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Nanex Gets $700k Whistleblower Award from SEC

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Re: Nanex Gets $700k Whistleblower Award from SEC

#41

Post by tptacek »

CyberDildonics wrote: post #30
Someone1234 wrote: post #3

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?

People who stand to benefit directly from High Frequency Trading will tell you it has benefits. 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?

Accusations of shillage aren't allowed on HN; in fact, they're one of the very few examples of pathological message board behaviors that HN actually explicitly bans. You can't dodge that ban by saying "everyone who believes this is a shill" without naming people; I believe HFT has benefits, and I am not a shill. If your comment invites people to litigate whether I'm a shill, you're doing the one of the few things HN specifically asks you not to do.

Please don't write comments like this.

Re: Nanex Gets $700k Whistleblower Award from SEC

#42

Post by biot »

reverend_gonzo wrote: post #23

What he's saying there was that due to inefficiencies in NYSE's infrastructure, the feed that went to the consolidation (which provides the NBBO) was delayed. Firms were able to then exploit those inefficiencies by dumping a ton of quotes into the market to cause it slow down those feeds. This is called quote-stuffing and is illegal and against exchange rules. (I don't know if this was illegal then.) From a technical…

Your summary is incorrect; the 30 second delay was six years ago and was caused by selling access to real-time data vs delaying the data for the public. Quote stuffing resulted in delays of hundreds of milliseconds:

  > Once again, we detected sizable delays between time-stamps
  > in the public quote and Open Book. These delays ranged in
  > the hundreds of milliseconds. Though the delay magnitude was
  > far lower than the tens of seconds discovered during the flash
  > crash, it was still hundreds of times higher than expected.

Re: Nanex Gets $700k Whistleblower Award from SEC

#43

Post by tptacek »

nostromo wrote: post #38
tptacek wrote: post #35

Earlier quoted context omitted.

What would be more "fair" or "fast" or "accurate" about Google's exchange? I've gotten to do software pentests of several huge exchanges. They work pretty much the way you'd expect them to. A lot of things people are just starting to do in web software (message-mediated microservices) were idiomatic in finance in the 1990s.

Look no further than the linked article. > a high quote rate from any NYSE stock will cause a corresponding delay in all NYSE public quotes! Anyone with this knowledge can easily cause latency on demand across many stocks, by simply blasting quotes in any one stock Or another link from this thread. > U.S. stock exchanges have invested huge sums of money creating two-tier markets - building and offering faster data an…

That was true on one exchange in 2012. It's no longer true today on NYSE, and probably wasn't true at any other venue (Hunsader is able to explain how he found this in a relatively small blog post; dollars to donuts he looked everywhere else for it too).

So: not delaying public quotes is table stakes. What could Google do better than that?

I'm not so much challenging you as I think it's an interesting question, and would like to see it hashed out in technical detail.

Re: Nanex Gets $700k Whistleblower Award from SEC

#44

Post by owlee »

tptacek wrote: post #15
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…

So, no? From 2008-2012, if you paid NYSE (one of like 15 different exchanges that trade NYSE-listed stocks) for a proprietary feed --- something that costs more than most idle home day traders can afford, but would be affordable by any YC startup --- you were getting an edge in competing with other electronic trading systems . If you were a retail investor or a mutual fund, what NYSE was doing probably didn't impact…

Quote from an interview with Hunsader on CNBC regarding this topic:

   Q (CNBC): Should long-term investors care about milliseconds?

   A (Hunsader): Yes, they should.

Re: Nanex Gets $700k Whistleblower Award from SEC

#45

Post by tptacek »

owlee wrote: post #44
tptacek wrote: post #15

Earlier quoted context omitted.

So, no? From 2008-2012, if you paid NYSE (one of like 15 different exchanges that trade NYSE-listed stocks) for a proprietary feed --- something that costs more than most idle home day traders can afford, but would be affordable by any YC startup --- you were getting an edge in competing with other electronic trading systems . If you were a retail investor or a mutual fund, what NYSE was doing probably didn't impact…

Quote from an interview with Hunsader on CNBC regarding this topic: Q (CNBC): Should long-term investors care about milliseconds? A (Hunsader): Yes, they should.

Ok, and...?

Re: Nanex Gets $700k Whistleblower Award from SEC

#46

Post by tptacek »

djsumdog wrote: post #39
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…

Is this the same thing that was discussed in the documentary Wall Street Code ( http://topdocumentaryfilms.com/wall-street-code/ ) where certain types of order/purchase types actually bumped your position in the queue?

No.

Re: Nanex Gets $700k Whistleblower Award from SEC

#47

Post by jgh »

cheald wrote: post #13
jgh wrote: post #11

Earlier quoted context omitted.

Another disincentive might be the trade tax that Bernie Sanders has proposed since it would basically affect HFT way more than anyone else.

No, it would affect everyone - that's why it's so bad. HFT traders would just adjust their minimum spreads and continue on their merry way. Sanders' FTT doesn't attack the mechanisms of HFT, it attacks the markets as a whole - HFT would suffer, but so would everyone else. If you want to hit HFT specifically you need to hit the HFT-specific behaviors - either add a per-message charge (like Canada did) or add a tax to…

I understand that a trade tax would affect everyone, but for someone like me who makes maybe a handful of trades per month it wouldn't really do that much to dissuade me from making those trades. I also don't particularly care one way or the other what happens with HFT, I was just mentioning this as a thing people are thinking about.

Re: Nanex Gets $700k Whistleblower Award from SEC

#48

Post by TheNanex »

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 happy to answer questions.

Re: Nanex Gets $700k Whistleblower Award from SEC

#50

Post by tptacek »

mrbill wrote: post #33

For someone who knows next to nothing about trading, but has read "Flash Boys", any other recommended books on the topic?

Yes: read "Flash Boys: Not So Fast", a very readable and very technical takedown of "Flash Boys", which is a terrible, incoherent book --- without a doubt Lewis' worst.

For a better version of "Flash Boys", read "Dark Pools"; Dark Pools also takes a gimlet look at high-speed trading, but also does a great job of documenting the birth of the NASDAQ ECNs and the transition from the early-90s centralized markets to modern, decentralized, electronic trading.

If you want to get into the technical detail, the best book is still Larry Harris' _Trading and Exchanges_; it is almost exactly the "TCP/IP Illustrated" of trading.

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