Market Makers are colluding to price fix for short/medium term

[VanishingMediator]

Hft market makers if colluding would not need to short fb to drop the price. They would just drop all or most of the ask bids would normally be met by whatever people sold... even if it was equal to the number of shares bought in that minute the price would drop.

They can easily pick the price this way and even use an algorithm to do it automatically based on whatever mathematical criteria.

Btw most of the mainstream trading info you read is provided by big money.... the people collecting your trading fees.

Volatility Option "speculators" are the only people who significantly cut into their profits because of the huge percent returns they can make. So they will cheat the options market any way they can.

 

[TskTsk]

Hft market makers if colluding would not need to short fb to drop the price. They would just drop all or most of the ask bids would normally be met by whatever people sold... even if it was equal to the number of shares bought in that minute the price would drop.

They can easily pick the price this way and even use an algorithm to do it automatically based on whatever mathematical criteria.

Well, to drop the price you need to either run through the bid (take on position) or remove liquidity alltogether. If all MMs remove liquidity to drop it it should be quite obvious to any observer. I havent looked at volume or transaction data for FB so I have no idea if this is happening, but I really doubt it...

 

[VanishingMediator]

Well, to drop the price you need to either run through the bid (take on position) or remove liquidity alltogether. If all MMs remove liquidity to drop it it should be quite obvious to any observer. I havent looked at volume or transaction data for FB so I have no idea if this is happening, but I really doubt it...

Not all liquidity, just enough to get the price where they want. And with large volume other people or one or two mm asks wouldn't stop it from dropping.

The obviousness of it depends how much they do it how quickly. I think you are not understanding the scale of hft trading. Google 5 seconds of hft trading slowed down to 5 minutes. They can move the price a great deal with 500k volume in one minute.

If you are trading on level 2 you are seeing a summary of what happened eons ago by hft standards and only seing the order book in a tiny fraction of its states.

 

[stock777]

they.

 

[VanishingMediator]

they.

You don't know anything. HFT makes up an enormous percent of the trading that goes on. Human traders are not going to thwart what they decide together to do. Competition between them should prevent this kind of thing, but it doesn't.

There is obvious collusion going on. This can be done automatically using game theory or agent theory. Mathematically it is entirely possible, but it requires any HFT market maker to agree that they will not screw over the others. (either the operators or the algorithm by sending signals using test trades) A signal could be agreed upon like a HFT only making one limit order to close the gap when he could have made more and made a lot more money.

If you saw a beautiful mind, if any of the HFT market makers goes for the blonde, the rest lose their opportunity to cheat the option traders AND lose money to the rogue. It's easier to explain it to you that way then to go through the "disappearing liquidity" explanation again. HFT requires big money as the speed costs dearly. There are only so many of them so you could easily fit the people responsible for them in a smokey backroom of a country club.

I suppose someone could make an argument that if all option traders were accurate they would lose their shirt to the option traders, but that is ridiculous. They make billions, and making markets to thwart option traders results in arbitrary volatility.

 

[nth]

You don't know anything. HFT makes up an enormous percent of the trading that goes on. Human traders are not going to thwart what they decide together to do.

They must be out to get you specifically?

I've been having a good year. So maybe you are sooooo intelligent that they decided to target you specifically? Chances are very high that your trades are not exactly the same as everyone else. So maybe they are after you? Or maybe you think like retail? And retail is on the "pay to play, I enjoy the game vs the money" mentality.

Did you ever see that thread where the poster said that his broker moved in next door to spy on him and try to get his code? It was interesting that his handle was "Fool".

http://elitetrader.com/vb/showthread.php?t=260674&highlight=father

I challenge you to find a new strategy. What are you doing? You are not trying to compete in high frequency time frames with point and click are you?

best to you

 

[VanishingMediator]

No, what that meant was that human trading is not going to stop their price fixing. And it is not about me, it's about all people long options.

 

[topdrudge]

I have developed a thoroughly unnatural love for this thread. As of this afternoon I have fired all my previous gurus and will now be following only VanishingMediator.

 

[TskTsk]

Not all liquidity, just enough to get the price where they want. And with large volume other people or one or two mm asks wouldn't stop it from dropping.

The obviousness of it depends how much they do it how quickly. I think you are not understanding the scale of hft trading. Google 5 seconds of hft trading slowed down to 5 minutes. They can move the price a great deal with 500k volume in one minute.

If you are trading on level 2 you are seeing a summary of what happened eons ago by hft standards and only seing the order book in a tiny fraction of its states.

Im aware of the scale of HFT trading and I've seen all the videos...I browse the nanex site all the time where they expose their shenanigans...but mostly it's not as serious as you present it. I'd be much more worried about HFT front-running due to their speed advantages, quote-stuffing, dark pools which hinder transparency, and liquidity being pulled when needed the most..

Widespread collusion on the contrary does not seem documented anywhere. I think, there are simply too many people in the markets for any one entity to corner them anymore but a few seconds at most. If anything, big banks etc. definitely collude long-term, because they combined have pockets deep enough to affect global markets. Like the LIBOR scandal, ISDAfix, gold fixing, aluminum fixing, many examples of this...And yes, game-theory proves that true self-interest indeed means cooperation and collusion, not competition. Just another blow to outdated free-mkt neoclassical economics if anything.

 

[trickyname]

I have developed a thoroughly unnatural love for this thread. As of this afternoon I have fired all my previous gurus and will now be following only VanishingMediator.

This. I love reading about how I collude with all my competitors and take massive positions during a very volatile earnings period. It's become such second nature to me that I totally forgot that I do it.