Ratigan nails how "dark pools" rip off traders: Dark pool trading = 10% of volume

[talontrading]

Quote from achilles28:

Its obvious that equity markets are rigged to favor Investment Banks and large funds. Dark Pools and HFT are just two examples where Big Guys stack the deck to ensure they get the best possible bid/ask, or move the highest volume with the least slippage. Even the self-proclaimed expert on the thread admits that, but in the same breath, says its not such a bad thing!

The problem of size is liquidity. Fair and open markets means bigger players hold bigger risk due to the nature of their (relatively) illiquid positions. Tough. That's life. Why should the system be gamed to screw over the smaller guys so Big Volume can get the best deal?

a thought and a question for you. you do realize that a lot of the Big Volume is you? Mutual funds, pension funds, ETF's that many private investors hold instead of those products... those institutions account for most of the big volume. Big Volume doesn't mean GS, JPM, etc are trying to get a good price.

Now explain something for me... maybe you can enlighten me because I have yet to hear a clear explanation of this. Please show me exactly how an order in the dark pool could screw over the smaller guys. I will warn you in advance your explanation will have to make sense and be technically sound (not like Matt Tabbi's explanation where GS makes a lot of money buying stock a fraction of a penny above the bid and then immediately selling it to the bid. MAKE SENSE.)

So... take the floor... explain to me how the little guy gets screwed here.

As for self proclaimed expert... well... I have traded privately, for a medium size and big institution.... swing traded, daytraded, position traded, traded long / short... futures, options and equities... worked with programmers and overseen black boxes for HFT... used algos and executed large blocks of stock in dark pools. Every day I learn something new so I'm certainly not saying I'm an expert, but I'm the little guy too. I started with 2K in my trading account working with a full service broker who charged $95 a trade lol... that was some years ago and I have learned a few things since then (I hope!) So I'm not an expert but I do know some things about how the marketplace works and I can't stand sloppy thinking.

 

[achilles28]

Quote from BPtrader:

fucking idiot.

"dark" pool is the alternative to the established exchanges.

To name it "dark" is to give it a bad name, a rumor-spreading technique used by NYSE and Nasdaq. They see a competitor and try to destroy it. Vicious.

If your orders to NYSE and Nasdaq are routinely routed to GS before being made public, what do you think the exchanges are doing??? They are making money by selling your orders to GS.

Why would GS pay the exchanges for your orders?

It front-runs them. They don't call it "front-run," because it has a bad meaning, they call it "high-frequency trading." High my ass, it's called stealing.

So you get fed up with the crooked exchanges collaborating with big players like GS, you decide to bypass the crooks and buy directly from the sellers. Instantly you get a bad name, you are running a "dark pool," which sounds like you are doing some illegal underground activities. Well, that's exactly what they want to portray you, because they want to get rid of you, so that they can have the monopoly.

If you think those crooked exchanges are not bad enough, think of this fact: Madoff was the chairman of Nasdaq for a long time and taught a few tricks to those crooks currently working there.

Good post.

But it's not either-or. Either HFT is bad. Or Dark Pools are.

They're both "bad".

One is non-transparent and shields T&S information from the public. The other probes market-order volume (but you can't hit it!), or sells market order info to Big Guys. Only Big Guys can operate HFT, so they profit handsomely. Check out the news. GS and JPM killing it with HFT. It's bullshit.

And yes, HFT is pure front-running. Front-running is great, so long as the playing field is level.

The Goldmans rigged the game so they can front-run.

On that note: why don't we just make volume and Level 2 a paid-service, too?

Volume and Level 2 can be made available to "everyone" for $10 million, per month.

What's wrong with that? That's "fair", right?!

 

[talontrading]

Are you a trader? How can you be so confused????

You can get time and sales from any trading platform and I think NASDAQ makes their T&S available free (archived) on their website.

You obviously have no clue about how large orders are executed. Large volume can't be limit orders????? Absolutely wrong. Large orders MUST be limit orders because large market orders are expensive (re execution cost). Large orders are split into smaller limit orders (which are not large relative to the displayed bid) and algos work them in various ways... from putting them on the bid, pinging between the bid / offer, sweeping the offers, etc... and anyone with even an IBKR account can use algos so don't even start with that lol.

HFT is not front running. That is a common misconception. Front running is flat out illegal... it happened in the pits but is extremely rare in electronic exchanges... that's not at all what HFT does. (and yeah... I've worked with programming teams on HFT algos so I do know how they work.)

So the Big Guys are so dumb they would get caught in their own HFT and they have to trade in the Dark Pools? That's how the world works? Who are they trading with? Themselves????

These types of questions are not the kind of questions a trader would ask achilles28. A lot of people trade 1 lot in futures and think that gives them an understanding of the equities market... but it's actually much more complex.

You can open an account for well under a $1M USD with a major prime broker and have access to dark pools and algos. Don't challenge me on that because been there done that too... worked for a small hedge fund with well under 500K under management that opened with a mid-tier investment bank prime broker and had algo executions with dark pool access. there are NO pension funds that don't have these tools... dont kid yourself... not everyone sits in front of their Ameritrade screen and hits the market button.

Does this make sense?

Quote from achilles28:


The side that has access to and employs dark pools and HFT has a discernible advantage over the side that does not.

You may have worked for a large Pension Fund (aka "The Public"), as you say. But Not All Pension funds are Large, or have the resources to capitalize on HFT or Dark Pools. So, in that case, your Large "Public" Fund, would screw the smaller, less capitalized "Public" fund. Or, in reality, many of them.

You don't understand my point about large order probing or HFT. A large order (institutional size), gets broken into smaller pieces, which are still LARGE relative to volume sitting on the bid/ask. How it relates to HFT: large orders can't probe the market successfully, because HFT seeks hidden volume (market orders) and front-run it. The Big Guys can't get use limit orders for Big Orders. Retail will front-run that. And market orders broken into pieces (FOR BIG ORDERS), get front-run by HFT. So Dark Pools are used. Get my point?

You say that Retailers can access Dark Pool liquidity and T&S information? Could you please tell us where we can find that info?

The difference between ice-berg orders on the Naz and Dark Pools - hidden orders on the NAZ get front-run by HFT!!! There's no HFT in Dark Pools!

So, once again, the Big Guys trade in Dark Pools, so they don't get caught by their own traps laid to ensnare small traders.

It's okay if you get irritated, btw. I don't really care.

 

[talontrading]

You have proven you aren't a trader. This is a paid service and you can get it with the $5k required to open a trading account... or actually less... just buy a subscription to something like esignal and watch time and sales.

IT ALREADY IS AVAILABLE TO EVERYONE. How can you not know that???? Who are you?!?!

Quote from achilles28:


On that note: why don't we just make volume and Level 2 a paid-service, too?

Volume and Level 2 can be made available to "everyone" for $10 million, per month.

What's wrong with that? That's "fair", right?! [/B]

 

[BPtrader]

Quote from lemeeeplay:

You realize that Goldman's Sigma X is one of the biggest dark pools?

so what's your point?

Ban GS from dark pool?

GS didn't collaborate with NYSE and front-run other traders?

GS participating in dark pool doesn't change the fact that GS collaborated with NYSE and front-ran other traders.

Let me give you an analogy:

GS employees stole money from other traders AND went to the bathroom, I also went to the bathroom. Does it mean going to the bathroom is bad?

Furthermore, GS employees stole money AND breathe oxygen, should I consider oxygen poisonous and stop breathing it?

 

[talontrading]

So you get fed up with the crooked exchanges collaborating with big players like GS, you decide to bypass the crooks and buy directly from the sellers. Instantly you get a bad name, you are running a "dark pool," which sounds like you are doing some illegal underground activities. Well, that's exactly what they want to portray you, because they want to get rid of you, so that they can have the monopoly.

[/B]

the point is that GS actually was there right at the beginning of dark pools and they now run the largest. so... i'm confused... i want to hide from GS so i go play in the dark pool that they own and that only they could see the orders in? Which brings us to....

Quote from BPtrader:

fucking idiot.

That's a little harsh but basically yeah... I agree.

 

[BPtrader]

Quote from talontrading:

the point is that GS actually was there right at the beginning of dark pools and they now run the largest. so... i'm confused... i want to hide from GS so i go play in the dark pool that they own and that only they could see the orders in? Which brings us to....

Do you understand English?

if you do, i will copy and paste my previous post here for you:

"GS participating in dark pool doesn't change the fact that GS collaborated with NYSE and front-ran other traders.

Let me give you an analogy:

GS employees stole money from other traders AND went to the bathroom, I also went to the bathroom. Does it mean going to the bathroom is bad?

Furthermore, GS employees stole money AND breathe oxygen, should I consider oxygen poisonous and stop breathing it?"


After you read it and if you still have no clue, then don't respond to my post, because you are not at the same level as me in terms of IQ. I hate idiots like you.

Why don't you continue to brag about you trading privately, publicly, semi-privately, and semi-publicly for this hedge fund and that hedge fund of medium size and small-to-medium size? Are you really desperate for attention? So desperate you brag to totally anonymous posters on ET? pathetic.

 

[talontrading]

How did they collaborate with NYSE again? I don't understand. I guess you're just smarter than I am.

Quote from BPtrader:

Quote from talontrading:

the point is that GS actually was there right at the beginning of dark pools and they now run the largest. so... i'm confused... i want to hide from GS so i go play in the dark pool that they own and that only they could see the orders in? Which brings us to....

Do you understand English?

if you do, i will copy and paste my previous post here for you:

"GS participating in dark pool doesn't change the fact that GS collaborated with NYSE and front-ran other traders.

Let me give you an analogy:

GS employees stole money from other traders AND went to the bathroom, I also went to the bathroom. Does it mean going to the bathroom is bad?

Furthermore, GS employees stole money AND breathe oxygen, should I consider oxygen poisonous and stop breathing it?"


After you read it and if you still have no clue, then don't respond to my post, because you are not at the same level as me in terms of IQ.

 

[BPtrader]

Quote from talontrading:

How did they collaborate with NYSE again? I don't understand. I guess you're just smarter than I am.

Have you heard of co-location of servers?

Oh, you worked with this programmer and that programmer and this hedge fund and that hedge fund, of course you know it.

 

[oraclewizard77]

What don't you understand?

1) If GS pays say NASDAQ to co-locate their server next to the the NASDAQ servers, they have less latency.

2) If GS pays to see orders before everyone else, it is front running.

3) If GS is front running orders, it costs other traders who place market orders more money to trade than if GS got the information at the same time as everyone else.

4) Dark pools don't matter to me since I can see the future darkly.

Quote from talontrading:

How did they collaborate with NYSE again? I don't understand. I guess you're just smarter than I am.