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Tradeworx' defense of their HFT strategies
- Thread starter MGB
- Start date
Quote from d138:
Current regulations does not allow it. What you see is the fills from market maker, it's different from HFT.
Check your broker or the routing instructions you are using. If you are doing things right, this behavior should not be possible.
Nope, this happens to me MANY times, and I have started to have to call into Ameritrade or Etrade to get this rectified... my brother has had it happen to him at least on a daily basis, and then when he calls into Ameritrade to complain, they call down to the broker, and then they admit they were wrong and pay him the difference...
It is such a pain to have to call in to get this fixed, but it happens all the time.
g
Quote from intradaybill:
FYI I do not trade stocks priced below $20.
Then, what you describe is typical MM activity and not necessarily HFT.
If I am misusing the term HFT then I apologize.
What I am referring to is what is obviously a computer algorithm that is jumping in front of your orders by 1/100th of a PENNY, which means that your bid at 1.0100 will never fill, since 1.0101 is actually a slightly better bid. This happens within 1/10th of a second of you putting in a bid at 1.01
And of course, since you cannot put in bids for fractional pennies in some stocks (such as this one) you can not do anything about it, except buy at the ask.
And of course, this typically happens when the bid side of the order book is very heavy, and the ask side is very thin... So that means that with much more selling than buying, then you cannot get ANY of those shares, because you are never on the best bid.
F*@King criminal.
g
Quote from d138:
Clearly your broker is routing your orders the to a market maker. This is the reason for you problems.
Don't blame HFT, but rather change the broker and learn more about US markets.
So you are saying that these high speed computer algorithms that insert sub-penny bids just over your bid (by 1/100th of a penny) is not HFT? Ok, well, whatever you are calling it, it is screwing the retail investor out of profits by making it an unfair playing field.
Fortunately, I still have managed to make 450,000$ in realized profits this year so I think I'll manage...
g
As I said earlier current regulations does not allow "inserting sub-penny bids just over your bid (by 1/100th of a penny)"Quote from gambler2075:
So you are saying that these high speed computer algorithms that insert sub-penny bids just over your bid (by 1/100th of a penny) is not HFT?
Quote from d138:
As I said earlier current regulations does not allow "inserting sub-penny bids just over your bid (by 1/100th of a penny)"
Then is this following post not correct? Seems to say you are wrong
http://quantinvestor.wordpress.com/...ing-is-it-price-improvement-or-front-running/
"3) Another way that sub-penny prices can occur is from a dark pool. A âsmart routerâ that manages a market order will check dark pools of liquidity for a better price. High frequency trading programs can place hidden orders in dark pools that automatically add or subtract a sub-penny increment to the NBBO price jumping in front of the displayed liquidity provider.
4) Flash trading can also cause a sub-penny price. Suppose you have a national best limit order to buy 1,000 Citigroup at $3.60. The exchange flashes a buy market order to the high frequency trading (HFT) firmâs computer. This gives the HFT firm a chance to trade against the market order. When favorable, the HFT firmâs computer places a buy order at $3.6001 to take the other side of the flashed market order. The 3.6001 quote is never displayed, so this does not violate SEC Rule 612. Your $3.60 buy order, the displayed liquidity, is once again bypassed.
In the previous scenario, the client of the broker/dealer only benefits by ten cents. But you lost the opportunity to buy Citigroup at $3.60. It is quite likely that a high frequency computer program was monitoring the S&P futures, noticed an uptick in the futures, so it jumped in front of you to provide the price improvement to the client. If the S&P futures had been trending lower, you can be sure they would NOT have jumped in front and your 1,000 share buy order would then be filled.
In other words, you get filled when it is highly unfavorable, but do not get filled when you would want to be filled. This is clearly a losing game for anyone who uses limit orders, discourages investors from offering liquidity and does not add to the integrity of the NBBO."
g
p.s. As an aside, this is _exactly_ what I have noticed... most of the time, when it is highly unfavorable, and you are making the wrong decision, you are not subpennied and are allowed to get fills... however, when you are on the right side of the trade (by buying or selling) then you get subpennied and stepped in front of by 1/100th of a cent so you don't get filled.
Perhaps you don't trade enough to notice these things, or do not trades stocks in this range (<5$) but believe me, anyone who trades frequently knows this happens all the time, and is a huge disadvantage to the retail trader. Furthermore, I believe it is almost wholly responsible for the decline of scalpers... They cannot make their profits when they are trading against computers that are always subpennying them...
The work DARK in the "dark pool" means that that this venue is no publishing bids or offers.
Here is what happening in your case.
Visible market is 1.01 vs 1.02 with 10K shares at each side. You send a buy order at 1.02 for 10K shares. Your broker instead of sending it directly to the exchange is showing it to the Marker Maker (actually if you press hard the broker that will tell you the name of the MM where they route the order flow). Sometimes you get a fill at 1.0199 and you are happy because you saved 10 cents.
However in other times, MM decides not to fill you and if they have an offer at 1.02 on the visible marker the pull it off. You are not happy.
Or say you decide you post at 1.01. Now when somebody wants to sell at 1.01 their order goes the the MM who fills it at 1.0101. And you are unhappy.
Interestingly this MM does not need to be fast at all, since it's not competing on the open market. So to some degree it's the opposite of HFT.
Here is what happening in your case.
Visible market is 1.01 vs 1.02 with 10K shares at each side. You send a buy order at 1.02 for 10K shares. Your broker instead of sending it directly to the exchange is showing it to the Marker Maker (actually if you press hard the broker that will tell you the name of the MM where they route the order flow). Sometimes you get a fill at 1.0199 and you are happy because you saved 10 cents.
However in other times, MM decides not to fill you and if they have an offer at 1.02 on the visible marker the pull it off. You are not happy.
Or say you decide you post at 1.01. Now when somebody wants to sell at 1.01 their order goes the the MM who fills it at 1.0101. And you are unhappy.
Interestingly this MM does not need to be fast at all, since it's not competing on the open market. So to some degree it's the opposite of HFT.
Thanks for the reply... but I am talking more about the situation where I put in my buy order at 1.01 when the bid/ask is, say 1.00 by 1.02, and
then the order book should look like this
1.01 X 1.02
(with my 1.01 as the best bid).
This is how it looks for about 0.2 seconds, then, magically, a bid appears at 1.0101 with ask kept at 1.02
and my bid will never get filled, all sells get filled with the 1.0101 ask so I can never get the shares I want.
If I move the bid to 1.02 then I may fill ~100 shares or some trivial amount, then, magically, again, 0.2 seconds later, a bid jumps in at 1.0201 and I cannot get fills again on any sells.
I can't do anything about it, but try to jump up to fill shares at the ask. Worse yet, even when I can see a large ask of say, 50,000 shares, at 1.02, and I put in a buy order at 1.03 of 50,000 shares (to ensure that if that ask order was 1.0201 or something like that, and a buy at 1.02 would not get filled) then magically, the 1.02 ask of 50K shares gets pulled BEFORE my bid can get filled, and there I am on the bid at 1.02 with 50,000 shares.
g
p.s. like I said before, I am not a noob trader, and I have traded ~25,000$ in commisions this year with >400K$ profit. So I have some idea what I am doing here, and overall I am doing something right.
then the order book should look like this
1.01 X 1.02
(with my 1.01 as the best bid).
This is how it looks for about 0.2 seconds, then, magically, a bid appears at 1.0101 with ask kept at 1.02
and my bid will never get filled, all sells get filled with the 1.0101 ask so I can never get the shares I want.
If I move the bid to 1.02 then I may fill ~100 shares or some trivial amount, then, magically, again, 0.2 seconds later, a bid jumps in at 1.0201 and I cannot get fills again on any sells.
I can't do anything about it, but try to jump up to fill shares at the ask. Worse yet, even when I can see a large ask of say, 50,000 shares, at 1.02, and I put in a buy order at 1.03 of 50,000 shares (to ensure that if that ask order was 1.0201 or something like that, and a buy at 1.02 would not get filled) then magically, the 1.02 ask of 50K shares gets pulled BEFORE my bid can get filled, and there I am on the bid at 1.02 with 50,000 shares.
g
p.s. like I said before, I am not a noob trader, and I have traded ~25,000$ in commisions this year with >400K$ profit. So I have some idea what I am doing here, and overall I am doing something right.
a bid appears at 1.0101 with ask kept at 1.02
I will mainly repeat that something is fishy about your broker. 1.0101 CAN'T be quoted on US equity exchanges..... then magically, the 1.02 ask of 50K shares gets pulled BEFORE my bid can get filled, and there I am on the bid at 1.02 with 50,000 shares.
Unless the second case you describe is a just coincidence, you are being ripped off. Is it possible that your signal is well know and 1.02 disappear because somebody else acts?
Are you 100 % sure you orders go immediately and directly to the open market and get posted there?
I would suggest to try some other broker, say IB. Check if you observer the similar behavior. If ARCA shows 10K shares at 1.02 and you send a buy order directly to ARCA at 1.02 nobody should be able to act on your order and pull the offer, so you must get close to 100% fill.