51–60 of 99 posts
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Flash orders
No longer available on lit US equities. A failed experiment by exchanges to compete with internalizers by providing the opportunity for price improvement to those orders who elect to be shown to participants prior to posting or taking. Can you think of one active in today's market?
Complete idiot's guide is right. Exchanges offer price-time priority. A 'better' price (higher bid, lower offer) gives you priority over a 'worse' price. Given two orders at the same price, an earlier order gives you priority over a later order. If you spend millions of dollars on computers, data feeds, and salaries to skilled personnel, to predict the motion of markets correctly and work within the system to make mo…
It's more like taking a peek at the other players' cards, when only you have the ability to do that. We have a bunch of laws that establish the pretense that everybody in the market is equal. I suspect we should get rid of most of the laws and drop the pretense. Folks should participate with the understanding that there are unfairly advantaged operators at all levels. But until that happens it's hard to morally squar…
Yes and no. To continue the analogy, if your counterparty checks his cards every few minutes, while you are sitting at the table and monitoring continuously, is that your fault that your decision making strategy has a much tighter feedback loop than his?
In a lot of ways, the HFT practitioners and the portfolio managers (or other active, but infrequent, trader) are playing complementary, but very different games. The portfolio manager wants to move large blocks of stock, and pays for liquidity. The market maker facilitates the motion of large blocks of stock, and charges a premium for assuming the risk of adverse, short-term market movements.
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No, I asking why bad faith in purchasing private equity would be any different than public.
* Because it is incredibly expensive to obtain a term sheet. * Because the term sheet usually has conditions that the entrepreneur is obliged to honor. * Because the term sheet is provided after the VC is given access to all the details of the entrepreneur's financials. * Because the ruthless withdrawal of a term sheet puts the entrepreneur in a distress situation that harms their ability to obtain other term sheets.…
Not quite. Use your example of a large block trade.
* Because it is incredibly expensive: check
* Because the B/D agmt usually has conditions: check
* Because the execution is provided after all the details of the trade/'s financials: check
* Because the ruthless withdrawal of a term sheet could put the [trader's book] in a distress situation that harms their ability to obtain [another execution]: check.
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There is still risk. Even if you never lose money on a trade, your firm can lose money. You're paying fixed costs such as colocation. It's conceivable that all your trades are profitable, yet the sum of all those profits is lower than your fixed costs. That becomes more likely for any given firm as the competition increases. Spreads get smaller; there's more competition for any given trading opportunity. For each fir…
Or you can blow up like Knight.
Worse, they ignored many alarms as the company was sinking.
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Declining profitabilities caused by increased competition. What market risk are the scalp-style of hft strategies (not all hft's are scalping) taking ? If they can cancel orders at abandon and make pennies if they win the race (against other hft's), but can simply x out of their order if the price doesnt go their way is as close to a riskless profit as it gets. virtu's prospectus as a case in point. https://www.sec.g…
Manoj Narang of Tradeworx has stated their average holding time is up to 10 minutes. Is he taking risk? http://washpost.bloomberg.com/Story?docId=1376-N2CB0F6TTDTQ0...
Directly contradicts "speed is not a problem".
Speed directly translates into being able to "front of trades from slower market participants". If they did not have the speed, they could not algorithmically predict the actions of (or react to activity on one exchange before it reaches other exchanges) and jump in front of slower participants.
There's other issues on top of this, such as paying for early or privileged access. But, if you are faster, you can successfully arbitrage across time or distance(really same thing as time)
If HFT GUARANTEES profits, why are the profits to HFTs declining so sharply, and why do HFT firms make such a small fraction of what the buy-side firms make? Much more discussion here: https://news.ycombinator.com/item?id=7531429
I think the somewhat sparse academic research on this topic is quite interesting - "The High-Frequency Trading Arms Race: Frequent Batch: Auctions as a Market Design Response" by Budish et. al at Chicago ( http://faculty.chicagobooth.edu/eric.budish/research/HFT-Fre... ) is one such paper. The key results in this paper are that: - market correlations 'predictably' break down at high-frequency horizons - these correla…
http://web.eecs.umich.edu/srg/wp-content/uploads/2013/02/ec3...
But in a study last year, University of Michigan professor Michael Wellman and I developed a model across two exchanges. We examined a strategy called latency arbitrage, which utilizes advantages in access and response time to exploit price disparities caused by fragmentation across those dozens of competing venues. HFTs employing latency arbitrage examine current market information to predict immediate price movements, essentially computing the best prices available before the exchange has even had a chance to update its price quote.
What we found may be even scarier than Lewis's book-selling punchline: it's not simply a matter of the HFT crowd taking profits away from regular investors. Predatory strategies like latency arbitrage have the potential to reduce trading gains for all market participants – high-frequency traders and Average Joes alike.
Their solution was to go to periodic call structure.
If HFT adds no value, rigs the game, adds cost to everyday investors and traders looking to make an honest fair buck from the markets, will it be allowed in the future? I almost feel like SEC will come down on them hard. Basically, I'm bummed at the idea that as individuals, we can't innovate in this field without ponying up several million dollars in startup cost.
Earlier quoted context omitted.
* Because it is incredibly expensive to obtain a term sheet. * Because the term sheet usually has conditions that the entrepreneur is obliged to honor. * Because the term sheet is provided after the VC is given access to all the details of the entrepreneur's financials. * Because the ruthless withdrawal of a term sheet puts the entrepreneur in a distress situation that harms their ability to obtain other term sheets.…
There are other reasons, but the analogy is, to me, obviously inapplicable. Not quite. Use your example of a large block trade. * Because it is incredibly expensive: check * Because the B/D agmt usually has conditions: check * Because the execution is provided after all the details of the trade/'s financials: check * Because the ruthless withdrawal of a term sheet could put the [trader's book] in a distress situation…
Obtaining funding is incredibly hard. Each individual term sheet is also incredibly hard.
Shopping a block is hard. Posting a limit order is incredibly cheap, cheaper than it has ever been in human history. Failing to execute also doesn't make posting a next limit order more expensive.