Getco cuts staff with trading volumes thin [Financial Times]

[Random.Capital]

Quote from logic_man:

If I as a retail trader buy or sell a futures contract at a given point in time at price X, are you saying that someone with access to a non-exchange-based market can buy or sell that same (or an essentially similar) asset for less than X?

As a retail trader, "at a given point in time" you are buying/selling very low quantities. It's quite a different game when you need to move sufficient quantity that you'd be wiping out half the book if you tried to do it in one fell swoop. The simplistic retail notion of price doesn't hold there.

It should be obvious that once retail has something resembling direct access to the traditional exchanges, the real action is going to move elsewhere.

 

[logic_man]

Quote from Random.Capital:

As a retail trader, "at a given point in time" you are buying/selling very low quantities. It's quite a different game when you need to move sufficient quantity that you'd be wiping out half the book if you tried to do it in one fell swoop. The simplistic retail notion of price doesn't hold there.

It should be obvious that once retail has something resembling direct access to the traditional exchanges, the real action is going to move elsewhere.

I used to work at a firm which did a ton of buying and selling of index options to hedge life insurance portfolios for variable annuities and I recall those guys spending a lot of time on the phone with various brokers to negotiate pricing. Are you talking about things like that? I still don't recall them getting pricing that far off from the same options that would be quoted to a retail trader, though. But maybe I'm thinking of an exaggerated pricing differential and you are not talking about a 25% difference in price, but a 1% difference in price.

But, if retail traders are the worst traders, why would the action move away from where retail traders trade? Granted, the amount of dollars professionals can take from retail traders is small, but it would almost be like leaving money on the table to not take it. Are you saying that the professionals just let the better retail traders take that money from the worse retail traders?

 

[eusdaiki]

Quote from logic_man:

While I will admit to a severe lack of knowledge about the back-end part of trading, it seems to me that the pricing of an asset would need to be nearly the same globally ("the law of one price") or else something is very out of whack. If I as a retail trader buy or sell a futures contract at a given point in time at price X, are you saying that someone with access to a non-exchange-based market can buy or sell that same (or an essentially similar) asset for less than X? I guess I can see some block trades getting someone better pricing, but by how much?

Again, my question may reflect more on my lack of knowledge than anything else, but I'd be interested to know if I'm interpreting your statement correctly.

they get the same prices but because of their captive pfof volume they get a lot more shares (easiers to buy bid sell ask n repeat)

 

[Occam]

Quote from Random.Capital:

As a retail trader, "at a given point in time" you are buying/selling very low quantities. It's quite a different game when you need to move sufficient quantity that you'd be wiping out half the book if you tried to do it in one fell swoop. The simplistic retail notion of price doesn't hold there.

Execution size is now tiny on most dark pools, in striking contrast to their original intention. Moreover, as the pipeline scandal proved, no customer can really know what's going on in a dark pool. Institutions can be muppets, too.

It should be obvious that once retail has something resembling direct access to the traditional exchanges, the real action is going to move elsewhere.

Undirected retail orders placed through the online retail brokerages rarely route to an exchange (at least not directly); they are internalized or go to PFOF so the broker can (on average) eke out a little more profit from the order in a manner that's not visible to the client.