What are the HFT scum up to?

[Rationalize]

A lot of quotes is likely a rounding error, or two algo's leap frogging each other.

Rounding: Make a 1c spread. Oops that looks like I made a 0.999c spread. Cancel. OK, make a 1c spread.

Repeat.

...

Leap forgging:

Algo 1: Be the best ask, but only if there's SOMEONE else there.

Algo 2: Be the best ask, but only if there's NOONE else there.

GO...

Algo 1: Ah, there's someone else there. I quote.

Algo 2: Oh crap, someone else is there. I cancel.

Algo 1: Oh crap, there's noone else there. I cancel.

Algo 2: Ah, there's noone else there. I quote.

Repeat.

 

[JuniorCTA]

100% correct

It's an attempt to improve the offer.

Quote from Rationalize:

A lot of quotes is likely a rounding error, or two algo's leap frogging each other.

Rounding: Make a 1c spread. Oops that looks like I made a 0.999c spread. Cancel. OK, make a 1c spread.

Repeat.

...

Leap forgging:

Algo 1: Be the best ask, but only if there's SOMEONE else there.

Algo 2: Be the best ask, but only if there's NOONE else there.

GO...

Algo 1: Ah, there's someone else there. I quote.

Algo 2: Oh crap, someone else is there. I cancel.

Algo 1: Oh crap, there's noone else there. I cancel.

Algo 2: Ah, there's noone else there. I quote.

Repeat.

 

[stock777]

Quote from WinstonTJ:

How do you know that a billion manual traders didn't get that news off Kramer and all decide to trade that name?

I consider this comment a confession that I was right all along, and no rational argument FOR hft is now possible.

I declare , once again, victory.

 

[FixedGrin]

So here's a reminder to everyone who thinks trading is difficult because of HFT: You'd most likely be a bad trader regardless of HFT. If you're not able to find a way to adapt to a changing market, what makes you think you have what it takes to be successful? I know numerous successful daytraders in the current market, some of them trading on Sterling, which is not co-located at any exchange and pretty slow compared to other trading platforms.

The original article posted is really reaching for reasons why HFT is bad, for example they wrote this in large font:

"If every subscriber printed out this one second of quotes in PSSI, it would consume about 250,000 trees or a dense forest 4 times bigger than Walt Disney World in Florida. And the stack of paper would reach into space (118 miles above earth)."

Who cares at all? Who the hell is printing out these quotes? They're trying so hard to denounce HFT but use the silliest reasons.

If you can't find a way to stay competitive in a modern market, just give up. There's plenty of bright people out there who can trade successfully without HFT, why blame HFT for your trading woes?

 

[Dustin]

Quote from monstimal:

Processing the message to see that it is one you want to ignore should take the same effort as processing it to record the quote change. It's not like you can prevent the message from coming down your pipe. So if you deny service to one person, you deny it to yourself as well.

For all Nanex's pretty graphs and doomsday language, they've never articulated how this stuff could be used by anyone for profit. They're just running around saying a conclusion lots of people want to believe ("the evil computer is stealing from you") with no evidence.

How do you know HFT can't stuff the pipe and remove the quote in their own feed allowing for latency arb? I think they do this all the time.

I think on this thread there's a bit of confusion between algo's and HFT. Imo the algo's that have replaced the human do directly affect our earnings by reacting faster to situations that take us longer.

Hft on the other hand probably don't affect most of us on a daily basis. They are fighting against each other, mostly in the latency arb game. I subscribe to HFT Alert and see it happen all day long in all the big names.

 

[JuniorCTA]

HFT is basically being able to detect a quote change and reacting to the quote change as fast as possible.

Possible reactions

1). adjusting your own quotes
2). hitting or lifting the bid or offer


That's basically it.

 

[monstimal]

Quote from Dustin:

How do you know HFT can't stuff the pipe and remove the quote in their own feed allowing for latency arb? I think they do this all the time.

What PRIMARY quote source allows you to tell it which symbols you want to receive information for and filters out the rest?

Primary meaning, NASDAQ, BATS, NYSE, UQDF....

 

[Crispy]

Quote from achilles28:

It'd be nice if the exchanges charged a flat fee for cancelled orders. Say 5 cents. The average discretionary trader might rack up 2 dollars a day in cancellation fees (big deal). Many HFT would go out of business.

That or a minimal time the quote remains. Say 5 seconds. About the length of time a person can enter an order then quickly pull it as they realized they may not want the trade at all.

 

[Dustin]

Quote from monstimal:

What PRIMARY quote source allows you to tell it which symbols you want to receive information for and filters out the rest?

Primary meaning, NASDAQ, BATS, NYSE, UQDF....

Whether they are able to use their quote source in that manner, or just tell their own servers not to process the data that they stuff down the pipe to everyone else...I don't know.

Excerpt from zerohedge:
"Competition between HFT systems today has reached the point where microseconds matter. Any edge one has to process information faster than a competitor makes all the
difference in this game. If you could generate a large number of quotes that your competitors have to process, but you can ignore since you generated them, you gain valuable processing time."
http://www.zerohedge.com/article/ho...6-and-threatens-destroy-entire-market-any-mom

 

[JuniorCTA]

What's so bad about an algo testing the market to see where orders get skittish/aggressive???

Quote from Dustin:

Whether they are able to use their quote source in that manner, or just tell their own servers not to process the data that they stuff down the pipe to everyone else...I don't know.

Excerpt from zerohedge:
"Competition between HFT systems today has reached the point where microseconds matter. Any edge one has to process information faster than a competitor makes all the
difference in this game. If you could generate a large number of quotes that your competitors have to process, but you can ignore since you generated them, you gain valuable processing time."
http://www.zerohedge.com/article/ho...6-and-threatens-destroy-entire-market-any-mom