Front Running, Flash Orders, or Blackbox/Algorithmic Manipulation?
- Thread starter pacific7
- Start date
ok, just to dispel a big myth here that has been widely spread recently, a lot of which seem to be coming from that Themis guy on cnbc (jury's still out whether he's a complete moron or just a propagandist).... these aren't supercomputers colo'd at the exchanges, for the most part, they're regular old dell's, hp's and custom servers. for the most part, they're cheap, and the rack space is too. it doesn't take that much to get something setup, all the info thrown around that it costs gazillions of dollars and it's unfair competition is complete bs. the bar to entry is low. if people actually took the time to check facts vs blindly listening to idiots on tv... then i'd probably have a lot more competition, so probably better they don't.
so, 'broker's' with 'supercomputers' are not doing this to you because it could literally be anyone anywhere on some unknown pool. no one is stepping in front of your order and taking the flash quote that should've gone to you because if you were sitting on the right exchange you would've been hit immediately. flash orders basically lock the mkt at different exchanges till they find some liquidity that will take them. if there's already liquidity there when the order comes in, then they don't get their rebate and they pay to remove. that's it. there's nothing more to them. they were an excellent example of what some well-directed disinformation campaign can do for those who stand to benefit the most (in this case, the nyse and it's major liquidity provider:gs).
also, NO exchange allows sub-penny ORDERS. it has nothing to do with quotes. if that were the case, you could put in sub-penny nasdq hidden orders... but you can't. the flash orders are just pinging the gazillions of dark books, some of which are quoting in sub-pennys, and if they're live when the flash comes through then they get removed, and THAT's why you see what you're seeing.
Propseeker,
So you're trying to say that no-one is intentionally stepping in front of my bid or offer? That any prints i see .0001 in front of my order are purely coincidental?
no, i'm trying to say that the people parked in front of your order have nothing to do with flash orders... which is your contention. my contention is not that it's going on, but that this is going on in dark pools. they've been making sub-penny markets for some time now. also, it's more than likely, that most exchange routed orders don't even get routed to these pools. think about it... how many .001 fills do you get? i do a good chunk of volume every month, and i never get those... on occasion i'll get a mid-point fill, probably < 1% of all executions.
I agree that Flash is not the entire problem here. I am simply stating that I believe it goes on with Flash orders as well. I don't get any .0001 fills, because our orders are routed directly into exchange (not flashed). It's the retail customer that is being flashed. But, I make money by providing liquidity to retail, and if the retail order is flashed or thrown to these dark pools, I get less fills, and hence make less money.