Quote from Pabst:
Until a month ago, for almost two centuries, counter-party information was available. It certainly didn't hurt volume. A marketplace, by it's very nature must be open and transparent. You make an unintentional irony filled point. You speak of eliminating the public from this increasingly all institutional marketplace, lest transparency cause futures to resemble the inter-bank FX market. The CME listed currencies as the antithesis of bank traded FX. Read Leo Melamed's (who I clerked for) story about Milton Friedman calling him and complaining that no bank would allow him to trade cable.
Just so we're clear I want more public participation not less. I wasn't sure if you were implying otherwise above.
I would argue that detecting and exploiting counterparty information is actually more difficult on the screen than it was on the floor and that this has been a positive thing for exchange volumes.
If friedman could have traded anonymously, the banks wouldn't have had a choice about trading with him and he could have sold the crap out of the pound with impunity right?
Everybody is impressed by your clerking for Melamed (sincerely).
However,in his own words at leomelamed.com he says:
Quote from Leo Melamed:
To suggest that credit established by an exchange clearing entity is less secure because the parties are "unable to determine the identity or assess the creditworthiness of their counterparties," ignores the fact that the parties are instead looking at the creditworthiness of the exchange clearing entity. The clearing entity assesses the creditworthiness of its clearing member firms which, in turn, guarantee their customers' transactions.
So clearly he doesn't care so much about determining counterparty, at least in regards to risk to the exchange or its members.
CME and CBOT having counterparty information (on the floor and on the screen) was financially beneficial to its members who consistently exploited the information for profit.
Now that the new owners of the CME and CBOT are the public who only get rich when trades are matched, anonymity becomes a key component to increasing trading volume.
You speak of "front running" as if it's anachronistic to "trading". Trading IS frontrunning. When you execute a buy, no matter your timeframe, you do so with the hope/expectation that those who follow will bid up the item you purchased earlier. If you trade big enough you "lock out" those who are bidding lower. That's the game. It's a two sided auction.
do you mean anachronistic like "old" or did you mean antagonistic?
Your definition sounds a lot more like a mix of buying low and bullying the market to me.
Frontrunning to me implies trading ahead of a large order that you know will be hitting the market. Like when you see a clerk answering the phone.
Although not strictly in the definition, most people I know use the term in the context of an almost unethical or unfair behavior. I think my understanding is more normal as evidenced by this:
http://en.wikipedia.org/wiki/Front_running
When I was a local in the Bonds a single individual (Rich Dennis) cleared himself (C&D) and used a single floor broker to execute his trades. He bullied the market and in 1984-1985 made $50,000,000 being long. Everyone saw the trades executed and everyone in Chicago knew his position. Same with Gary Bielfeldt. It didn't matter to them! Who does it matter to?
Just because people trade successfully without it doesn't mean anonymity doesn't matter to them. Thats doesn't even make sense as an argument. Some people run fast barefoot, but that doesn't mean they wouldn't like a nice pair of nike's.
Are you telling me that you didn't benefit as a local knowing Dennis' position or when he was buying? My argument is that "benefit" to you translates to "slippage" to Dennis.
1. Bots with auto-spreaders are exploiting the size algorithm in pro rata contracts. These players of course prefer anonymity.
2. As do spoofer's.
Both 1 and 2 involve entering legitimate hittable limit orders into the book. People are making a risk reward tradeoff that any other player is allowed to mimic (or better yet exploit)
3.So do the brokers who are frontrunning on the screen. Are you so naive to think that firms don't frontrun customers on Globex? Try proving it though. Same way if there's suspicious activity in front of economic data. Much easier to do with anonymity.
Ahhhh here's the definition of front running i'm talking about.
Well I'm certainly not naive enough to belive a guy talking his position that's for sure. I have no problem with retaining records of the counterparty information to be audited later. I'd even be open to something set in the timeframe of a COT. But a realtime camera into every participants account is another story altogether.
If i'm a customer that's big enough to bother frontrunning, i'm going to be able to afford the IT staff, equipment and sophistication to execute through multiple brokerages. In other words, in your suggested model the only people that truly have anonymity are gigantic ass funds and banks. Personally i'd rather we all had the same playing field as much as possible.
People who are trading honestly, speculating with purity, could give a flying fuck if their position is known. It's only the thief who prefers the dead of night........
I guess speculating with purity means enjoying massive slippage in and out of every position you enter.
People who are speculating with purity shouldn't "give a flying fuck" who they are trading against either by the way.
