Options Exchanges Knock High-Frequency Traders Down a Peg

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Billy Thunder

The two largest options exchanges are taking steps to protect exchange market makers from poaching by high-frequency traders.

This week the International Securities Exchange instituted a new rule that eliminates the priority high-frequency traders once had in that marketplace. Under the rule change, high-frequency traders will no longer be able to jump ahead of the exchange's market makers in the competition for orders.

http://www.tradersmagazine.com/news/options-exchanges-high-frequency-traders-ise-cboe-104467-1.html
 
Quote from Billy Thunder:

The two largest options exchanges are taking steps to protect exchange market makers from poaching by high-frequency traders.

This week the International Securities Exchange instituted a new rule that eliminates the priority high-frequency traders once had in that marketplace. Under the rule change, high-frequency traders will no longer be able to jump ahead of the exchange's market makers in the competition for orders.

http://www.tradersmagazine.com/news/options-exchanges-high-frequency-traders-ise-cboe-104467-1.html
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Still does not do anything about situation where the most manipulative high frequency traders ARE the Marker Makers.
 
Quote from truehawk:

Still does not do anything about situation where the most manipulative high frequency traders ARE the Marker Makers.
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You honesty believe that MMs have the ability, advance knowledge of pending orders, and the capital necessary to compete with Goldman Sachs?

You do not live in the real world.

Mark
 
As of yesterday, ISE members representing customer orders must designate those orders as "priority" or "non-priority." Priority orders are expected to be those from traditional retail customers. Non-priority orders are those from high-frequency traders. Only those marked "priority" will be able to cut in front of market maker orders at the same price.

The dividing line between a retail customer and a non-priority high-frequency customer is now 390 orders per day, or one order a minute. Anyone doing 390 orders per day or less on average during a calendar month is considered a retail customer and is allowed to step in front of a market maker when competing for flow. Anyone doing more than 390 orders per day per month is considered a professional customer and trades on parity with market makers.
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So this is nothing too serious. You have to submit 8000 orders per month before you have a potential disadvantage.

And it's only on 2 exchanges, hopefully the volume will divert to exchanges that offer a better level playing field (like BOX).
 
Quote from dagnyt:
You honesty believe that MMs have the ability, advance knowledge of pending orders, and the capital necessary to compete with Goldman Sachs?
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How would Citadel be "categorized"? :confused:
 
>> The dividing line between a retail customer and a non-priority high-frequency customer is now 390 orders per day, or one order a minute. Anyone doing 390 orders per day or less on average during a calendar month is considered a retail customer and is allowed to step in front of a market maker when competing for flow. Anyone doing more than 390 orders per day per month is considered a professional customer and trades on parity with market makers. <<


If the above means a per minute restriction then maybe it's a problem. But if it's a per day restriction, what's to stop someone from having more than one account?

Maybe I'm naive since I have no clue how much volume a HFT does.
 
Reading the article it will be a per month restriction (and maybe only after a few monts of > 8000 orders).
 
Quote from dagnyt:

You honesty believe that MMs have the ability, advance knowledge of pending orders, and the capital necessary to compete with Goldman Sachs?

You do not live in the real world.

Mark
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Come on Goldman Sachs is not this mystical beast. Can Goldman's be beat? Of course it can be. You just have to be clever.

Here is the a question. Why do you hear about those that whine? Ever hear about those that don't whine? Of course not because they are making money and are not scared of the big bad wolf...
 
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