front running from pit noise

L

Lucias

Some people believe based on those selling noise from the pits that it is possible to 'front run' the big banks. Here's a little thought experiment...

Imagine you're GS...

You need to sell a lot of contracts. You're not trading on price and want to get the best price you can get to sell.. You've a ton of contracts to sell

Do you....

A. Both buy and sell to keep your selling activity as uncertain as possible over time
B. Set limit orders outside the market
C. Use programs to monitor the market for high activity (stop runs) to execute markets when liquidity is high
D. Run down to the pit and announce to everyone that you have a big order to sell so they can front you.
 
Quote from Lucias:

Some people believe based on those selling noise from the pits that it is possible to 'front run' the big banks. Here's a little thought experiment...

Imagine you're GS...

You need to sell a lot of contracts. You're not trading on price and want to get the best price you can get to sell.. You've a ton of contracts to sell

Do you....

A. Both buy and sell to keep your selling activity as uncertain as possible over time
B. Set limit orders outside the market
C. Use programs to monitor the market for high activity (stop runs) to execute markets when liquidity is high
D. Run down to the pit and announce to everyone that you have a big order to sell so they can front you.
More...

I think A...

if they need to sell a large order they'll come to the pit with a buy ... making it seem as if they're buyers when people start to front run em, they start selling...


I've heard such moves on the squawk all the time...

during a moment of turmoil they'll come out and execute a series of trades where they buy/sell
buy 100, sell 200, buy 500...

net effect: 400 bought...
 
Quote from Lucias:

Some people believe based on those selling noise from the pits that it is possible to 'front run' the big banks. Here's a little thought experiment...

Imagine you're GS...

You need to sell a lot of contracts. You're not trading on price and want to get the best price you can get to sell.. You've a ton of contracts to sell

Do you....

A. Both buy and sell to keep your selling activity as uncertain as possible over time
B. Set limit orders outside the market
C. Use programs to monitor the market for high activity (stop runs) to execute markets when liquidity is high
D. Run down to the pit and announce to everyone that you have a big order to sell so they can front you.
More...

How do you know their not just hedging? Why would they make their intentions so clear.
 
or maybe as a hypothetical example

E: Get your analysts to announce upgrades and higher price targets on the stock based on fundamentals and revisions. Take financial reporters to lunch and slip some ideas to buy on the hush hush. Send out an email recommending the stock and then send another one telling everyone that the first one was sent in error and should be disregarded. Spread rumors of accumulation of the stock - takeover, buy out, undervalued, etc.

Sell into the rises on green candle days using crosses and good overall index news. Use lots of MOC orders. Sell some to your clients based on the upgrades.

Where do these movie producers get their ideas from? (Blue Horseshoe loves Anacott Steel)
 
if brokers or traders at execution desks are given a very lagre order its common to divide it into blocks of a number eg. 4, 6, 8 units or whatever, and execute after watch each hour/half hour intervals, in most cases this assure close to an average price throughout the day.
 
Quote from Lucias:

Some people believe based on those selling noise from the pits that it is possible to 'front run' the big banks. Here's a little thought experiment...
More...

Better thought experiment: Name one pit where the traded volume and meaningful order flow is superior than its' electronic analog. In other words; "what noise"?
 
Quote from Lucias:

Some people believe based on those selling noise from the pits that it is possible to 'front run' the big banks. Here's a little thought experiment...

Imagine you're GS...

You need to sell a lot of contracts. You're not trading on price and want to get the best price you can get to sell.. You've a ton of contracts to sell

Do you....

A. Both buy and sell to keep your selling activity as uncertain as possible over time
B. Set limit orders outside the market
C. Use programs to monitor the market for high activity (stop runs) to execute markets when liquidity is high
D. Run down to the pit and announce to everyone that you have a big order to sell so they can front you.
More...

You're making the assumption that this is done by a person and thought goes into it. It's my understanding that GS, and many other large banks, run a global dispersion portfolio within an automated system. If the portfolio did a large number of trades on one side it would offset those trades with a basket of equities, options and futures that was most cost effect immediately. This is what causes flash crashes. Not only are a few large banks all off setting their trades all at the same time, they are also not providing depth and liquidity in the markets on that side of the market during that selling period.
 
Quote from bone:

Better thought experiment: Name one pit where the traded volume and meaningful order flow is superior than its' electronic analog. In other words; "what noise"?
More...

cattle and hog options, and one could even argue grain options (as far as "meaningful" goes)...albeit probably not for too much longer
 
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