hey HFT scum, yeah, you. Watch this
- Thread starter stock777
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I am all for quant, automated and HFT....
They have made markets much more predictable...... More volatile, but predictably volatile...
They have made markets much more predictable...... More volatile, but predictably volatile...
Nonsense.
Flash orders are alive and well. The CBOE, ISE, along with quite a few dark pools still use private flash messages to give their users or members an advantage over those not engaging in the flash info exchange. The flash messages can only be used by sophisticated computers. It is true that flash messaging does not alone define HFT, nor does every HFT company use the flash messages. However, the companies that use flash messages are HFT companies.
Can you provide any valid links/examples that demonstrate HFT frontrunning orders? The only examples I can think of are internalization, which isn't really HFT. [/QUOTE]
You have a strange definition of HFT. I suppose that is to be expected since HFT has become a catch all for any company using hi-speed computers and algo trading methods.
Just like the flash quotes, not all HFT companies take advantage of internalization, however pretty much all companies that do, are doing so within a HFT strategy. That is very clear to "people in the know." Also, linkage among the normal exchanges can often result in legalized front-running.
Flash messaging and internalization should both be eliminated completely. Dark pools should be regulated just like exchanges. An entity, whether an individual or a company, should either be allowed to engage in trading for its own profit/loss, or to represent a customer's interests--never both. A trading company should never be allowed to internalize a brokerage company's order flow, or gain information about that order flow which is not available to the public.
On the other side of the coin the regulators should not put in trading speed bumps, data dissemination pauses, or forcefully close exchanges because having one seems more "simple".
We, as the trading public, should differentiate between HFT--which encompasses almost every proprietary trading company these days, and the specific structural problems that require regulatory attention. It is our duty to uncover those practices which are harmful to the investing public and the capital raising process which is our financial markets. We must exorcise our own demons, lest we leave our market structure in the hands of ignorant, bought-off politicians.
Regulators do need to decide 1) if exchange information is wholly owned by the exchanges or if the information should be public knowledge, 2) if payment for order flow can ever be compatible with a broker's fiduciary duty to it's customers, 3) re-evaluate regNMS from the standpoint of today's less latent world.
^^^ I agree with the majority of that. I don't know every exchange's mechanics, and haven't traded equity options in a while (in the late '90s I was on the CBOE floor).
But even Flash orders probably get a worse rap than they deserve. The implementations I know of simply offer a select group of people the ability to fill an order on the specific exchange *before it is routed away at the same price*. So the only person hurt is the person on the other exchange who is NBBO but gets shafted. Don't get me wrong, that sucks and I'm 100% against it. But it's not like the aggressing order is doing any worse than they could have assumed in the first place, unless they wanted the price posted. And in that case I bet different rules apply anyway.
re: "high speed computers" or w/e and Flash, that's not really a determinant. I have access to some ridiculous (colocated) computing horsepower, and have never seen a Flash order. It's available to liquidity providers/certain member classes/the cool kids.
But even Flash orders probably get a worse rap than they deserve. The implementations I know of simply offer a select group of people the ability to fill an order on the specific exchange *before it is routed away at the same price*. So the only person hurt is the person on the other exchange who is NBBO but gets shafted. Don't get me wrong, that sucks and I'm 100% against it. But it's not like the aggressing order is doing any worse than they could have assumed in the first place, unless they wanted the price posted. And in that case I bet different rules apply anyway.
re: "high speed computers" or w/e and Flash, that's not really a determinant. I have access to some ridiculous (colocated) computing horsepower, and have never seen a Flash order. It's available to liquidity providers/certain member classes/the cool kids.
Yes, and...
What? Absolutely not. Flash trading is nothing more than prearranged trading by another name. Both the flasher (the customer benefits if voluntary, and the broker almost always benefits) and flashees are benefitting at the detriment of every market participant not involved. The trader who is on the receiving end of adverse selection pays the largest price. The cost to the rest of the market participants who are not privy to the flashed info is more difficult to measure, though it is definitely significant.
The trader who posts to NBBO publicly is providing price discovery and should be rewarded with trades. No trader should be able to sit back and cherry pick flash trades. Remember the term "carp" from the floor? How about when brokers did "whisper trading" with their buddies? There is a very good reason why these practices were discouraged (sometimes violently) on the trading floor. Flash trading is the worst of both of these practices.
Again, this is simply not true. If you send your order to a working bid/offer you get filled. After a second of flashing the trade on the ISE, not only may the NBBO change organically, but you will also have to compete with frontrunning a$$holes. Think about a one second flash auction at the ISE. (I forget the exact time, but it was a second when the flash auction program began.) Every ISE member who can write code has the ability to see this order as well as the chioce but not the obligation to step up and trade the order. If they choose not to trade your order, these participants can easily use the info to front run your trade to other exchanges where they can lift the deltas or vol risk liquidity in front of you.
It is your choice to use your resources towards other ends. Almost any sophisticated trading company can access flash quotes. Those companies that trade with a customer designation can typically still access the information via a broker's membership. Of course you have to put up huge size for your broker to spend their time working with you on this project, but it happens quite often. It is the retail customers, and those without access to programmers who have no ability to access private flash info. It tends to be this same class of trader that has no idea their order is being flash auctioned and chewed up. These poor chaps are getting chewed apart. The regulators need to step in and outlaw this incidious practice.
not really,... they saw morgan or merrill,smith barney coming in selling unusual size, they never new what was behind it,... nor were they often selling you 1000 contracts and turning around and buying 5000,...the shrinkage or extermination of large houses,..lowered the risk to each as there werent as many houses vs houses , opponents on 2 side of the market...., ...what started out with crt and timberhill,oconnor,arbing 1/8s and 1/4s on options that were mathematically under/over priced has morphed into mega houses ,.... with government in the mega houses kennel,....sleeping and toothless, .....fighting to peel the public mom and dads,daytraders,pension funds, 401ks,entire small countries,..it's the sopranos times 100...why were offshore credit default swaps ever allowed to trade publicly,.... if legal, why go off shore to begin with,...for tax reasons,... then propose a new tax law to regulate them, ...sleeping and toothless, ....so why stop there...,create dark pools ...front running,...deregulation, ..allow houses to become banks overnight to skirt margin requirements....,its a huge push,.. not sure of its end mean,... but the repeated lack of regulation and relaxation in the laws... tells its a 5/10/20 year orchestrated plan ...with a means to an end that can't be good or we would have had everything spelled out..argue all you want about what the hft's are and arent..and i agree they are sort of a catchall dog to kick.....but they are one of a handfull of tools thats allowing the expansion of the transference of wealth,...into fewer hands... at an increasing pace.. and the world economic health ...doesnt seem to be able to withstand it's side effects..it only seems to make it's demise accelerate
http://financial-dictionary.thefreedictionary.com/Internalization
(first page of search results for "internalization" on google)