HFT spread trading

[j0sh]

Hi all,

Pretty sure this topic has been discussed to death but no matter how hard I try I can't seem to wrap my head around how the strategy works in the real world. I've done some research on spread betting and I think I understand the theory of buying at the bid and selling at the ask. What I don't understand is how do you execute this? Exchanges only fill limit buys at the ask and limit sells at the bid. Do you need some sort of special arrangement with the exchange?

Regards,
Josh

 

[Bob111]

assuming you are talking about stocks

http://www.youtube.com/watch?v=GEAGdwHXfLQ

from 24min

 

[WinstonTJ]

Do you need some sort of special arrangement with the exchange?

No, but it does help.

 

[j0sh]

So it doesn't work for regular traders? Since you need to send a special type of order according to the YT video

 

[2rosy]

Hi all,

Exchanges only fill limit buys at the ask and limit sells at the bid.

This isnt true

 

[j0sh]

This isnt true

For the regular trader that is. How do we become part of the exclusive club?

 

[SouthbeachCTA]

For the regular trader that is. How do we become part of the exclusive club?

You're in dreamland son.
The fact that you are asking on this forum about becoming part of the HFT club means its never gonna happen for you...sorry. You obviuosly dont have the specialization(technical knowledge), nor the money.

 

[j0sh]

You're in dreamland son.
The fact that you are asking on this forum about becoming part of the HFT club means its never gonna happen for you...sorry. You obviuosly dont have the specialization(technical knowledge), nor the money.

I assure you I do have access to sufficient funds to run a prop desk. I just reside in a country that does not allow HFT on the official stock exchange yet.

 

[Occam]

For the regular trader that is. How do we become part of the exclusive club?

"Discount" broker/dealers can trade at .0001 inside the bid or ask, by trading against their accounts using "internalization" and/or take a kickback from a "wholesaler" (such as Knight or Citadel) to do the same. The unfortunate result is wider spreads and a more fragmented market for all, not to mention potentially inferior execution for the client, as the client order then can't trade against potentially far better price-improving orders on the exchanges.

 

[j0sh]

"Discount" broker/dealers can trade at .0001 inside the bid or ask, by trading against their accounts using "internalization" and/or take a kickback from a "wholesaler" (such as Knight or Citadel) to do the same. The unfortunate result is wider spreads and a more fragmented market for all, not to mention potentially inferior execution for the client, as the client order then can't trade against potentially far better price-improving orders on the exchanges.

From my probably incorrect interpretation of your post, you mean that the brokerages themselves are the only ones able to trade the spread i.e. they engage in market making activities? Is there a way for a fund to plug into the exchange and take a tiny slice of the pie?
Please correct me!