A trading platform that outlaws what it sees as abusive practices
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Re: A trading platform that outlaws what it sees as abusive practices
#2I'm no stock expert, but I still don't see how people are getting "screwed" by hft. If you are concerned about a price fluxation just place a limit order. Simple as that. If you don't care, then place a market order. There's always been someone out there with more information, smarter people, and now faster connections than you. It's never been a level playing field and will never be.
Re: A trading platform that outlaws what it sees as abusive practices
#3I'm no stock expert, but I still don't see how people are getting "screwed" by hft. If you are concerned about a price fluxation just place a limit order. Simple as that. If you don't care, then place a market order. There's always been someone out there with more information, smarter people, and now faster connections than you. It's never been a level playing field and will never be.
Then why are we seeing market demand for his service?
Re: A trading platform that outlaws what it sees as abusive practices
#4I'm no stock expert, but I still don't see how people are getting "screwed" by hft. If you are concerned about a price fluxation just place a limit order. Simple as that. If you don't care, then place a market order. There's always been someone out there with more information, smarter people, and now faster connections than you. It's never been a level playing field and will never be.
Well, you can disable front running with your own exchange which is what he is doing. And it seems to be working (he is getting liquidity, their average market share has tripled from .4% to 1.1%)
This is much better than the government stepping in, so I am very glad he is doing it. We'll see if he can keep up the growth.
Re: A trading platform that outlaws what it sees as abusive practices
#5I'm no stock expert, but I still don't see how people are getting "screwed" by hft. If you are concerned about a price fluxation just place a limit order. Simple as that. If you don't care, then place a market order. There's always been someone out there with more information, smarter people, and now faster connections than you. It's never been a level playing field and will never be.
The fundamental idea of algorithmic trading doesn't really fall into the category of screwing-people-over. However, some techniques employed by institutions engaged in it can easily be seen as outright cheating. One common example is front running [1] where a player with access to real-time order information exploits the knowledge of pending trades from other players to turn a profit at the other players' expense. These techniques can also be used across exchanges.
The issue is a consequence of the lack of market transparency. The exchanges are only required to make order information public with a significant delay. However, they sell the real-time order information to a few market players enabling them to engage in the dubious tactics at the expense of other players.
Note that tactics like front running used to be employed by brokers before algorithmic trading and have since been banned.
Re: A trading platform that outlaws what it sees as abusive practices
#6I'm no stock expert, but I still don't see how people are getting "screwed" by hft. If you are concerned about a price fluxation just place a limit order. Simple as that. If you don't care, then place a market order. There's always been someone out there with more information, smarter people, and now faster connections than you. It's never been a level playing field and will never be.
Well, you can disable front running with your own exchange which is what he is doing. And it seems to be working (he is getting liquidity, their average market share has tripled from .4% to 1.1%) This is much better than the government stepping in, so I am very glad he is doing it. We'll see if he can keep up the growth.
Front running is already illegal.
Re: A trading platform that outlaws what it sees as abusive practices
#7if you have continuous trading, you are going to have complicated interactions (such as outlined in the article.)
instead, an occasional crossing (once a day? once an hour?) would provide much more "fairness" since everything happens at once, at the expense of "timeliness".
back when I worked in this industry (a decade ago) POSIT provided something a lot like this
you can't have it both ways, though.
Re: A trading platform that outlaws what it sees as abusive practices
#8I'm no stock expert, but I still don't see how people are getting "screwed" by hft. If you are concerned about a price fluxation just place a limit order. Simple as that. If you don't care, then place a market order. There's always been someone out there with more information, smarter people, and now faster connections than you. It's never been a level playing field and will never be.
The fundamental idea of algorithmic trading doesn't really fall into the category of screwing-people-over. However, some techniques employed by institutions engaged in it can easily be seen as outright cheating. One common example is front running [1] where a player with access to real-time order information exploits the knowledge of pending trades from other players to turn a profit at the other players' expense. Th…
Front running is already illegal, so if any group is doing that they are already breaking the rules of the game, and should be punished/stopped if found out.
Re: A trading platform that outlaws what it sees as abusive practices
#9I'm no stock expert, but I still don't see how people are getting "screwed" by hft. If you are concerned about a price fluxation just place a limit order. Simple as that. If you don't care, then place a market order. There's always been someone out there with more information, smarter people, and now faster connections than you. It's never been a level playing field and will never be.
The fundamental idea of algorithmic trading doesn't really fall into the category of screwing-people-over. However, some techniques employed by institutions engaged in it can easily be seen as outright cheating. One common example is front running [1] where a player with access to real-time order information exploits the knowledge of pending trades from other players to turn a profit at the other players' expense. Th…
>The exchanges are only required to make order information public with a significant delay. However, they sell the real-time order information to a few market players enabling them to engage in the dubious tactics at the expense of other players.
It's easy to see why you view this as unfair.
But it is fair. Anyone can buy the real-time information if they have the capital.
Obviously markets are going to be more friendly towards you the more money you throw at them.
Just like everything else in capitalism, the fairness comes from anyone being able to have money. If you think this is unfair, you're essentially opposing capitalism.
Re: A trading platform that outlaws what it sees as abusive practices
#10I'm no stock expert, but I still don't see how people are getting "screwed" by hft. If you are concerned about a price fluxation just place a limit order. Simple as that. If you don't care, then place a market order. There's always been someone out there with more information, smarter people, and now faster connections than you. It's never been a level playing field and will never be.
The fundamental idea of algorithmic trading doesn't really fall into the category of screwing-people-over. However, some techniques employed by institutions engaged in it can easily be seen as outright cheating. One common example is front running [1] where a player with access to real-time order information exploits the knowledge of pending trades from other players to turn a profit at the other players' expense. Th…
The idea that HFT is front running any more than a human market maker is a fallacy. What HFT does, is to properly price the liquidity in the market. Previously, large institutional or more likely hedge fund orders would be priced very tightly, because it was in the market maker's interest to know the direction of the flow. By "winning" the trade he/she would have an information advantage on the subsequent likely move in the market (a good assumption here is that flow directions are auto-correlated, with a higher autocorrelation to important customers, which is why this makes economic sense). Armed with this information, said market maker would then pre-position against some of the slower "less in the know" flows who are inevitably triggered by price action, with such price action of course influenced by the market maker himself who can "dribble" out the big position at his leisure. He is "armed" with a position that he can move the market with. Such pre-positioning was profitable as smaller investors reacted to price action and sold. It was basically a game of "I pay for your directional information through tight bid offer for the privileged few".
HFT says the following. If you start selling, then I will move the price downwards in accordance to my best guess as to the size of your flow. If I see serial sell orders, I will move the price subsequently lower on the evidence. I am pricing your liquidity correctly. Thus, if you are a huge hedge fund shorting the market, you face higher transaction costs because the liquidity you are demanding of the market is high, and the market maker can no longer offset your liquidity cost against ripping off smaller investors who will be stopped. This latter is the key point. In fact, for smaller investors, HFT means bid offers are much tighter. If you put a small order through the market you are instaneously filled almost at mid, thanks to HFT, whereas in the old days, retail would pay the same bid/offer for his tiny flow as huge hedge fund. The converse is true for buy orders, obviously.
Have you wondered why HFT is most hated by large institutional funds? It's because suddenly they have to pay a fair price for their huge liquidity requirements.
HFT has short-circuited the old game where large influential funds obtained tight bid offer at the expense of smaller players, and were thus able to dominate markets by trading size at unrealistically tight prices. Now we all pay for our liquidity at a fair price. It's actually really democratic (keeping in mind that competition is mega-fierce).
Ultimately, those who accuse HFT of front running are 100% correct. But there is always "statistical" front running (autocorrelation remember), HFT or Human. The difference now with HFT is that the cost of this front running is proportional to the size of your flow, and thus for smaller/retail investors it is neglibeable (because pricing is now much tigher than under the old "human" regime), and therefore positive, but for the spoiled insitutional investors / hedge funds, used to being privileged, it is back to a level playing field. Need to sell a yard? Need to pay for that buddy. Not good for them.
(obviously I am schematizing to a certain degree. Even humans price large orders wider. It's just they didn't price those large orders anything like wide enough. They sponsored the big client for the info advantage thus earned, info advantage wielded against the rest of the market: read smaller, and/or less in the know, investors).