HFT Orders Getting filled against market

M

max_w

Hello guys,

I've been dabbling in forex trading for about two years now. At this point it isn't a source of income, but I'd like it to be. My current setup is as follows:
- Collocated in NY
- Connected through primexm to a few banks, currenex and hotspot.
- Pursued arbitrage and inverted algorithm strategies.
- Ping times to currenex and primexm is 1ms. Hotspot 3ms.
- Running linux and OnixS c++ engine.

Arbitrage doesn't work. I have to get three orders filled as well as exit. I'm either too far away or the wrong pairs get filled. So I pursued inverted algorithms. There are a few opportunities out there. I find them in 8 microseconds on average. The problem is by the time I send my order most of the time I get a reject, when I do get filled the market is likely moving against me. How do I avoid this?

I'm just looking for someone to point me in the right direction.
 
You trade on the wrong ECNs. Do not trade on ECNs with last look, meaning that your orders may get rejected. For a start I would look to check out LMAX, caveat though, their liquidity is pretty shallow. But you want to trade on such kind of ECN, what you see is what you can get. Currenex to my knowledge has last-look provisions to protect their liquidity providers (from what I am not sure...)
 
running arbs in userspace is probably not going to happen. all your competitors have been in hardware for years now. unless you have a 6-fig budget to develop that out, your best bet is to start working on something a bit less latency sensitive.
 
good point. Ultra high frequency is not the best game to start with ;-)

OP, I recommend you start researching strategies before you commit so much to fixed costs that you apparently incur (unless you peruse an existing setup as part of a firm). Sounds to me like you were hired to develop strategies in a space you have not garnered much work experience before. Sounds about right?

onelot said:
running arbs in userspace is probably not going to happen. all your competitors have been in hardware for years now. unless you have a 6-fig budget to develop that out, your best bet is to start working on something a bit less latency sensitive.
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Avoid this by stop doing what you are doing. It doesn't wok.

How did you go from dabbling in forex to arbitraging in an 8 microsecond time frame ? Did you buy this setup from someone who promised it to be a holy grail ?

As for the market moving against you, this is normal. Did you imagine the market maker is stupid and would give your his money ?
 
you can't buy such low latency setup, at least not under several hundred thousands, just to start with. I am absolutely sure if what OP mentioned is true that he is trading as part of a hft firm. And because he seems to lack rigorous research experience he is probably someone with a CS background who now wants to stop up to the plate. At least that is a highly likely scenario.

Having said that, there are pure FX ECNs where you can even as retailer quote on both sides and modify orders multiple times per second without causing any sort of issues. There are no market makers in fx space. There are liquidity providers and on some ECNs you can quote as frequently as you like without pissing anybody off.

ExperiencedJoe said:
Avoid this by stop doing what you are doing. It doesn't wok.

How did you go from dabbling in forex to arbitraging in an 8 microsecond time frame ? Did you buy this setup from someone who promised it to be a holy grail ?

As for the market moving against you, this is normal. Did you imagine the market maker is stupid and would give your his money ?
More...
 
volpunter said:
you can't buy such low latency setup, at least not under several hundred thousands, just to start with. I am absolutely sure if what OP mentioned is true that he is trading as part of a hft firm. And because he seems to lack rigorous research experience he is probably someone with a CS background who now wants to stop up to the plate. At least that is a highly likely scenario.

Having said that, there are pure FX ECNs where you can even as retailer quote on both sides and modify orders multiple times per second without causing any sort of issues. There are no market makers in fx space. There are liquidity providers and on some ECNs you can quote as frequently as you like without pissing anybody off.
More...

Of course you can buy a low latency set up. But the OP hasn't the infrastructure to use it. 1ms ping suggests cheap business class broadband. But the 8 microsecond set up is probably intended to be collocated at the exchange, or at least with the broker bank where the business is to be conducted.

Market maker, liquidity provider are all the same to me. They are not in the business of giving away their money to people willingly. When they get some business coming in, they are going to have a quick run against the trade to see if they can force a close.

If success or failure of a trade is really 50/50 as people imagined, then all the casinos will be out of business for giving poor odds.
 
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Well the infrastructure needed between a 1ms and 8 microsecond setup is huge, I repeat to get to 8 microseconds huge investments into infrastructure and hardware are needed.

Market makers and liquidity providers are not the same, I could list dozens of important differentiating factors. A spot fx ECN such as LMAX lets you quote on both sides and modify your quotes as often as you like. None of the bank liquidity providers that add liquidity on this ECN mind whatsoever. They run their eFX models and believe they are running a prudent risk model, and you run your model.

Listen, I have no interest to engage in a shouting match with you, just saying that suggesting one can buy an 8microsecond setup off the shelf is ludicrous.
 
Joe, Euronext is an exchange where listed products are traded. Spot FX is an OTC product, an entirely different animal. You can't compare the two in terms of market makers or liquidity providers because they fulfill very different functions and are bound to entirely different regulations. Nobody in OTC space commits to anything, trust me on that, I have traded currencies professionally for a very long time. In spot fx space a liquidity provider can come and go as they like at their own discretion. That is why I pointed out there is a huge difference.

ExperiencedJoe said:
Don't shout if you don't want to :). But here the definition of liquidity provider as stated by euronext https://www.euronext.com/en/members/market-makers-and-liquidity-providers:

Liquidity Providers (LPs) are trading members that act as market makers by committing to provide liquidity in an instrument listed on Euronext.
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