance results in a 350-microsecond delay, giving the exchange time to take in market data from other venues—which is not delayed—and update prices before executing trades

Re: Wall Street’s ‘Private Rooms’

#159

Post by rhelz »

After coming of age on Milton's and Hayek's views of the market--as a mechanism for processing information and allocating resources which was far better than any central planning could be--it was a huge eye opener when I actually did go to Wall Street.

The degree to which market players are going to make market signals to not have the correct meaning is amazing. Dark pools, chopping up buys and sells and strategically rerouting them--all meant to make the market as bad of an information source as possible.

In retrospect, it seems obvious that they would do this. If the market is the best source of information, you can't beat the market, because you'll never knew more than it will.

Re: Wall Street’s ‘Private Rooms’

#160

Post by shawabawa3 »

JumpCrisscross wrote: post #156
modderation wrote: post #155

Earlier quoted context omitted.

I think it's an interesting thought experiment. What would happen if the stock market were quantized to a blind one trade per-minute granularity? I suspect this would put everyone on more even footing, with less focus on beating causality and light lag, placing more focus on using the acquired information to make longer-term decisions. This would open things up to anyone with a computer and a disposable income, thoug…

> What would happen if the stock market were quantized to a blind one trade per-minute granularity? Like one share of stock trades each minute in each name? Or one trade randomly executes? If the former, you stop trading the stock and start trading something pointing at it. If the latter, the rich get to trade. > less focus on beating causality and light lag You’d have to ban cancelling orders, otherwise you bid and…

He means every minute a single "opening trade" style trade happens and clears overlapping sections of the order book

This has the advantage of every trader getting the same price every minute. And racing against the clock has marginal utility

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