21–30 of 237 posts
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…
IMHO markets should do something similar: create something like 30-second barriers for trades. Trades that cross the bid/ask are carried out. Trades submitted cannot be canceled until the next 30s cycle. Trades outside of the range (bid too low/ask too high) stay open. The open trade book is sent to everybody every 30s.
Allowing µs-range trades (and particularly adding and removing bids and asks so fast) is asking for trouble, it is obvious that at some point of time two or three HFT robots will react on each other's trades and do something veeeeery stupid.
From a technical perspective, as orders are sent to the exchange, NYSE sends them out on a direct line to subscribers who listen to that feed. This is not private information, but it is relatively expensive, given you'd need to have servers at a colo, and pay for fast networking, boxes, software, etc.
They also then aggregate that data and send them out on a feed to the NBBO which is much more accessible to the majority of traders. Obviously, it is somewhat delayed, as they need to aggregate, and a firm that can aggregate the data faster than NYSE thereby has an advantage. This aggregated data gets set out as soon as possible, and NBBO defines a time range that they need to be accurate. For what its worth, NBBO means "National Best Bid and Offer" and they will aggregate bids and offers from all exchanges and provide the best one in a single consolidated feed.
Nanex determined that at certain times during high volume, Nasdaq's aggregate feed was delayed by up to 30 seconds, and this was cause by certain entities quote stuffing (which like I said earlier, is against the rules).
That is all that was determined. There is nothing about trading on private information (which there is none here) or front-running (which HFT firms can't do) or any of the other nonsense that gets spewed out.
If anything, other firms with good infrastructure would have been able to arb out the inefficiency and make the markets right again, quickly.
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…
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Earlier quoted context omitted.
IIRC, HN's yummyfajitas goes into a lot of details in his blog posts on HFT[1]. My own understanding is that it provides liquidity and reduces bid/ask spreads, resulting in a more accurate stock valuation. I'm not sure the negatives, but I'm not a trader nor do I follow such things all that closely. 1: https://news.ycombinator.com/item?id=3852341
From that blog post: "Most HFTs run a market making strategy. What this means is they play both sides of the table - they take no position on whether a stock will go up or down. Instead, they try to offer securities both to buy and sell. If you want to buy, they will sell to you at $20.10. If you want to sell, they'll buy from you at $20. As long as their buys and sells match don't get too out of whack, the HFT will…
Nuclear reactors are planned in a way that their response time is in human scale e.g. they take something like 20 seconds to increase or decrease activity. This leaves room for human intervention. IMHO markets should do something similar: create something like 30-second barriers for trades. Trades that cross the bid/ask are carried out. Trades submitted cannot be canceled until the next 30s cycle. Trades outside of t…
Meanwhile, if you're the kind of trader that is impacted by trade latency (read: a competitive market maker or decently well capitalized prop trading firm), there are already venues you can trade in that are quantized. The problem is that nobody wants to trade in them.
Sure, they'd be weary of the immense regulation involved. But I imagine they're much more qualified to build a fair, fast and accurate trading system than any of the existing exchanges are.
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…
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 for a business. The largest cost will be salaries for the people writing your code and maintaining your infrastructure.
This might be of interest to people: A NYSE Speed Bump You Weren't Aware Of https://www.iextrading.com/about/press/op-ed/
I have two questions about HFT: - Is HFT a healthy or unhealthy part of the economy? Meaning does it help flatten out the highs/lows, or does it emphasise them? - Aside from a micro-tax on trading (e.g. 1c/trade) is there any other mitigations/solutions to HFT?
Everyone else will tell you it doesn't. Given the choice, someone buying stocks directly would not choose to buy them from an exchange that allows high frequency trading. People will also dispute that, but you have to ask yourself, if HFT is so good for everyone, who is all their money coming from?