Minimum time before Order Cancel

PocketChange · May 22, 2012

The law requires every order submitted must be intended for execution. Not to pump price or provide the illusion of liquidity. There are 10's of millions of orders that are submitted and immediately cancelled.

Why not require a minimum time that all orders must wait before they are allowed to be cancelled?

Tie the minimum time to the exchange and fair access to to the execution venue.

25ms may be sufficient to bring parity in the US markets allowing market participants to take on the trade opportunity via websockets if access is limited to US based clients.

Globally accessible Markets should have a minimum wait equal to reasonable ping times so all participants are at least given the opportunity to take on the trade opportunity. ie. CME products: 250ms.

An exchange may run lower minimum times if they require market participants to colocate. ie. 1ms or sub 1ms. But than all participants are trading at wire speeds at the venue.

Clients of these fast market exchanges would piggy back on their brokers infrastructure to gain access.

Make it the responsibility of the exchange to provide fair access to all market participants.

As it stands even computer to computer is unfair and human to computer is silly.

4thaugust1932 · May 22, 2012

http://en.wikipedia.org/wiki/Pump_and_dump

Random.Capital · May 22, 2012

Quote from PocketChange:

Why not require a minimum time that all orders must wait before they are allowed to be cancelled?

You're suggesting eliminating FOK orders?

The only fair way to implement a "minimum live time" is to pick a very long time frame - for example, any order placed must live through that day's close. That would do much much more to balance the playing field between traders and investors.

That was the point, right?

eusdaiki · May 22, 2012

Quote from Random.Capital:

You're suggesting eliminating FOK orders?

The only fair way to implement a "minimum live time" is to pick a very long time frame - for example, any order placed must live through that day's close. That would do much much more to balance the playing field between traders and investors.

That was the point, right?

I don't think that FOK and IOC orders are a problem since they don't display a quote. the problem is "Day" orders that get cancelled a millisecond after being entered, in this case the order generates a quote... but other participants cannot act on that quote since by the time they see it the quote is already cancelled.

FixedGrin · May 22, 2012

Quote from Random.Capital:

The only fair way to implement a "minimum live time" is to pick a very long time frame - for example, any order placed must live through that day's close. That would do much much more to balance the playing field between traders and investors.

The long time frame would be detrimental for people with fat fingers who mistakenly send orders. Perhaps it would be better to limit the amount of orders you can cancel within a time frame?

Random.Capital · May 22, 2012

Quote from FixedGrin:

The long time frame would be detrimental for people with fat fingers who mistakenly send orders.

Those are supposed to be caught by pre-trade risk checks and should not make it to the matching engine/book.

PocketChange · May 22, 2012

I'm expanding on an idea proposed by Nanex here:
http://www.nanex.net/Research/Proposal/NanexProposal.html

I would think FOK orders must live for the minimum time period before being killed. ie. 1 - 250ms depending on the exchange's fair access rules.

I don't think the time has to be necessarily long as much as it should be long enough to give all market participants an opportunity to take action.

Almost like different limit tables in Vegas.

The retail screen traders may want to stick to trading products that have 250ms minimum times before cancels and the high speed bots may want to trade products on the 10gb nanosecond exchanges.

I'm not sure how to quantify "fairness" in trading as it is similar to our legal system... Deeper pockets prevail.

I believe this is a responsibility of the governing bodies to make sure each product traded on any exchange have fair access and execution rules. Unfortunately this will never go anywhere cause its the responsibility of the governing bodies.

I think the exchanges will push the race to zero cause they make $ on the nbbo prints and commissions. They certainly have no incentive to turn away participants that want to phone in their orders to a broker... The dealer/broker network is web of incestuous and conflicted toll booths. gouge them when you can...

Quote from Random.Capital:

You're suggesting eliminating FOK orders?

The only fair way to implement a "minimum live time" is to pick a very long time frame - for example, any order placed must live through that day's close. That would do much much more to balance the playing field between traders and investors.

That was the point, right?

Random.Capital · May 22, 2012

Quote from PocketChange:

I would think FOK orders must live for the minimum time period before being killed. ie. 1 - 250ms depending on the exchange's fair access rules.

They live for "zero" time - when they get to the matching engine, they either generate a trade event, or they're killed and never get into the book.

I don't think the time has to be necessarily long as much as it should be long enough to give all market participants an opportunity to take action.

That's the issue. The proposal doesn't level the playing field for "all market participants", it gives an unfair advantage to participants who are kinda fast but not really fast.

A truly level playing field would have (by modern standards) a very very long time-to-cancel.

The retail screen traders may want to stick to trading products that have 250ms minimum times before cancels and the high speed bots may want to trade products on the 10gb nanosecond exchanges.

Most retail traders cannot run at anything approaching 250ms. It takes longer than that to click the "buy/sell" button, never mind the processing time to actually display a chart, absorb the visuals, and make a decision. To accomodate "screen traders", you need a time-to-cancel measured in full seconds, at a minimum.

If you're talking about "retail" bots, sorry, there should be no special dispensation for someone silly enough to enter a Miata in a race specifically intended for Porsches.

FixedGrin · May 22, 2012

Quote from Random.Capital:

Those are supposed to be caught by pre-trade risk checks and should not make it to the matching engine/book.

yes, that is true, but sometimes people may send a buy order for 1000 shares, which may be well within their bp, while they may have meant to send it only for 100 shares. it would be great to have a minimum time before canceling orders, but determining "fairness," for this would definitely dependent on who is paying the person who decides what it is fair =[

PocketChange · May 22, 2012

All valid points... What do you think of Nanex's proposal?

Seems my expansions of their general idea doesn't do much...

Quote from Random.Capital:

That's the issue. The proposal doesn't level the playing field for "all market participants", it gives an unfair advantage to participants who are kinda fast but not really fast.

[/B]