Peterffy proposes 100ms delay to data feeds to solve HFT problem

AlphaRocks said:
Peterffy solution to HFT order spoofing is to drive business from dark pools on to large exchanges and delay orders by say, a tenth of a second, except for quote updates from market makers
http://www.ft.com/intl/cms/s/0/68273928-bf33-11e3-b924-00144feabdc0.html?siteedition=uk
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"except for quote updates from market makers" -- how convenient for IB; IB's Timber Hill is a market maker and an HFT. So he's proposing a rule that only allows the biggest of firms to quote frequently -- that will really "fix" things -- i.e., it will fix the outcome in favor of an oligopoly of large firms (Timber Hill, Knight/GETCO, Citadel, etc.).

BTW, most, if not all, of the big HFT's are also market makers, and many also do payment-for-order flow deals acting as "wholesalers".

If they want to slow quotes down, the rule should hold true for everyone, rather than exempting the largest HFT firms such as IB's Timber Hill "affiliate".

If they want to put more quotes in the light, by far the most effective solution would be to ban internalization and payment-for-order-flow/wholesaling agreements, practices the main purpose of which is to skim brokerage clients on the back-end without them knowing it.
 
If they want to put more quotes in the light, by far the most effective solution would be to ban internalization and payment-for-order-flow/wholesaling agreements, practices the main purpose of which is to skim brokerage clients on the back-end without them knowing it.
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yep. simplify things. i would also simplify orders as well. simplicity=transparency.
but WS is not interested in transparency..neither SEC
 
Daal said:
Does anyone know if Timber Hill has any affirmative obligation?
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I don't know for sure, but I would assume that as a market maker they will trade in products that have affirmative obligation.

My guess is his reasoning for exempting market makers from the delay is so non market maker participants and intermediaries can't game them on their own trades that only serve the purpose of posting a bid/ask with no real customers bidding or offering. However, I agree with Occam that this just ensures the market is rigged in favor of the market oligopoly.

Personally I think that this problem is very complex and implementing delays is just a work-around that is bound to break down at some point. Plus a 100ms delay still leaves the participants on slow connections at a disadvantage. The real solution to the problem is to have a centralized exchange, and to regulate that exchange so they cannot sell higher speed data feeds, nor sell co-located server space, and only produce one quote data feed--the equivalent of the consolidated tape--which would be published in synchrony with atomic clocks around the world, at a set heartbeat interval (pick your time, 10ms, 100ms, 1000ms, whatever is considered fair, maybe the time it takes the slowest ping to go around the globe), the point of the interval being that it will theoretically give all participants time to see the last quote and react to it before the next one is published. But hey I don't know enough about market internals to provide a real solution :)
 
Occam said:
If they want to put more quotes in the light, by far the most effective solution would be to ban internalization and payment-for-order-flow/wholesaling agreements, practices the main purpose of which is to skim brokerage clients on the back-end without them knowing it.
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I agree that should be banned and it will make it more fair for all parties, and it will get rid of rebate harvesting strategies, but it still leaves room for HFT strategies that exploit time delays between the various exchanges and speed of data feeds.
 
wall street is still trying to get the uptick rule reinstated but with an exemption for themselves.

business as usual.
 
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