FredBloggs
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i'll pm u later today/tonight about it - bit busy now & wouldnt want to educate too many know-it-alls would i!!
Block Boxes, Volatility, and Manipulation
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i'll pm u later today/tonight about it - bit busy now & wouldnt want to educate too many know-it-alls would i!!
I love it when a thread turns into a flame-fest on the very first page 
A lot of people here talk about blackboxes as the reasons for various things as though they know the details of how and why they operate, and why they are responsible for some particular market phenomena.
However, nobody wants to share their blackbox strategies, or those of others that they've figured out from observation (or other means
)?
I, too, would be most appreciative for some detail and the ability to discuss and analyze.
A lot of people here talk about blackboxes as the reasons for various things as though they know the details of how and why they operate, and why they are responsible for some particular market phenomena.
However, nobody wants to share their blackbox strategies, or those of others that they've figured out from observation (or other means
)?I, too, would be most appreciative for some detail and the ability to discuss and analyze.
Rise of the robots
Black box trading - in which powerful computer programs scour the markets for money-making trading opportunities - is set to have a major influence on the development of dealing and exchange technology over the coming decade. The rise of the robots has implications for every active participant in the deal execution arena - traders, vendors, institutions, exchanges and regulators.
Program trading now accounts for about half of the average daily volume on the New York Stock Exchange, up from about 15% five years ago and about 40% in 2003. The growth is being driven by ever-more sophisticated algorithms and their repackaging for buy-side consumption. In aggregate, program volume executed on the Nyse by firms as agent, for non-member customers, amounted to 55.5% during the week of Nov. 8-12.
Dealing room mavericks and active day traders who like to fly by the seat of their pants are losing out in this man vs machine dual. The successful human trader of the future will be more akin to a buttoned-up jet fighter pilot, flipping switches on a dashboard in response to commands from his unflappable auto-pilot.
For market data vendors, this shift in the balance of power necessitates a rethink of traditional data feed strategies. Screen-based interfaces augmented with pricey 3D-visualisation tools to aid the human interpretation of reams of real-time price feeds will have less appeal than the fat pipe pumping raw data directly into an auto-dealing engine. Instead, more effort will need to be expended on the back office, supplying cold, clean reference data for post-trade cost efficiency drives.
Bulge bracket brokers will increasingly compete to produce the best algorithms. Most will offer them to the buy-side through interfaces with order management systems, or as white label services supplied by smaller broker-dealers. The more sophisticated will open up the black box to their biggest clients, allowing institutions themselves to re-tune the system to suit their own trading objectives and goals.
Such strategies reposition the sell-side institutions as technology vendors in their own rights, creating a need for a new set of skills in customer relationship management, sales, distribution and benchmarking.
The buy side might welcome the increasing cost-efficiency and the competition for custom, but should also be wary of leaking their own intellectual property and trading secrets, with the black box serving as an inscrutable 'spy in the cab' for self-serving sell-side strategists.
The exchanges themselves also have much to think about. There are now so many computer programs flipping trades as the markets close that late day volatility is becoming the norm.
Nyse is understood to be reviewing program trading rules introduced after the stock market crash of 1987, when computer programs contributed to the downward spiral that caused the market to tumble. The Big Board still defines program trading as index-abitrage, or trading a basket of 15 or more stocks with a value of at least $1 million. It was an adequate definition at the time, but the latest generation of programs are much more elaborate, breaking down bargains into smaller orders and sweeping across multiple markets and asset classes.
Conversely, the introduction of a new hybrid electronic and auction market by the Nyse, and upcoming SEC regulations compelling brokers to execute at the best available price, are likely to further push the pace of program trading.
The human broker is not finished yet - after all, somebody has to pay for lunch - but on the dealing floor, the machines are clearly in the ascendancy.
http://www.finextra.com/fullfeature.asp?id=568
Black box trading - in which powerful computer programs scour the markets for money-making trading opportunities - is set to have a major influence on the development of dealing and exchange technology over the coming decade. The rise of the robots has implications for every active participant in the deal execution arena - traders, vendors, institutions, exchanges and regulators.
Program trading now accounts for about half of the average daily volume on the New York Stock Exchange, up from about 15% five years ago and about 40% in 2003. The growth is being driven by ever-more sophisticated algorithms and their repackaging for buy-side consumption. In aggregate, program volume executed on the Nyse by firms as agent, for non-member customers, amounted to 55.5% during the week of Nov. 8-12.
Dealing room mavericks and active day traders who like to fly by the seat of their pants are losing out in this man vs machine dual. The successful human trader of the future will be more akin to a buttoned-up jet fighter pilot, flipping switches on a dashboard in response to commands from his unflappable auto-pilot.
For market data vendors, this shift in the balance of power necessitates a rethink of traditional data feed strategies. Screen-based interfaces augmented with pricey 3D-visualisation tools to aid the human interpretation of reams of real-time price feeds will have less appeal than the fat pipe pumping raw data directly into an auto-dealing engine. Instead, more effort will need to be expended on the back office, supplying cold, clean reference data for post-trade cost efficiency drives.
Bulge bracket brokers will increasingly compete to produce the best algorithms. Most will offer them to the buy-side through interfaces with order management systems, or as white label services supplied by smaller broker-dealers. The more sophisticated will open up the black box to their biggest clients, allowing institutions themselves to re-tune the system to suit their own trading objectives and goals.
Such strategies reposition the sell-side institutions as technology vendors in their own rights, creating a need for a new set of skills in customer relationship management, sales, distribution and benchmarking.
The buy side might welcome the increasing cost-efficiency and the competition for custom, but should also be wary of leaking their own intellectual property and trading secrets, with the black box serving as an inscrutable 'spy in the cab' for self-serving sell-side strategists.
The exchanges themselves also have much to think about. There are now so many computer programs flipping trades as the markets close that late day volatility is becoming the norm.
Nyse is understood to be reviewing program trading rules introduced after the stock market crash of 1987, when computer programs contributed to the downward spiral that caused the market to tumble. The Big Board still defines program trading as index-abitrage, or trading a basket of 15 or more stocks with a value of at least $1 million. It was an adequate definition at the time, but the latest generation of programs are much more elaborate, breaking down bargains into smaller orders and sweeping across multiple markets and asset classes.
Conversely, the introduction of a new hybrid electronic and auction market by the Nyse, and upcoming SEC regulations compelling brokers to execute at the best available price, are likely to further push the pace of program trading.
The human broker is not finished yet - after all, somebody has to pay for lunch - but on the dealing floor, the machines are clearly in the ascendancy.
http://www.finextra.com/fullfeature.asp?id=568
What a dopey article.
Putting on arb, implies you either let it roll off at maturity, eg deliver stocks v some basket, or you have to take it off,eg, unwind it. Trading against arbs is pretty simple - they usually come back to unwind.
Keep in mind that volume comes to volume, so some awful box trader who obviously eats your lunch every day, faces the very real prospect that when hes plowing through the market, some other geek maybe simply meet him, or some exrtraneous event occurs - just ask the genius arbs who thought trading GM equity v bonds was a slam dunk.
Heres a thought - why dont you do some research and try it, rather than asking everyone for free samples?
Putting on arb, implies you either let it roll off at maturity, eg deliver stocks v some basket, or you have to take it off,eg, unwind it. Trading against arbs is pretty simple - they usually come back to unwind.
Keep in mind that volume comes to volume, so some awful box trader who obviously eats your lunch every day, faces the very real prospect that when hes plowing through the market, some other geek maybe simply meet him, or some exrtraneous event occurs - just ask the genius arbs who thought trading GM equity v bonds was a slam dunk.
Heres a thought - why dont you do some research and try it, rather than asking everyone for free samples?
Must be another losing and unprofitable day for you! LOL (tone of response)
If you hadn't noticed moron, this is a discussion board where free thought and open discussion is encouraged.
Now go back and bleed and flame your brokerage account.
Where is "I write my own black boxes" ?
beating the bots is not the problem. it is what we beat them out of that is the problem. they don't mind taking a penny move and booking it because they can do this on a much wider scale. hence, they kill any chance for good moves. also, given the unbelievable unfair advantage of one cent increments they have fragmented size. when you look at these aspects and couple that with the specialist arbitrarily freezing the book for his own benefit, it makes scalping extremely difficult.
therefore we are back to the question of why does the NYSE continue with one cent increments??? obviously someone is benefiting. is it the big Box players like GS, JPM, Merrill, and ATD. i would say yes. what is GS's and JPM's influence on the exchange? GS owns SLK and has a tremendous amount of influence at the NYSE. many ex-GS'ers hold powerful policy controlling positions in the finance world.
does the little guy benefit from this policy and all of these bots. well considering the little guy usually participates via an institution i would say NO. it is so hard finding size these days... i have never seen the markets so fragmented. the bot firms market to these institutions professing to overcome the problems which the bots themselves are creating. i.e. fragmented size.
Look at a firm like ATD.... they claim to break up orders for the institutions and get them better prices. well, what is the commission cost for this service??? if it weren't for the fragmentation caused by the bot's and one cent increments the institution's traders could have done it themselves and avoided the cost of a middle man.