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Nanex Gets $700k Whistleblower Award from SEC

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Re: Nanex Gets $700k Whistleblower Award from SEC

#211

Post by tptacek »

CyberDildonics wrote: post #209
tptacek wrote: post #140

Earlier quoted context omitted.

There is nothing magical about the word "shill". The prohibition isn't simply on using the word. https://hn.algolia.com/?query=author:dang%20shill&sort=byDat...

All I said was "People who stand to benefit directly from High Frequency Trading will tell you it has benefits." Then is a general statement, I didn't say anything about this site or you. Now you seem to be trying to pull a self righteous reframing of what I said to be against some rule set since you seem to be threatened and unable to confront legitimate criticisms. It had nothing to do with you yet somehow you've a…

No, that is not what you said. You said "people who stand to benefit directly from HFT will tell you it has benefits, and everyone else will tell you it doesn't."

Your comments are right there for everyone to read, and they're getting flagged off the site for a reason.

Re: Nanex Gets $700k Whistleblower Award from SEC

#212

Post by KMag »

TheNanex wrote: post #207
KMag wrote: post #196

Earlier quoted context omitted.

> Pretty simple. Oversimplification, forgetting the laws of geometry and physics. The triangle inequality and relativity conspire against the SIP. If you're getting the SIP from B, any new prices at C go to B and then forwarded to you, so it's faster (best case equal in the degenerate triangle case) to get direct feeds from B and C and consolidate locally.

Are you saying the SIP runs on the best hardware/software available? I want to get that cleared up before moving on to a new topic.

I don't know about the hardware being used by the SIP. It might very well be very slow hardware. You clearly have a lot more knowledge than I do and have done some very good research.

I was just pointing out that

> 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?

is faulty reasoning.

Re: Nanex Gets $700k Whistleblower Award from SEC

#213

Post by KMag »

kasey_junk wrote: post #189
TheNanex wrote: post #187

Earlier quoted context omitted.

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 ma…

What do you mean by "fully consistent" in the context of the SIP feed? The SIP isn't required to be consistent in the CAP sense of "consistent".

Re: Nanex Gets $700k Whistleblower Award from SEC

#214

Post by tptacek »

jsprogrammer wrote: post #210
tptacek wrote: post #100

Earlier quoted context omitted.

No, that's not what he's saying. But aside from that: the reason orders you place won't be matched on any market at NYSE, let alone a special one, is that HFT market makers will give you a price break to route your dumb order to them so they can collect their tiny spread from your trade without worrying that you're a hedge fund about to steamroll them with a giant block order.

Who is subsidizing the HFT market makers so that they can undercut the rest of the market on their private exchanges?

This is like a question from a markov generator. I won't try to answer it.

Re: Nanex Gets $700k Whistleblower Award from SEC

#215

Post by jsprogrammer »

tptacek wrote: post #214
jsprogrammer wrote: post #210

Earlier quoted context omitted.

Who is subsidizing the HFT market makers so that they can undercut the rest of the market on their private exchanges?

This is like a question from a markov generator. I won't try to answer it.

Some help:

>is that HFT market makers will give you a price break to route your dumb order to them

You claim a price break on a private exchange. How can they (HFT market makers) deliver a better price than the public exchange? Presumably they cannot have bought it on the public market at the better price, so some party must absorb the loss on the price break.

My question can now be translated to:

Who absorbs the loss from the price break?

Re: Nanex Gets $700k Whistleblower Award from SEC

#216

Post by kasey_junk »

KMag wrote: post #213
kasey_junk wrote: post #189

Earlier quoted context omitted.

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 ma…

What do you mean by "fully consistent" in the context of the SIP feed? The SIP isn't required to be consistent in the CAP sense of "consistent".

The SIP isn't currently required to be consistent in the CAP sense of "consistent", but that is something people complain about. I think rightly, they point that the audit/compliance components of RegNMS are very troubling in the face of N inconsistent SIPs.

Similarly, people complain about the SIP feeds being latent and I'm sure it would be a very real problem if any single exchange being unavailable made the entirety of the SIP unavailable.

Its a fascinating problem because the engineering trade-offs are relatively static and well known, but each and every decision you could make provides an opportunity for arbitrage market activity that someone would consider predatory.

That we've layered a regulatory requirement that is pretty vague on some of the edge cases on top of this, just adds to it.

Re: Nanex Gets $700k Whistleblower Award from SEC

#217

Post by wglb »

zekevermillion wrote: post #194
kasey_junk wrote: post #180

Earlier quoted context omitted.

> Or, is the info asymmetric and someone is disadvantaged in a trade? There is no expectation in the markets that everyone is working with the same information, quite the contrary, the markets wouldn't provide value if everyone was working with the same data. One of the chief reasons the markets are valuable is that they give people incentives to surface (in the form of market activities) pricing information they mig…

How do you know Vanguard disagrees with me when I haven't even stated a position. I'm posing a loaded question hoping that someone can make an intelligent and factual argument as to why the sanctioned behavior that the SEC believes is illegal does or does not in fact cause any harm to retail investors. The Nanex commenter does that pretty well, and I think frames the proper issue (if we care about the "morality" of t…

Perhaps he is referring to your comment I have to think that at some level, HFT will result in higher prices paid by brokers and their clients

From the Vanguard comments: This roughly 25% decrease in the end value of the investment demonstrates the impact of reduced transaction costs on longterm investors.

So perhaps you didn't state a position, but you posed a thought (I have to think that at some level) or question and Vanguard rather decisively answers that question.

Re: Nanex Gets $700k Whistleblower Award from SEC

#218

Post by ethbro »

EdHominem wrote: post #155
ethbro wrote: post #106

Earlier quoted context omitted.

If NYSE wants to lobby for laws to be changed, then they're welcome to do that. Just like Uber or Airbnb when they get hit with fines. But the law's the law. "It doesn't make sense" isn't a valid defense.

Imagine that they're providing free firewood to the public - what obligates them to provide the pickup trucks?

The law, in the same way we regulate many markets that can only efficiently support fewer participants than would be required for a fully competive marketplace.

Usually due to capex: energy infrastructure, network effect: financial, or limited availability of resources: wireless spectrum.

If it's in the public interest to have trucks and no firewood seller would otherwise provide them. That's absolutely something government can (and IMHO should) mandate in exchange for a firewood license.

Re: Nanex Gets $700k Whistleblower Award from SEC

#219

Post by nanexllc »

kasey_junk wrote: post #79
revelation wrote: post #67

Earlier quoted context omitted.

Somethings off. If all this is is market making, why all the trouble with the microsecond latencies? Microwave links? Shared colos? That seems like a lot of cost everyone could save on by simply having the exchange enforce some minimum timings.

A couple of things: 1) It is a common fallacy that there is "the exchange" or "the market". The market is an aggregation of exchanges (and non-exchange traded instruments) across a wide variety of jurisdictions and localities. But even though there is no central coordination between all that jumble, the instruments are correlated. That is, the change in price, demand, or availability of one is a signal about the pice…

It is a common fallacy that retail orders ever go to stock exchanges. This is a good way to determine someone telling the truth. Here's proof: http://www.nanex.net/aqck2/4704.html

Re: Nanex Gets $700k Whistleblower Award from SEC

#220

Post by nanexllc »

kasey_junk wrote: post #216
KMag wrote: post #213

Earlier quoted context omitted.

What do you mean by "fully consistent" in the context of the SIP feed? The SIP isn't required to be consistent in the CAP sense of "consistent".

The SIP isn't currently required to be consistent in the CAP sense of "consistent", but that is something people complain about. I think rightly, they point that the audit/compliance components of RegNMS are very troubling in the face of N inconsistent SIPs. Similarly, people complain about the SIP feeds being latent and I'm sure it would be a very real problem if any single exchange being unavailable made the entire…

Please point to the exact paragraph in Reg NMS that backs up your story. To those reading, don't waste your time awaiting an answer because there is no such paragraph in Reg NMS.

The Regulations (Reg NMS) are very clear about this. That's why I was awarded $750K from the government after all.

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