High Speed Trading Unfair To Retail Traders

[bighog]

Good stuff, agree with assume the worst. Retail traders have ALWAYS played with disadvantages and imperfect info, that's just the way it is.

When us small piker retail traders place a trade there is not a single soul out there that gives a rats ass what we are doing. Yes, i know, it helps a fragile ego to think we matter.

Speaking of speed, the retail trader still must realize by the time the quote shows up on the chart, etc .........it is history. Then also realize that you must process the info, then the answer must flow from the gray matter between your ears (hopefully some cells are actually active) down to the finger that then must hit the mouse................now the quote you received is not only historic but ancient.

What to do? Try this: Anticipate what the big dogs will do by getting in their shoes and inside their heads as they see the same levels as targets as we do. there is no way we can compete AGAINST them so lets try and join them as a couple have suggested. I like to think i am a step ahead of the big dogs most of the time. Why not you?

PS: The end of the bike race is super cool. france is a beautiful country and Paris, supremo. Have a good day.

 

[Shreddog]

Quote from Cygnus Atratus:

+1 for your post Nitro

Any market will always be skewed by any one group of partcipants, HOWEVER THE ISSUE HERE IS, the day the banks decide to switch off their NYSE SLP partcipation, remember when Goldman Sucks did that for a week in June ? These guys on some days are responsible for 73% of volume, but as they are for profit imagine when an exogenous event forces them to switch off for the day/week/month and KAPOOOT !!! 73% of "market volume vanishes"

Over and out

I'm pretty sure NYSE issued a correction and GS was #1 that week same as usual. This was all on the Zero Hedge blog.

 

[Shreddog]

Quote from d138:

This article is misleading, and it's surprising that traders on the forum is supporting it. If you just read the description of Nasdaq order types, you will see that FLASH is an optional flag on the order.

Bingo. If you don't want your order flashed turn off that function. It is optional on BATS/EDGX/NSDQ which are the routes under debate.

If you do your volume with lots of small orders, these Flash orders are great. Price improvements are pretty common.

If you're sending a large order via one of these routes it doesn't matter whether your order is flashed or not. Someone is going to step in front of you and pull bids/offers. It's the whole reason algos and darkbooks were created in the first place.

The small investor should be benefiting from flash orders overall. It's the big funds that are the "victims" if you can call someone who should know better but is too stupid/ignorant to protect themselves a victim.

Having said all this I think there likely is abuse here. I think the solution is to allow orders to be flashed only to "passive" dark venues, ie venues that only match buyers and sellers and do not carry any inventory of their own. This would be something that could be easily regulated and implemented.

 

[walterjennings]

Quote from lemeeeplay:

This point is mute!

That’s like saying, people shouldn’t group drug dealing with violence.

The reason HFT and front running is group together is because HFT shops are front running.

Its more like saying people shouldn't group drug dealing with pharmaceuticals.

I do HFT and I most definitely don't do any front running (ie. using any information which isn't public knowledge). IMO front running is a form of insider trading (trading with knowledge which hasn't been made public yet).

Lots of the proposed 'solutions' to front running would kill my ability to offer liquidity/improved pricing services to the market. Not that the policy makers are as mind numbingly ignorant about the subject matter as the general public. I think I'm pretty safe.

 

[d138]

I find it's funny when people on this forum are complaining that HF traders have there severs collocated and thus they beat the retail investor. So what? Some of average investors are on DSL and others are on FIOS, clearly FIOS guys have "unfair advantage". Should government go ahead and prohibit use of FIOS in financial operations?

 

[walterjennings]

Quote from d138:

I find it's funny when people on this forum are complaining that HF traders have there severs collocated and thus they beat the retail investor. So what? Some of average investors are on DSL and others are on FIOS, clearly FIOS guys have "unfair advantage". Should government go ahead and prohibit use of FIOS in financial operations?

qft or like saying any business needs to gimp down their technology or practices because average joes cant afford to compete with them on the same level. Grr US Airways. Their ability to 'buy' and 'fly' planes really hampers my ability to extract profit from the transportation market. So unfair. QQ. Welcome to free market economics.

 

[truehawk]

Quote from nitro:

Imo, again people are blaming the messengers. If something legal exists that you can use to advantage, then you use it. So to say that it is manipulative by GS or whomever is a horrible misuse of words.

What it comes down to is this. Exchanges are constantly trying to dream up ways to increase revenue. So they invent products they hope will be big hits volume wise, or they invent FLASH orders they can sell to the big players, etc.

STOP BLAMING THE MESSENGER! Find the root source of the problem, and either join the party, or complain to your congressman that these rules do not "make for a fair playing field" whatever that means in this world.

You want to make trading markets fair?

1) Make direct multicast exchange data is available to everyone for "free" or enough to cover the infrastructure and make a little profit, not the huge profits they make now from data fees. We have a fibre backbone that can handle this now. In other words, democratize access to the highest quality market data.

2) No one can be colocated in the same building as the ECNs. You must be at least a certain distance, and that distance should be such that being <= 1MS (milli second) faster makes no difference. In other words, democratize physical distance to market data and execution latency.

3) Do away with brokers and have Clearing Firms do what brokers do now. This removes middle men and brings down the cost of execution and clearing down to bear minimums. If the exchange offers payment for order flow, then I get that. If exchange offers payment for liquidity, I get that. KILL THE MIDDLE MEN! In other words, democratize the fees that exchanges pay to attract volume and give it to the people directly connected to generating that volume.

4) Balance the interest of the customer with that of the exchanges, not just the trading firms.

I agree with all the above except the elimination of the broker. I think that brokers should be optional, but I like being able to get someone on the phone that I know when things go wrong, which is every now and then.

It bugs me to have to pay for feed data from what is essentially a quasi government entity.

 

[risktaker]

I totally agree with your points on exchanges screwing people with data fees. Why not get that revenue from trading fees instead? I have some platforms where I'm paying $60-$100 per exchange on the charting application & then another $60-100 for the execution platform *on the same exchange*!

Yeah, STOP all this "colocation" BS altogether!!!

I'm tired of these FU%^$ing games & rules made to just scam the smaller trader.

Quote from nitro:

You want to make trading markets fair?

1) Make direct multicast exchange data is available to everyone for "free" or enough to cover the infrastructure and make a little profit, not the huge profits they make now from data fees. We have a fibre backbone that can handle this now. In other words, democratize access to the highest quality market data.

2) No one can be colocated in the same building as the ECNs. You must be at least a certain distance, and that distance should be such that being <= 1MS (milli second) faster makes no difference. In other words, democratize physical distance to market data and execution latency.

4) Balance the interest of the customer with that of the exchanges, not just the trading firms.

 

[d138]

Quote from nitro:
2) No one can be colocated in the same building as the ECNs. You must be at least a certain distance, and that distance should be such that being <= 1MS (milli second) faster makes no difference. In other words, democratize physical distance to market data and execution latency.
[/B]

That does not make any sense. Ok, we will prohibit collocation with ECNs and make SEC the single source of exchange data. So, firms will start collocating with SEC or whatever will be itstelecom provider. Retail investors want two things at the same time: cheap data feed and fastest possible access to the exchange. That is not possible.
You will never be able to make a system where 1 millisecond faster makes not difference. Even if you enforce that orders should be send via USP or pigeon post, the firm that releases the pigeon 1 msec faster will benefit from it, so there will be always a speed race.

 

[DHOHHI]

Quote from vingbel:

This is why less and less retail traders are making money. At this rate, no one will be able to make a living trading on their own.

http://www.nytimes.com/2009/07/24/business/24trading.html?_r=1&hp

Woe is me. So many aspiring traders have little, if any chance of success if they constantly whine about all their disadvantages. So you can't compete speed wise with the institutions. Rather than bitching about that why not look at the advantages you have over the institutions. I've found that if I'm in a position, long or short, it's a heck of a lot easier to exit that position if I hold 5000 shares than if I want to unload 50,000 (100,000) or some large institutional quantity. Any decent trader can make $$$ in any market, whether a prop trader or retail. But anyone who points to reasons why they're at a disadvantage has the deck stacked against them from day one. I'm starting my 14th year of full time trading and have more confidence and expectations of higher profits than any time in my past.