Wall Street’s ‘Private Rooms’ • Hacker News Board

Re: Wall Street’s ‘Private Rooms’

#181

Post by JedMartin » Tue, Mar 18, 2025, 1:44 PM UTC

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…

You would change the rules, but I think the result would largely remain the same. As a market participant with the fastest access to data from other markets, news, and similar sources, as well as low order entry latency, you would still be able to profit from information asymmetry.

Imagine that a company announces the approval of its new vaccine a few milliseconds before the periodic trade occurs. As an HFT firm, you have the technology to enter, cancel, or modify your orders before the periodic auction takes place, while less sophisticated players remain oblivious to what just happened. The same applies to price movements on venues trading the same instrument, its derivatives, or even correlated assets in different parts of the world.

On the other hand, you risk increasing price volatility (especially in cases where there is an imbalance between buyers and sellers during the periodic auction) and making markets less liquid.

Re: Wall Street’s ‘Private Rooms’

#182

Post by JumpCrisscross » Tue, Mar 18, 2025, 1:58 PM UTC

shawabawa3 wrote: post #160

JumpCrisscross wrote: post #156

Earlier quoted context omitted.

> 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

> racing against the clock has marginal utility

It has the same utility as in the opening cross, the most algorithmically-trafficked moments of trading after the closing cross. The last order can incorporate more information than an earlier one. Given the book is assembled transparently, that means an order submitted close to the deadline can “see” other orders in a way they couldn’t “see” it.

Re: Wall Street’s ‘Private Rooms’

#183

Post by matthewdgreen » Tue, Mar 18, 2025, 2:51 PM UTC

dkjaudyeqooe wrote: post #151

hayst4ck wrote: post #90

Earlier quoted context omitted.

> 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 red…

I don't really understand what you're saying. The scenario being discussed is that I buy a financial product for a higher price then [hypothetical alternative]. We use the phrase "losing money" in many cases where your financial upside is potentially reduced compared to alternatives. It isn't a "this makes no sense" situation.

Re: Wall Street’s ‘Private Rooms’

#184

Post by matthewdgreen » Tue, Mar 18, 2025, 3:00 PM UTC

chii wrote: post #123

throwaway2037 wrote: post #120

Earlier quoted context omitted.

Agree: They are called block trades in equities. Also, another benefit of a dark pool is that you can pay to control who you trade with. On the primary exchange, it is dog-eat-dog. This is why long-only asset managers prefer block trades for supersize trades, and dark pools for smaller trades. To me, the practice of paying for (non-toxic retail) flow is way more suspicious than dark pools. This is how Robin Hood can…

> to another firm that can front run it. to be legal, the broker selling your order flow must give the price you're supposed to have gotten to be at or lower than the best price from the market. I dont get how front running could work under this legal rule.

Each time I hear this I am reminded of the signs that appear the inside of hotel room doors in some places, advertising insanely high prices for the room. I believe these stem from laws that require the hotel to offer the room at or lower than the price advertised on the sign, so the hotels jack that price up to something unrelated to the actual price you'd get from competitive shopping. I assume this can't happen with open market prices, right?

Re: Wall Street’s ‘Private Rooms’

#185

Post by affyboi » Tue, Mar 18, 2025, 3:11 PM UTC

kubafu wrote: post #49

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…

This. What's the difference between hft and gambling? Yet we put tight rules on gambling.

Gambling is much less regulated than the markets.

Re: Wall Street’s ‘Private Rooms’

#186

Post by reverendsteveii » Tue, Mar 18, 2025, 3:12 PM UTC

_bin_ wrote: post #81

reverendsteveii wrote: post #19

Earlier quoted context omitted.

The only reaction more adverse than the one you get asking coders about remote voting is the one you get asking finance people about transparency and anticorruption. It's an open secret at this point that any effort that would weed out a significant proportion of the fraud would cripple our finance sector overall just because everyone who runs it would be in prison.

it's more like because governments have started to try to assign criminal liability to seniormost execs, not just to the people responsible. this is a response to the wink-and-nod cases that do exist but glaringly fails to account for the complexity and scope of large financial institutions and the fact that the guy at the top can't always supervise everything personally. i don't know who you're talking to but no, it…

top executives are responsible when the company makes a profit. maybe they should be responsible when the company commits a crime. if they can't be responsible when the company commits a crime, how do they justify being primarily responsible when the company does well?

Re: Wall Street’s ‘Private Rooms’

#187

Post by sdwr » Tue, Mar 18, 2025, 3:18 PM UTC

JumpCrisscross wrote: post #182

shawabawa3 wrote: post #160

Earlier quoted context omitted.

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

> racing against the clock has marginal utility It has the same utility as in the opening cross, the most algorithmically-trafficked moments of trading after the closing cross. The last order can incorporate more information than an earlier one. Given the book is assembled transparently, that means an order submitted close to the deadline can “see” other orders in a way they couldn’t “see” it.

> blind one trade per-minute granularity

"Blind" meaning that no orders can "see" each other.

Re: Wall Street’s ‘Private Rooms’

#188

Post by LewisVerstappen » Tue, Mar 18, 2025, 3:53 PM UTC

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…

Everything you “suspect” is completely wrong

Re: Wall Street’s ‘Private Rooms’

#189

Post by 0dte » Tue, Mar 18, 2025, 4:26 PM UTC

JedMartin wrote: post #98

hayst4ck wrote: post #90

Earlier quoted context omitted.

> 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…

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…

This is not exactly how it works. You're right that a big fund executing on a public market will incur (potentially excessive) impact, but the purpose of these private rooms is not to prevent trading against informed parties! Often, the counterparties that a big fund might find on these private rooms will in fact be the same market makers and liquidity providers present on public exchanges.

The difference is that in these private rooms, liquidity providers are often able to understand their customer more. For example, big passive index funds aren't buying and selling due to some adverse knowledge of future price movement. Instead, they are merely following the index. If market makers are able to distinguish between the passive indexers and the smart sophisticated hedge funds, they will then be able to provide to the passive indexers at a better price.

Re: Wall Street’s ‘Private Rooms’

#190

Post by ElliotM » Tue, Mar 18, 2025, 4:54 PM UTC

dheera wrote: post #110

ElliotM wrote: post #73

Earlier quoted context omitted.

> Unfortunately the SEC only requires them to report transactions within 15 minutes, not in real time. TRF reports must happen within 10 seconds or be submitted with a late modifier [0]. An executing broker systematically submitting all reports 15 minutes late would be investigated pretty quickly. You can buy access to the consolidated tape from a marketdata provider, although this is going to be pretty prohibitively…

I have a Polygon real-time market data subscription and everything comes real time except for darkpools. From the customer service bot: "Yes, other trades are generally reported faster than dark pool trades on our WebSocket. We stream market data in real-time as we receive it, with most trades being reported very quickly. For US stocks, the average latency for trades and quotes is less than 20ms. However, dark pool t…

I suspect that customer service bot is incorrect. As also noted on this page[0], all dark pool trades are published to the consolidated tape, which appears to be part of the polygon API.

As an aside, the behavior you’re seeing might actually be causal- a large print appearing on the tape likely causes automated systems to widen out their quotes. Or alternatively, if the trade is through the NBBO, you’re seeing the top of the book (the protected quote) being swept in compliance with RegNMS.

[0] https://www.finra.org/investors/insights/can-you-swim-dark-p...