Steven Cohen Targets High-Frequency Trading With ‘Dark Pool’ Venture

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Steven Cohen Targets High-Frequency Trading With ‘Dark Pool’ Venture
Billionaire invests venture capital through his Point72 firm in new trading platform designed to counter impact of high-speed trading

By Alexander Osipovich
April 17, 2018 3:45 p.m. ET
3 COMMENTS

Billionaire Steven A. Cohen is backing a startup that aims to prevent high-frequency traders from eating away at the profits of stock-pickers like himself.

The venture-capital arm of Mr. Cohen’s firm, Point72 Asset Management LP, was the first investor in Imperative Execution Inc., said representatives of the two firms. They didn’t specify the investment size. The startup is set to launch a new “dark pool” trading platform designed to counter the impact of certain high-speed trading strategies...

Imperative founder and Chief Executive Roman Ginis previously worked as a quantitative trader for Mr. Cohen’s firm, applying statistical models to trade stocks. He said he waged a daily battle to prevent slippage from hurting his profits...

The new venue will use a variety of tricks to foil fast traders. A key feature is that it only executes trades at discrete points in time, rather than continuously, the way exchanges work. The length of the intervals varies randomly, which Imperative says will keep the speedy traders from figuring out a pattern and gaming the platform’s design.

The idea of “non-continuous” trading venues isn’t new. But Imperative says it has added a new element by using artificial intelligence, or AI. Its systems will monitor for whether trades on IntelligentCross are causing stock prices to move, and adjust the length of its intervals to minimize such slippage, using AI-powered software...
 
Error Correction Funder said:
He's going to be sorely disappointed when he finds out UHFTs don't really front run.
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The founder of the company is an accomplished HFT trader himself. He certainly know what UHFT do and do not.

Conceptually, it's a dark venue specifically geared for a mid-market cross execution (so both crossing parties will get done at NNBO mid for a given sub-order), with a specification that crossing intervals are randomized to prevent pinging. There is also a trifle of machine learning added which counters other HF order snooping, from what I gathered. So it's nothing like the IEX and it's a pretty interesting development.
 
Error Correction Funder said:
He's going to be sorely disappointed when he finds out UHFTs don't really front run.
More...

Funny words but absolutely not true.

If a high frequency algo detects a likely large buy or sell order being worked, they do sub-penny on front. This is well known.

Do you really think you understand this situation better than Steve Cohen?
 
777 said:
Funny words but absolutely not true.

If a high frequency algo detects a likely large buy or sell order being worked, they do sub-penny on front. This is well known.

Do you really think you understand this situation better than Steve Cohen?
More...

That's not front running.

It depends on if someone gave him inside information or not.
 
Error Correction Funder said:
That's not front running.

It depends on if someone gave him inside information or not.
More...

Sure. That absolutely is illegal "front running". And what you are talking about is the truest sense of the term. Absolutely.

What I described is what Steve Cohen is talking about:

Lot's of time traders and hedge fund guys speak of algo's front running aka "stepping in front of" their big orders when they can sniff them out, and it costs them pennies (or sometimes more) over and over. A huge amount of money has been made over quite a long time by the firm's that excel at this.
 
777 said:
Sure. That absolutely is illegal "front running". And what you are talking about is the truest sense of the term. Absolutely.

What I described is what Steve Cohen is talking about:

Lot's of time traders and hedge fund guys speak of algo's front running aka "stepping in front of" their big orders when they can sniff them out, and it costs them pennies (or sometimes more) over and over. A huge amount of money has been made over quite a long time by the firm's that excel at this.
More...

Wrong, illegal front running is what Stevie did with his hedge fund, intercepting orders or publishing beforehand and trading on the expected reactions.

What you describe is what people who can't compete whine about yet try to do themselves which is 100% not illegal, and the algos can't even do that properly. When I close a spread from buying or selling by these yahoos stepping in front, by the time the algos finally figure out which side I'm after, I'm out, and they're still trying to soak up the supply I was after.

There's almost no money in this kind of nonsense except when institutions are too stupid to break up and adjust their orders for lag.
 
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