It's mkt-making, no? If you're just dumbly collecting the bid/ask spread, why would you expect losing days?
Again, I am not saying that they are white as the driven snow, but should we be automatically assuming they're guilty?
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The Holy Grail Of Trading Has Been Found: HFT Firm Reveals 1 Losing Trading Day In 12
- Thread starter Cdntrader
- Start date
Again, I am not saying that they are white as the driven snow, but should we be automatically assuming they're guilty?
Providing liquidity means buying below the market and selling above the market. Taking liquidity means buying the ask and selling the bid.
Afiak, HFT don't trade passively with limit orders.
+1 on provide vs take definition. One places resting orders by joining the bid or ask, the other removes orders existing on the book.
It really depends on the strategy but market making hft can trade passively using limit orders. For example in index or etf arbitrage. But there will be taking to hedge the providing side of the strategy.
It's mkt-making, no? If you're just dumbly collecting the bid/ask spread, why would you expect losing days?
Again, I am not saying that they are white as the driven snow, but should we be automatically assuming they're guilty?
I agree, not to say that these guys are legit, but we cannot assume that because they participate in hft that they front run or are crooks. Entirely possible but it's not a guarantee.
If it's their risk system that protected them from exposure, in some systems if the market turns against you it usually stops trading to minimize loss until you figure out why you're losing money.
The real issue with this Virtu shop is this (from their pre-IPO disclosure, as discussed here: http://www.bloombergview.com/articles/2014-03-11/high-speed-trader-isn-t-so-good-with-numbers):
"we and our independent registered public accounting firm identified a material weakness in our internal controls over financial reporting... This material weakness related to our inability to prepare accurate financial statements, resulting from a lack of reconciliations, a lack of detailed review and insufficient resources and level of technical accounting expertise within the accounting function,"
Who would wanna get involved in this particular IPO, I dunno...
"we and our independent registered public accounting firm identified a material weakness in our internal controls over financial reporting... This material weakness related to our inability to prepare accurate financial statements, resulting from a lack of reconciliations, a lack of detailed review and insufficient resources and level of technical accounting expertise within the accounting function,"
Who would wanna get involved in this particular IPO, I dunno...
It's mkt-making, no? If you're just dumbly collecting the bid/ask spread, why would you expect losing days?
Again, I am not saying that they are white as the driven snow, but should we be automatically assuming they're guilty?
Lets say your right. Have you heard of any other firm engaged solely in market making, that enjoyed a win:loss ratio of 1300:1 (days)?
I haven't.
In my neck of the woods? Maybe not a whole firm, but individual desks which only engage in mkt making, yes, for sure... If you have a good franchise and/or decent mkt share, you should never lose money. You should never make a lot of money either, unless you start punting, but that's where it all changes.Lets say your right. Have you heard of any other firm engaged solely in market making, that enjoyed a win:loss ratio of 1300:1 (days)?
I haven't.
Lets say your right. Have you heard of any other firm engaged solely in market making, that enjoyed a win:loss ratio of 1300:1 (days)?
I haven't.
Well, the reason why you aren't hearing about it is because they aren't going public. They usually won't open their mouths with that information because then everyone screams murder.
In my neck of the woods? Maybe not a whole firm, but individual desks which only engage in mkt making, yes, for sure... If you have a good franchise and/or decent mkt share, you should never lose money. You should never make a lot of money either, unless you start punting, but that's where it all changes.
I stand corrected. How much is "too much"? How much daily profit is normal for market making?
It can vary a LOT...I stand corrected. How much is "too much"? How much daily profit is normal for market making?
In the settings I have encountered, we're talking about $10 - $50 bucks (mil) for a medium-sized desk per annum as normal. If they make $100 or more, it's an anomaly. If it's a big desk, with a really well-developed franchise, it's an order of magnitude more.
Again, I dunno what exactly this Virtu place does, but it could be that they operate sort of like an electronic broker. If that's the case, you can see if it makes sense by comparing them to someone like ICAP, whose electronic mkts division had arnd $220mil revenue and arnd $90mil operating profit in H1 2013. That comes mostly from BrokerTec and EBS. Nobody asks questions why ICAP doesn't have any losing days (why would they?), so maybe it makes sense here. I dunno...
Virtu is NOT a market maker, and HFT is not market making. It's legalized thievery.
The SEC is either too stupid to figure out wtf is going on or paid to look the other way.
It's all fine when the market goes up every month for 5 years, but when the music stops watch all the "liquidity providing" HFT algo's pull every bid from the market.
'Thievery' is a far fetched claim; whats more likely is that you can't/don't know how to compete. if you put out a limit order, you are providing liquidity. does not matter if its manual, automated or HFT