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Nanex Gets $700k Whistleblower Award from SEC

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Re: Nanex Gets $700k Whistleblower Award from SEC

#181

Post by TheNanex »

kbenson wrote: post #59
TheNanex wrote: post #48

Yikes. Lots of misinformation here. First of all, this has nothing to do with High-Frequency Trading. It's about the NYSE not delivering a product (SIP real-time data) while collecting $100M a year for that service. This was happening for at least 3 years. I am a champion of free markets. The term "High-Frequency Trading critic" is a label others use when they either can't understand and/or refute solid evidence. I'm…

Can you comment on how hard it was to find another period exhibiting this behavior? The article says We chose this period because there was a noticeable lag in the public quote from the NYSE versus quotes from other exchanges, allowing us to rule out the consolidation process as a source of the delay. Did you have to look for a few periods to see the behavior, or did you look for a few to get a sample that showed the…

It happens all the time (ALL. THE. TIME.) and have documented dozens of examples. There are links to many of those examples on that page (fantaseconds).

I've also posted many examples on twitter @nanexllc using recent data (yes, this is still a problem!)

Re: Nanex Gets $700k Whistleblower Award from SEC

#182

Post by TheNanex »

officialchicken wrote: post #172
TheNanex wrote: post #48

Yikes. Lots of misinformation here. First of all, this has nothing to do with High-Frequency Trading. It's about the NYSE not delivering a product (SIP real-time data) while collecting $100M a year for that service. This was happening for at least 3 years. I am a champion of free markets. The term "High-Frequency Trading critic" is a label others use when they either can't understand and/or refute solid evidence. I'm…

Please excuse my ignorance if this question is dumb, but what is the name of the kind of Chart 3? I've never seen one like it and it's fascinating to me - it seems like it's a 2d line graph with some shaded regions, but not a heat map.

I don't have a name for that chart. It's a customized display I wrote that I found makes it easiest to view quote spreads and trades from multiple exchanges. I write in "c" combining simple graphics: lines, pixels and text.

Re: Nanex Gets $700k Whistleblower Award from SEC

#183

Post by TheNanex »

[deleted] wrote: post #169
TheNanex wrote: post #48

Yikes. Lots of misinformation here. First of all, this has nothing to do with High-Frequency Trading. It's about the NYSE not delivering a product (SIP real-time data) while collecting $100M a year for that service. This was happening for at least 3 years. I am a champion of free markets. The term "High-Frequency Trading critic" is a label others use when they either can't understand and/or refute solid evidence. I'm…

[deleted]

Nothing will make it move more quickly. As for tips, in no particular order: 1) don't tell anyone (for many reasons) 2) you don't need a lawyer in the first stage 3) be sure you have rock solid proof 4) do not risk your career 5) prepare to be called every name imaginable when others find out (they always do) 6) have a solid support network of family/friends 7) seek the advice of someone wise that you trust 8) remember: wall street always wins

Re: Nanex Gets $700k Whistleblower Award from SEC

#184

Post by TheNanex »

PhantomGremlin wrote: post #78
TheNanex wrote: post #48

Yikes. Lots of misinformation here. First of all, this has nothing to do with High-Frequency Trading. It's about the NYSE not delivering a product (SIP real-time data) while collecting $100M a year for that service. This was happening for at least 3 years. I am a champion of free markets. The term "High-Frequency Trading critic" is a label others use when they either can't understand and/or refute solid evidence. I'm…

It's about the NYSE not delivering a product (SIP real-time data) while collecting $100M a year for that service And, just to be clear, the NYSE generously agreed to pay a $5M fine as punishment? The actual SEC order is linked to by Nanex, and can be found here: http://sec.gov/litigation/admin/2012/34-67857.pdf It explains NYSE's failings in more detail, e.g. "Inadequate Compliance Efforts" and "Failure to Retain Bus…

Excellent question: they were ECSTATIC to pay $5M

Covington and Burling - who represented the NYSE in this matter, used the paltry $5M fine as bragging rights in their year end letter to clients! 'We got the NYSE off with just $5M'

Nice.

Re: Nanex Gets $700k Whistleblower Award from SEC

#185

Post by Lazare »

jsprogrammer wrote: post #179
Lazare wrote: post #175

Earlier quoted context omitted.

Oh boy, you got this 100% the wrong way around. As a small trader, you get access to special lower prices that a hedge fund can't get. Your broker will be routing your order to a wholesaler who will fill it at lower prices (ie, narrower spreads) than you would get on the open market, because they have a legal obligation to not screw you over. You can request that they route it to anywhere you want, and they are legal…

As a small trader I don't get paid to provide liquidity. A hedge fund may. I used the word scrape in response to tptacek's response below my above post. If a trader is not aware that what tptacek describes is happening to their orders, then I believe my characterization is accurate.

You're still not addressing my main point.

As a small investor, your order is probably routed to a wholesaler like Citadel, where you will get a better price than you would otherwise get.

And you are upset because you incorrectly believed that your order would be routed somewhere else (where, exactly?), where you would get a worse price, which you think would be better because...why?

> I believe my characterization is accurate.

It's not even slightly accurate; it's literally the opposite of the truth.

Re: Nanex Gets $700k Whistleblower Award from SEC

#186

Post by zekevermillion »

jsprogrammer wrote: post #151
kasey_junk wrote: post #150

Earlier quoted context omitted.

Well just to clarify a little. There are 2 different concepts that sound sort of similar. 1) A dark pool. This is just another name for an exchange, but one that is not public. I don't know if NYSE runs one, but it wouldn't be surprising. The theory behind these is that they are provided as a service to large institutional investors to trade with each others outside the vagaries of the public markets for lots of reas…

The case we are talking about however, I believe, is where NYSE operates an apparently public market with delayed quotes for some players. Tptacek claims that my orders cannot even make it into the supposedly public market because someone will scoop up my order on the way, before it even reaches the delayed quote market and therefore, the market is not special because I cannot access it (which is disputable).

Tptacek seems quite convinced that the "tiny spread" pocketed by HFT arbitrageurs comes entirely out of the pocket of competing HFT shops and has no impact on the prices paid by other participants.

Re: Nanex Gets $700k Whistleblower Award from SEC

#187

Post by TheNanex »

reverend_gonzo wrote: post #28
tsunamifury wrote: post #9

So essentially the NYSE is a provably fixed game, with large HFT houses paying for the right to trade on non-public information, and it hides behind the idea that it was just a few hundred milliseconds. All the while they are selling non-public information as a product that is deliberately used to micro-manipulate the market? I mean, deep down I always knew this, but to have it all spelled out is shocking because it…

Market data is not non-public definition. NYSE was simply slow in aggregating market data during times of high volume. This did not affect you as a retail investor, as you get the NBBO price. This only affected you if you were an HFT firm with bad infrastructure who depended on the aggregate feed and not their direct line. Like tptacek said, the price for getting a direct line, while expensive, is not unreasonable fo…

Where to begin.

The retail investor gets the slowed down price (the NBBO is really what the internalizer/wholesaler saw from the SIP when they executed your order). That same internalizer buys/sells from the faster feed. Whenever the two feeds are out of sync, it's like printing money.

"The price for getting a direct line is not unreasonable?" I just laughed out loud reading that. Is $60,000/month for just one exchange (there are a dozen), reasonable? Then you need network engineers, infrastructure, etc. It used to be nowhere near this expensive for "real-time" data. Orders of magnitude less.

Re: Nanex Gets $700k Whistleblower Award from SEC

#188

Post by TheNanex »

KMag wrote: post #177
reverend_gonzo wrote: post #98

Earlier quoted context omitted.

Outside of labor, the primary costs are hardware, colocation, and networking, none of which is a fee to the exchange. Please tell, how the world is supposed to provide that for free to anyone who wants it? Colocated servers are the public.

The regulation is about equal access, not free access. Now, the SIP feed contains combined market data from all of the exchanges to which the National Best Bid / Offer (NBBO) applies, so that a broker-dealer can look at the SIP feed to determine nationally what the best bid across many exchanges is and what the best offer across many exchanges is. The Reg NMS mentioned is that the broker can't give you a price (befor…

The SIP (consolidated feed) is tasked with using the most efficient hardware and software available. If a private company can consolidate faster than the SIP, then the SIP isn't using the most efficient hardware and software available now is it?

Pretty simple.

The exchanges take in $500M a year in SIP fees, which are supposed to go to the most efficient hardware and software available. Pretty sure that's not happening.

Re: Nanex Gets $700k Whistleblower Award from SEC

#189

Post by kasey_junk »

TheNanex wrote: post #187
reverend_gonzo wrote: post #28

Earlier quoted context omitted.

Market data is not non-public definition. NYSE was simply slow in aggregating market data during times of high volume. This did not affect you as a retail investor, as you get the NBBO price. This only affected you if you were an HFT firm with bad infrastructure who depended on the aggregate feed and not their direct line. Like tptacek said, the price for getting a direct line, while expensive, is not unreasonable fo…

Where to begin. The retail investor gets the slowed down price (the NBBO is really what the internalizer/wholesaler saw from the SIP when they executed your order). That same internalizer buys/sells from the faster feed. Whenever the two feeds are out of sync, it's like printing money. "The price for getting a direct line is not unreasonable?" I just laughed out loud reading that. Is $60,000/month for just one exchan…

What would be your proposal for a solution to a sync'd feeds obvious distributed systems problems?

How much latency would be acceptable for a fully consistent, high throughput distributed log of events, that when it becomes unavailable the entirety of US trading shuts down and if it ever gets out of order can cause gigantic lawsuits?

How would you change the obvious organizational disincentives as well? Given that maintenance of the SIP is full cost, no profit operation for the exchanges?

Finally, don't take this as a criticism of your whistle blowing, I think that is critical to a functioning market, I am curious to know how you would solve the obvious technical challenges the consolidated feed faces?

Re: Nanex Gets $700k Whistleblower Award from SEC

#190

Post by TheNanex »

Lazare wrote: post #175
jsprogrammer wrote: post #83

Earlier quoted context omitted.

Are you saying that there is a special market operating in the NYSE that some traders cannot access? Why would my order not be eligible for being matched, but a HFT's would? Edit: wow, rate limited after three posts this morning. A new HN low. My response to tptacek below: My dumb order? How can HFT's intercept and redirect my trades to their, appently, captive pool of dumb trades? Sure sounds like multiple markets a…

Oh boy, you got this 100% the wrong way around. As a small trader, you get access to special lower prices that a hedge fund can't get. Your broker will be routing your order to a wholesaler who will fill it at lower prices (ie, narrower spreads) than you would get on the open market, because they have a legal obligation to not screw you over. You can request that they route it to anywhere you want, and they are legal…

Are you from Citadel?

Would you trust Wall Street to give you the best price on anything if there was no way to verify it?

There is no way to reasonably know if you are getting the best price (because they can change many times in the same second).

You are relying on the internalizer to give you the best of many possible prices. History says: "that's not going to happen"

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