Reaction to Michael Lewis's book and "60 Minutes" interview

[freedinner]

There are some interesting posts in this thread by trader422 about hidden orders being sniffed out by HFT (methods other than pinging with a couple shares):

http://elitetrader.com/vb/showthread.php?t=255059&highlight=hidden

Thanks a lot. Didn't read this before.

trader422: "Later, I learned that the predators know immediately, if they care at all, where the hidden NBBOs are ... in fact they invented a special order type (NYSE calls it an ALO order) which basically has the purpose of allowing predators to sniff out the hidden NBBO quickly and quietly. Of course, they can also do old-fashioned pinging with 1-lots to find the hidden NBBO."

i googled ALO and came up with this:

https://www.sec.gov/rules/sro/nysearca/2013/34-70637.pdf

(proposed order rule changes by "self regulatory organization" NYSE Arca)

"An ALO Order is a limit order that is accepted and placed in the NYSE Arca book only where the order adds liquidity"

So HFT can use this order on all levels to sniff the hidden. If it comes back as rejected they know that an order sits there. If not, they just cancel it themselves after a few millisecs.

there's much more in that pdf. apparently there was an "don't arb me" order modifier.

Have to agree with Lewis now. The markets are rigged. Hopefully the SEC will act now after this gets dragged into the spotlight.

 

[Bob111]

----Hopefully the SEC will act now after this gets dragged into the spotlight. ---

they won't. SEC is a good example of what happening with USA at every level of every sector\industry. it's a same s*** everywhere.

as i said before-it they have ANY intentions to stop at least little part of this current nonsense-they can simply ban sub penny. or PDT for f** sake. both won't cost them a dime and(fro 100th time-can be done by issuing one executive order. a piece of paper with some words in it). didn't happen and wont happen.cause they OWNED by WS
SEC should hire independent ass***es like me and give them a chance,not former GS boys or those porno collectors(who wasn't even fired btw,for spending months,doing nothing,but watching porn online at work)(at our expense btw)

 

[QuantWizard]

There are two solutions to this problem: 1) SEC does its job and penalizes THE REAL offenders, I.e the exchanges that provide direct feeds which is the actual violation (not the HFTs), or 2) scrap the regulation which prohibits any feed to be faster than the NBBO.

 

[StarDust9182]

There are two solutions to this problem: 1) SEC does its job and penalizes THE REAL offenders, I.e the exchanges that provide direct feeds which is the actual violation (not the HFTs), or 2) scrap the regulation which prohibits any feed to be faster than the NBBO.

I agree with this comment somewhat. The exchanges are also offenders by having provided special order types and access (if that is the case). Another issue is who owns the exchanges and the relationships to those HFTs. For example if an HFT owns a significant stake in an exchange that doesn't spend money to upgrade speed on the exchange for all customers. That might be conceived as a conflict of interest.

 

[KDASFTG]

Greetings,

I have just received an email today from John Carter's group at "Right Angle Trading". The email states that twice tomorrow at 8am & 1pm EST, John will be hosting a video presentation on:" How to protect yourself against the HFT's".

The email verbiage reads:

"John will also show you how to "get in front of" the High Frequency Traders so you can take advantage of big market moves. HFT impacts virtually ever segment of today's markets - options, futures, currencies, and stocks - so there's something for everyone in this free training webinar. And, if you missed his video explaining how HFT sees what's happening inside the markets before you do, it's still available, so check it out."

I have no affiliation with John Carter or any other vendor for that matter. Further, I have no hidden agenda's with regard to this email or anything or anybody. I'm merely presenting this offer to the group, since it is very much in line with the title of this thread.

If you want to see this presentation tomorrow, you'll have to register with this guy: bradpowell@rightangletrading.com.

He's definitely got my curiosity aroused on this one. But then again, that is what vendors do...smile. I hope some of you ET'ers who are well versed on this topic will be there to take him to task on what he has to say. It's currently way beyond my pay grade.

KDASFTG

 

[freedinner]

----Hopefully the SEC will act now after this gets dragged into the spotlight. ---

they won't.

From their public talk, it seems like they are working on some grand big bang plan. But agree with you; better not to expect too much from there.

Anyway, this would be my "grand plan" for the markets:

- ban internalization
- a single exchange with one order book for each instrument. anyone who wants to transact in this instrument has to route their order into that book
- simple limit orders only. no market orders, hidden, iceberg, ALO etc. no games.
- order priority on price, then time. no exceptions.
- orders will be held for at least 2 seconds before a cancellation is possible

- SEC maintains a list of approved exchanges. This means that they vet possible trading venues and set and enforce minimum technology and financial standards etc.
- Each of those approved exchanges will be able to bid for the privilege to be that single order book for a trading instrument for a period of 2 years. After that there's a new tender.
- Exchange bidding is based on a single number: The price per executed share traded. Exchanges will have to provide all ancillary services like quote acceptance, cancellations and real time quote dissamination for free. This will make the competitive bidding among exchanges very transparent and the offers easily comparable. Of course the lowest offer is chosen for those 2 years.
- The 2 year terms of all stocks will not expire at the same time but evenly spaced out based on alphabet.

With this system we will have a stable, simple and cheap market with a single order book yet without long term exchange monopolies.

 

[StarDust9182]

From their public talk, it seems like they are working on some grand big bang plan. But agree with you; better not to expect too much from there.

Anyway, this would be my "grand plan" for the markets:

- ban internalization
- a single exchange with one order book for each instrument. anyone who wants to transact in this instrument has to route their order into that book
- simple limit orders only. no market orders, hidden, iceberg, ALO etc. no games.
- order priority on price, then time. no exceptions.
- orders will be held for at least 2 seconds before a cancellation is possible

- SEC maintains a list of approved exchanges. This means that they vet possible trading venues and set and enforce minimum technology and financial standards etc.
- Each of those approved exchanges will be able to bid for the privilege to be that single order book for a trading instrument for a period of 2 years. After that there's a new tender.
- Exchange bidding is based on a single number: The price per executed share traded. Exchanges will have to provide all ancillary services like quote acceptance, cancellations and real time quote dissamination for free. This will make the competitive bidding among exchanges very transparent and the offers easily comparable. Of course the lowest offer is chosen for those 2 years.
- The 2 year terms of all stocks will not expire at the same time but evenly spaced out based on alphabet.

With this system we will have a stable, simple and cheap market with a single order book yet without long term exchange monopolies.

Just one flaw, what ever will the regulators do with their free time?

 

[Bob111]

Just one flaw, what ever will the regulators do with their free time?

won't happen..cause they are busy with.....
usual..

 

[stock777]

I've been calling them front running SCUM for YEARS,

Get it now? I bet you do. Ask WinstonTJ for the details.

Nice info there on the ALO order. I haven't been happy with the hidden order type for years.

The number of order types and rules surrounding them has become a clusterf%%%. Perfect for the HFT wizards with million dollar budgets to use for gaming the system. And keep changing the rules so mere mortals can't keep up.

 

[StarDust9182]

There's a paper about to be published that destroys Lewis's ridiculous claims about HFT with facts. As soon as it's made public, I'll link it here.

Has your paper been published yet?

Someone should send this lawyer a copy of it : http://www.zerohedge.com/news/2014-...yer-launches-class-action-lawsuit-against-hft

There are still those who claim smoking cigarettes causes illnesses!

And if the lawsuit is about "This is a case about broken promises", then the entire government bureaucracy must be heading to DEVCON 1 - max readiness!