Reaction to Michael Lewis's book and "60 Minutes" interview
- Thread starter Maverick74
- Start date
sorry if this has been discussed before
just watched this HFT documentary from November 2013, The Wall St Code
http://youtu.be/GEAGdwHXfLQ
at 24:10, HFT insider and whistleblower Haim Bodek makes interesting analogy how HFTs jump ahead in the queue.
just watched this HFT documentary from November 2013, The Wall St Code
http://youtu.be/GEAGdwHXfLQ
at 24:10, HFT insider and whistleblower Haim Bodek makes interesting analogy how HFTs jump ahead in the queue.
Haim was right,but only partially( he is missing another big part -current microstructure created by SEC)
or worse for everyone-combo of both..
last friday i have few postions. my soft popped up couple stocks that are traded at my price,but i got no fill. i counted at least 5 separate transactions at my price-an i got nothing. actually- on both cases i got 2 shares on each stock(and price vent thru my order). now have to pay a full commish on entry and exit. ok...got that..
next stock-did hit my stop-tried to exit at bid(short)-at least 800 shares passed by at my price( looking to buy 200 shares)-i got 38 shares and price went against me.
tried to add to a short-once again-got the price right at high-another 1200 shares passed by at my price (all 100-200 shares trades)-got nothing and price went straignt down 5% from this level.
my point is(i said that before here,on ET -you can be a 100 times correct on the price direction during the day(short term)-but you won't get any shares. PERIOD. i see no point to trade stocks in this environment(and i'm not alone ,judging by the volume and complaints about lack of volume\participants from major firms)
part of the problem(besides one,mentioned by Haim)-US stock market right now ridiculously fragmented to the point of absolute nonsense. to the point,where no one can even regulate it. as this Lewis guy stated-there is OVER 80(!) market centers in US trading same stocks. combined-all of them are lowering your chances to get filled to zero. good luck trying to buy at bid or selling at ask,making living intraday stocks..
why it's s hard to undestand this for a lot of people here- i don't know..
PS-forgot to add another one that i got into by accident-bid on that crapper for a whole day is 5.1,ask 5.15 with plenty of shares at ask. closing price(w/o any transactions in between or at those two price)-5.25. try to make sense out of it. this is US stock market of 2014...
http://www.zerohedge.com/news/2014-...-rigged-market-explained-one-simple-animation
Once again, stock777, declaring hft scum, and apologists like "wtj" pimps for scammers, was 105% correct.
I own. U borrow.
Once again, stock777, declaring hft scum, and apologists like "wtj" pimps for scammers, was 105% correct.
I own. U borrow.
yeah soes. so you're in favor of millionaires gaming the entire market with co location and tape fraud. you sound like a real prince.
But where is the logic here.
SIP (official feed) is slower and running on outdated infrastructure with altered time stamp by SIP.
Regulations are followed and quote is disseminated at the same time by the exchange. How Exchange can be held responsible for third party network technology?
And why HFT is considered offender here?
How they front run order flow if they have no customers and do not use SIP quotes to fill internalized customer orders?
Well, he probably leaves that out because, as I understand it, gaming the Reg NMS via latency arbitrage was his business model with his own HFT firm. Until some of his competitors found a way (or as he alleges, colluded with the exchanges) to always jump the queue ahead of him.
I personally think that, just trying to be faster via faster networks, colocation and algorithms is not illegal, actually quite clever, albeit at current speeds detrimental to the market as a whole.
But being faster by receiving preferential treatment from exchanges using secret order attributes that not even an industry participant like Haim knew about for 12 months... we might hear more about this from the law enforcement side
The problem you describe is, I believe, due to internalization. The trade prints you see actually never happen at an exchange. A computer at an internalizer sees an incoming order, decides the price is beneficial to it, fills it, reports the trade, and then this trade gets printed on the tape. So your front-line order sitting in vain at the exchange gets the dubious honour to determine the price someone else pays or gets, but you never get the benefit. You only get hit when the internalizer determines the order is toxic.
As you have described, internalization reduces the willingness to actually put limit orders into exchanges' books and thus reduces liquidity and increases spreads.
I am not sure of your argument, but number one IMO, the regulations were not followed when the feed tape time was changed. NBBO doesn't exist independent of time.
Also, if the exchanges publish two tapes (one fast and one slow - one of which doesn't go to all market participants), also goes against the regulation as highlighted in the article. The NYSE was already fined for the same issue - so there seems to be legal precedence.
Those that traded (not all HFT algos- a meaningless term now unless we segment what specifically is being talked about) on information not generally available to the market (and designed to be that way) are doing something wrong. Remember SAC capital? Those that supplied that information were also charged.
As a thought experiment, suppose you are legally subject to a rule that requires you to post your trades 2 hours ahead for all to see. We can see the current price. Anyone here could front run you "legally". Is that a fair system? Are you getting the best trade price NBBO on each trade? What if the tape is re-written timewise to make it look like you got the best price. Would that be fair?
Ok, now change the time to 1 hour, 1 minute, 1 second, 1 millisecond etc. and ask the same questions. Are any of those fair trades in your view? Where is the time differential that Vicirek would say yes it is fair to me? Isn't the answer zero?
Bottom line if anyone is trading on price/volume information not generally available to the market, they are able to front run people and the market is not a "fair" market.
Good post. All of these things also reduce order sizes and average hold times which should have been a big clue to the SEC that something was wrong. If the SEC finds out that the tape time was being rewritten to look good for the regulators - isn't that something like destroying the complete and detailed records that are required to be kept?
The problem is that these "tricks" are disrupting the true liquidity distributions of markets, which is a huge key to shorter term trading. Longer term capital raising, price discovery (which is some function of liquidity and the sentiment and other things) and just a place to buy and sell securities are all being negatively impacted. Is that good or bad? The public is not fooled that 'tricks" are good for the markets.