I quite liked the style of writing in this article. It's days like this that I wish news outlets like Bloomberg and IFR has RSS feeds for particular journalists.
Spoofers Tricked High-Speed Traders by Hitting Keys Fast
31–40 of 89 posts
Re: Spoofers Tricked High-Speed Traders by Hitting Keys Fast
#32Earlier quoted context omitted.
The order book would quickly become a tragedy of the commons - everyone's free to add quotes to it, and doing so costs everyone else. In a perfect frictionless free market maybe exchanges could charge appropriately to put in an order, and rebate the proceeds to people who use the order book. But that's probably impractical (if nothing else, people would send their orders to other exchanges), and would create bad ince…
Here's an interesting proposal - you charge a small amount (e.g. 0.001 of a cent) for every single order placement and rebate the proceeds to all market participants in proportion to how much volume they actually traded. People who enter many quotes that they never trade on would be punished by this system (human traders and "flickering" high frequency traders alike) whereas people providing genuine liquidity, in the…
This is already done. There is an per-order fee and a per-trade fee. All your proposal would do is shift the balance slightly between these fees.
Re: Spoofers Tricked High-Speed Traders by Hitting Keys Fast
#33HFT systems were tricked into making bad decisions?
Boo hoo hoo! Won't anyone please think of the HFT systems?
Re: Spoofers Tricked High-Speed Traders by Hitting Keys Fast
#34I'm not even sure if I would consider this fraud (personally). I mean, if the initial outstanding orders were at risc of actually being bought and he had to deliver, then I think it is just fine that the market is naive enough to judge the worth of a company on some anonymous seller, rather than company performance and market-place condition of said company. What's next, you start moving stock prices through twitter…
It's an odd situation, for sure. After all, these share orders were being entered by humans and could have been sitting in the market order books for several seconds. In that time, anyone could have taken their orders. So they really were genuine offers to sell and buy shares. Compare that to high frequency traders where it is alleged that 'flash' market orders are submitted and cancelled so fast that no-one could ac…
You can take an order, at least probabilistically.
Suppose an HFT has an order on the market from 0.30 to 0.40. If you submit an order at 0.00, your order will arrive at some time uniformly distributed between 0.00 and 1.00. With probability 0.1 you'll get a fill.
Re: Spoofers Tricked High-Speed Traders by Hitting Keys Fast
#35The article has to be completely misrepresenting which part, exactly, was illegal here. Nearly every high frequency trader in every electronic market aims to do something very similar to 90% of what he describes here.
Is it all because of the motive? And bots can legally do the exact same thing because it's harder to prove any motive behind a bot's actions?
Re: Spoofers Tricked High-Speed Traders by Hitting Keys Fast
#36Earlier quoted context omitted.
That's exactly what I was thinking. When high frequency traders are doing it it's OK but when this guy tricks them into actually taking some risks it's fraud.
When most high frequency traders trade, they are not actively trying to manipulate the market for their own gain (in the cases where they are manipulating the market, they should of course be punished). Most high frequency traders are trying to make money by providing liquidity, i.e. offering to buy and sell at a better price than the rest of the market. This benefits both the HFT (because they make money) and other…
95 percent of high-frequency trader orders are cancelled (so fast that nobody can take them). Some high-frequency traders have claimed to be profitable on over 99 percent of their trading days.
I don't buy the "providing liquidity" defense of HFT.
http://blogs.wsj.com/moneybeat/2014/04/03/schwab-on-hft-grow...
Re: Spoofers Tricked High-Speed Traders by Hitting Keys Fast
#37The article has to be completely misrepresenting which part, exactly, was illegal here. Nearly every high frequency trader in every electronic market aims to do something very similar to 90% of what he describes here. Is it all because of the motive? And bots can legally do the exact same thing because it's harder to prove any motive behind a bot's actions?
which part, exactly, was illegal here.
The part where he did this with the expressed intention to deceive the market. This is one of those cases where your intentions are far more important that your actions.
Re: Spoofers Tricked High-Speed Traders by Hitting Keys Fast
#38Earlier quoted context omitted.
The market clears any matching orders in effectively zero time (that is, it runs its matching algorithm to clear the book before it allows any new quotes to enter). After an order is matched, you can't cancel it except in exceptional circumstances (for example, you mistakenly entered an order very far from the bbo - in that case, with the cooperation of your broker and the counterparty to your trade, you may be able…
So if I offer a trade, and then withdraw the trade because I decide I don't like the idea anymore (or 'any other reason')... that's legal. And routine to do on microsecond timescales. But offering a trade, and then withdrawing the trade manually a few seconds later because I never intended to execute the trade... that's not legal? What was the original rational for creating this class of thoughtcrime? Why does it cri…
>So if I offer a trade, and then withdraw the trade because I decide I don't like the idea anymore (or 'any other reason')... that's legal. And routine to do on microsecond timescales.
Yes that's right. So quickly you may as well assume that they are updating the price they are willing to buy/sell continuously in realtime. Which is the idea. And because they are updating their prices continuously and accurately, they can keep the gap between those two prices as small as possible. For some bizarre reason, this is the only field in all of technology where HN contributors get freaked out by this. Name a control system that doesn't update its outputs frequently.
>But offering a trade, and then withdrawing the trade manually a few seconds later because I never intended to execute the trade... that's not legal?
Yes that's right. Markets work on trust, if you don't actually want to buy/sell what you're claiming you want to buy/sell then you are lying. More importantly, if you don't want to trade, what are you doing putting the order in? What does that leave as your motivation? Manipulation, that's what. Which is illegal. It's very hard to define market manipulation, but that's just about the easiest way I can think of - can you think of a simpler definition? They have to settle on some way of describing it, and it's not unusual for crimes to be defined by intent.
>Doesn't HTF presuppose that we are hard-coding this behavior, this tactic, into the trading algorithms of automated traders?
I don't follow
Re: Spoofers Tricked High-Speed Traders by Hitting Keys Fast
#39Earlier quoted context omitted.
When most high frequency traders trade, they are not actively trying to manipulate the market for their own gain (in the cases where they are manipulating the market, they should of course be punished). Most high frequency traders are trying to make money by providing liquidity, i.e. offering to buy and sell at a better price than the rest of the market. This benefits both the HFT (because they make money) and other…
95 percent of high-frequency trader orders are cancelled (so fast that nobody can take them). Some high-frequency traders have claimed to be profitable on over 99 percent of their trading days. I don't buy the "providing liquidity" defense of HFT. http://blogs.wsj.com/moneybeat/2014/04/03/schwab-on-hft-grow...
>95 percent of high-frequency trader orders are cancelled
So what. 99.9999999% of the pixels blatted onto your screen aren't looked at. Why do you care?
Let's say I'm making a market in a derivative product (A), one where the price is 'derived' from the price of another product (B). By a simple equation. Let's say A = 2 * B. No one likes product A. No one trades it. Lots of people trade B. All day long B moves around. B ticks up, I have to cancel my bid and offer on A and move them up 2 ticks (I do it quickly, cos I'm an evil HFT). B ticks down, I have to cancel my bid and offer on B and move it down 2 ticks. All day long I move my quotes. No one fucking trades. 100% of my orders are cancelled and replaced on a different price.
Why do you care?
A limit order is a limit order. It isn't doing anyone any harm by being there.
>Some high-frequency traders have claimed to be profitable on over 99 percent of their trading days.
McDonalds are profitable on 100% of their trading days. Casinos are likely profitable on 99% of their trading days. If they weren't profitable they wouldn't be doing it. Market-makers like Virtu are more service providers than they are 'traders'. They are the middle men who allow others to trade and take risk, and extract a small fee for doing so. Here's a good analysis to read: http://blogs.wsj.com/moneybeat/2014/11/13/virtus-losing-day-...
Re: Spoofers Tricked High-Speed Traders by Hitting Keys Fast
#40Earlier quoted context omitted.
You're not allowed to place an order you have no intention of honoring. Basically it comes down to a question of his intent rather than his actions.
Then why does the API allow it?
Because there are scenarios where the actions he did are both legal and reasonable. As I said, the case is all about intent.