HFT Myths

baglunch said:
You also have to put it into perspective that if you have 500 microsecond jitter on your exchange ack time but your total latency is over 50 milliseconds, you have bigger fish to fry.
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+1. I've seen people push for FPGA usage when their internal latency is in the mid double-digit microsecond timeframe thinking it will solve their problems.
 
johnnyqpublic said:
What about in the case of futures, where you're not getting rebates?
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His original question was pertaining to equities, where there are rebates and a multitude of exchanges to process data from. In futures, there are some strategies that can scalp a single product with just that product's info, but most often you need at least a single related product that you can listen/hedge to, and the more *effective* ones the better.
 
hft said:
No. If a quote is untradeable against, it is garbage. I rest orders in pre-open in many markets, but that is to establish queue position, not trade against what's showing.
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sorry I didnt mean to trade against picture on the screen :)

I can see NYSE OpenBook - the exchange matches orders in extended hours. its not the same as the normal trade but you can get fill for a few thousands size relatively OK (I guess looking at the trade info)..

So you could potentially place orders at bid/ask and take the opposite in ES..

Problem is that if it hasnt filled you cant pull it off... This is why I asked. May be someone could manage to make money out of it :)
 
maxima120 said:
I can see NYSE OpenBook - the exchange matches orders in extended hours. its not the same as the normal trade but you can get fill for a few thousands size relatively OK (I guess looking at the trade info)..

So you could potentially place orders at bid/ask and take the opposite in ES..

Problem is that if it hasnt filled you cant pull it off... This is why I asked. May be someone could manage to make money out of it :)
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I'm not sure what you a exactly referring to but if you are talking about the large size trades that get printed around 4:01+pm, those are the closing trades from the closing cross auction where they match all of the on-close orders and close the imbalance. After that then there is the market summary message that also looks like a trade in some feeds+applications. Nyse market closes between 4-4:01 but they stop accepting orders well before that. Similarly the Nyse open works in a opening rotation and doesn't open exactly at 9:30am for all stocks, some open as late as 9:45am.

But many of the other exchanges are still open til 8pm and trade all NYSE listed instruments. But be careful as regnms price protection only covers market hours.
 
hft said:
+1. I've seen people push for FPGA usage when their internal latency is in the mid double-digit microsecond timeframe thinking it will solve their problems.
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Me too. Even if the savings doesn't directly result in added p+l, to play devils advocate those single digit micro savings that would come from paying extra for fpga is an easy win compared to expecting them to reduce the latency elsewhere by being smarter or a better programmer or better trader. In some cases you may be asking the impossible, of course you could never say that out loud without insulting someone, unless you're a trader talking to IT then it's ok to call them idiots. :eek:
 
baglunch said:
I'm not sure what you a exactly referring to but...
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Ok.. If you guys dont know what I am talking about then it probably shouldnt've been said out loud...

but if anyone interested the NYSE opening auction logic is easily available from the exchange website.

as I said I wasnt talking about actuall fills. but if you bid/ask price/size available on pre-open you can virtually consider this order filled in the opening auction..
 
hft said:
Data from a single stock is enough to make a market in that stock. A stock trades at a dozen exchanges though, so that's already a lot of data to consume. Futures do drive stocks, but in a pure single symbol market-making strategy, the signal that I can use from the futures contract is dwarfed by the alphas from that stock's orderbook data across its traded exchanges. Remember that in market-making I usually gross negative and net positive from rebates, so it's probably a very different ballgame than what you're doing. Also I need to reiterate that equities is not my strong point; baglunch seems to have more experience in this arena than I do based on his previous comments.
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well,
actually i'm looking at european venues, where markets are mainly centralised. most of the volume is taking place on the
main market. So, what i'm interested in is single stock/single market and no rebate scheme.

you wrote that you usually gross negative and net positive from rebates, is there models which are not relying on rebates ?
or is this all about fees ?
because, to me generating zero pnl after fees was waste of time, maybe i'm just thinking wrong ...

cheers
 
hft said:
1. You test different sizes of buckets and analyze them. That VPIN wiki article is just an example of a way to use trades to bias your market. Real alphas used are more complex and handle more edge conditions.
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Do you use VPIN to detect short-term imbalance, say within 30 seconds? Could you elaborate more on the edge conditions which are not listed in the VPIN wiki article?

BTW, do you have any experience on the high order-to-trade market making strategies in case you get penalty on issuing a large number of cancels?
 
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