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For example, while other markets and the real world moves on, you gain info. So the later in the batch you can submit a trade, the greater your advantage.
This type of order book is actually quite common in Europe now! It provides an interesting alternative to central limit order books and dark pools. Around the introduction of MiFID II regulation in 2018, several exchange operators added these frequent auction books. Cboe's period auctions book is the biggest of these by volume: https://www.cboe.com/europe/equities/trading/periodic_auctio... In addition to Cboe, Turqu…
Periodic auctions still need tie breakers. CBOE for instance falls back to size then time. This is the same tie breaker that some CME futures contracts have used in a continuous order book. Those contracts always had more gamesmanship than standard price/time contracts when I was trading. Has that become true in the auction space at well?
Earlier quoted context omitted.
High turnover rates are part of the definition of high frequency trading. If your holding positions for 30 minutes your not doing HFT. Ultimate buyers and sellers aren’t gaining anything on the timescales we are talking about.
I don't know why you're bringing this up because it's not relevant, and nor is it accurate. You can have high turnover rates in batch auction strategy as well as a continuous trading strategy, this market structure change won't change that. And you can have a HFT strat with low turnover, e.g in a large tick name that barely moves where you might get five latency sensitive trades per day.
“Very short time-frames for establishing and liquidating positions.” strait from the SEC: https://www.sec.gov/marketstructure/research/hft_lit_review_...
Now it’s true an individual stock may only see 5 trades per day from a HFT algo, but theirs more than just one stock. The larger pool of money sitting around waiting for those 5 trades the lower your ROI. So, the obvious strategy is to reuse the same pool of money to back multiple different strategies.
Is there any mathematical proof that it's harder to game batch auctions than what we have now? For example, while other markets and the real world moves on, you gain info. So the later in the batch you can submit a trade, the greater your advantage.
Earlier quoted context omitted.
I don't know why you're bringing this up because it's not relevant, and nor is it accurate. You can have high turnover rates in batch auction strategy as well as a continuous trading strategy, this market structure change won't change that. And you can have a HFT strat with low turnover, e.g in a large tick name that barely moves where you might get five latency sensitive trades per day.
Latency sensitivity and Alo trading isn’t the same thing as HFT. “Very short time-frames for establishing and liquidating positions.” strait from the SEC: https://www.sec.gov/marketstructure/research/hft_lit_review_... Now it’s true an individual stock may only see 5 trades per day from a HFT algo, but theirs more than just one stock. The larger pool of money sitting around waiting for those 5 trades the lower your R…
Anyway my point is that it's wrong to think that HFT are going out of business with this change because it's a fundamental misunderstanding of HFT. There's almost always an ML component and always an execution component and these two skills are going to be critical to profiting off the new market structure. Citadel, Jump, Tower, you name it. I promise you they will be all over this new structure.
I was working in HFT as a dev team lead around the time of this article (2105). I remember this was being seriously considered by one of our target exchanges (can't remember if it was Eurex or Globex). Our main HFT trader didn't seem worried - he said that the race would just change from a race to pick off an opportunity into a race to align with any auction timeframe. Back then, our strategies were implemented in FG…
Actually, it got implemented by most major exchanges in Europe in 2017/2018 and cboe seems to be bringing this to the US now: https://www.cboe.com/us/equities/trading/offerings/periodic_...
I've been out of the HFT business for a while, so i guess things have moved on.
While I was at jpmorgan I actually spent some time thinking about alternative auction structures (vs the order book model). The current trading model is ultimately a mechanization of the rules from trading happened in a literal trading floor room, and a lot of the structural issues stem from those rules treating time as infinite resolution and the speed of information propagation/light being instaneous. There’s some…
Is there any mathematical proof that it's harder to game batch auctions than what we have now? For example, while other markets and the real world moves on, you gain info. So the later in the batch you can submit a trade, the greater your advantage.
That was my initial thought as well: this would just become an arms race to submit your trade last? But maybe if the trades were priority queued it would negate that.
How does a priority queue work?
Earlier quoted context omitted.
Latency sensitivity and Alo trading isn’t the same thing as HFT. “Very short time-frames for establishing and liquidating positions.” strait from the SEC: https://www.sec.gov/marketstructure/research/hft_lit_review_... Now it’s true an individual stock may only see 5 trades per day from a HFT algo, but theirs more than just one stock. The larger pool of money sitting around waiting for those 5 trades the lower your R…
A HFT that's trading bond futures may only have a handful of trades per day and hold for a long time because it's hard to liquidate effectively. Sometimes they just range all day. Anyway my point is that it's wrong to think that HFT are going out of business with this change because it's a fundamental misunderstanding of HFT. There's almost always an ML component and always an execution component and these two skills…
I completely agree, and they are going to use the same tools. The question is if this change is a net positive trade for the economy, and that I don’t know but I have heard reasonable arguments in favor.
Earlier quoted context omitted.
Actually, it got implemented by most major exchanges in Europe in 2017/2018 and cboe seems to be bringing this to the US now: https://www.cboe.com/us/equities/trading/offerings/periodic_...
Wow - TIL. Thanks. I've been out of the HFT business for a while, so i guess things have moved on.