HFT Myths

elliots11 said:
Front running is use of non public order info to place orders ahead of public hft has info the public lacks
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Jumping the FIFO queue is front-running. Because anyone can buy a feed that flashes executable orders and delays their execution for a few hundred milliseconds to give computer thieves the jump, doesn't make it ethical, or moral. Its stealing and if you engage in it, you're a piece of shit who deserves whatevers coming to him.

FBI has an open investigation. Whats the name of your HFT shop? Maybe you can explain this big misunderstanding to the FBI? :D
 
onelot said:
if you want to fish in the ocean, which is open to the public, wouldn't it be pretty ridiculous to infer that it's not fair that some fisherman have bigger boats or faster equipment and that every fisherman should be "equal" because the ocean has public access? or that you should get the same benefits of a commercial fishing license with much higher catch limits for the price of your personal use license? higher useage and impact require higher fees and it's acceptable to think that those who make the larger fishing infrastructure investments can potentially make more money vs the hobby angler on the pier. why the different expectation for market participants?
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That's fair, but is the analogy complete? Do commercial fishermen follow small anglers around, waiting for them hook a tuna just so they can take it for themselves and replace it with a minnow? That's meant to be an honest question, not argumentative. I fully admit to being ignorant of HFT strategies, but will say that there were some compelling details in the book.
 
The fisherman analogy misses the point
Sec rules state that the market needs t be fair orderly and transparent
Hft is not fair nor transparent
A broker for Goldman knows a big order is coming through if he puts his order first he is front running
Hft has non public order flow information and they exploit it
The fact that I too can do hft if I had a spare few million illustrates the point
Hft is for the rich and the market is supposed to be fair for all participants
I can't wait for them to close down the hft shops
Hft apologist fail to convince most insiders and they won't convince the authorities
 
jtrader33 said:
That's fair, but is the analogy complete? Do commercial fishermen follow small anglers around, waiting for them hook a tuna just so they can take it for themselves and replace it with a minnow?
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no, commercial fisherman just try and catch as much fish as possible and then sell it to a canner/distributor or wholesale market. i'll let you figure out the different market analogues for that. b/d's selling flow would be one.
 
elliots11 said:
The fisherman analogy misses the point
Sec rules state that the market needs t be fair orderly and transparent
Hft is not fair nor transparent
A broker for Goldman knows a big order is coming through if he puts his order first he is front running
Hft has non public order flow information and they exploit it
The fact that I too can do hft if I had a spare few million illustrates the point
Hft is for the rich and the market is supposed to be fair for all participants
I can't wait for them to close down the hft shops
Hft apologist fail to convince most insiders and they won't convince the authorities
More...
actually i think the fishing analogy was pretty good. i'll try to do another one... most people don't know what fresh fish even looks or tastes like, so they bitch to everyone that they don't eat fish because it stinks. little do they know that they actually look pretty foolish for not having taken the time to truly understand the subject they're running their mouths about. ehem.
 
sprstpd said:
Ah, so as long as you have 10 million dollars, then you'll be on equal footing with all the other HFT front-runners? Yes, seems totally fair.

Route all your orders to IEX.
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It doesn't cost quite that much, I work for a market marker who spends way less than that and we are still able to fight off hft firms. It can be had on a smaller budget with the right strategy. For futures you could get away which one server with a single connection to CME.

We already route orders to IEX, I don't know why you would route all your orders there because there isn't enough liquidity and as a dark pool IEX's quotes aren't on the public feed. I neither like nor dislike them, but I will like them more once they become a protected REGNMS participant and display their quotes on the tape. The only difference is that it's owned mostly by hedge funds, I'm sure some of them use hft techniques.

A funny coincidence is that jim Clark from Netscape is an owner and on the board of IEX while the ex CEO of Netscape jim barksdale owns spread networks which caters to hft.
 
When people confronted maddof about his fraud his response was the same as hft
You guys don't understand how the market works
No we know what goes on and this Madoff tactic won't work
 
baglunch said:
It doesn't cost quite that much [10M], I work for a market marker who spends way less than that and we are still able to fight off hft firms. It can be had on a smaller budget with the right strategy. For futures you could get away which one server with a single connection to CME.
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i agree with this. when i priced it out it was around 15-20k/mo to pull all the direct feeds with a single market center colo. but you can absolutely get away with a lot less. i do. believe it or not, i do a lot of intraday stat-arb market making using just the raw full feed SIP. i've found the cycles and upkeep required to process 5-6 different book feeds is right around SIP latency for my current infrastrucutre, so a lot easier/cheaper to just use the SIP. you can still make money, you just can't compete inside all the time.
 
onelot said:
no, commercial fisherman just try and catch as much fish as possible and then sell it to a canner/distributor or wholesale market. i'll let you figure out the different market analogues for that. b/d's selling flow would be one.
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I'm going to drop the analogy since I phrased my earlier post poorly and think we may be talking past each other a bit. Regardless, I appreciate you, hft, baglunch, et al contributing to the discussion as speaking with those with actual experience helps to separate reality from the boogie man stuff. Question for you and others in the space:

Is it a legitimate concern that a HF player will see my order arrive at the first venue and then beat it to liquidity at other venues so that it can sell(buy) it back to me at a worse price?
 
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