I assume you mean that it's not about some wheel and deal to get the feed explicitly earlier. However, if the HFT folks generally get the data faster due to the technology, they in effect get it earlier anyways.
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What does a HFT data feed actually look like?
- Thread starter Rocko Bonaparte
- Start date
I assume you mean that it's not about some wheel and deal to get the feed explicitly earlier. However, if the HFT folks generally get the data faster due to the technology, they in effect get it earlier anyways.
Quote from Rocko Bonaparte:
Out of my own curiosity, I wonder what kind of data an HFT system would have to work with at all. Are we talking something at a level even more basic than level 2 data?
Most use data feeds direct from trading centers. Each of these feeds is different, but all carry messages used to represent depth of book changes and execution messages. A few examples:
The most serious of the high-frequency firms don't use aggregated feeds. The connect directly to the various venues and consume their native market data feed. Some are proprietary to the exchange, like NASDAQ's ITCH or BATS's PITCH, but others like CME's FAST is a "standard". CME used to use a proprietary format called RLC, but recently migrated away from it to FAST which is an adapted form of FIX for faster delivery and lower latency.
Take care,
Louis
Could someone explain *how* a flash order can reveal hidden liquidity?
It's simple really:Quote from johnnyqpublic:
Could someone explain *how* a flash order can reveal hidden liquidity?
- BATS receives an order to BUY 100 shares of CSCO at market
- BATS "asks" traders using the BATS direct feed with the appropriate entitlement if they can fill that order. These traders have a certain amount of time to respond. I believe it was 50ms.
- If no response, the order proceeds into the BATS market for matching and then, potentially, is routed cross-venue to other NMS participants.
Flash trades were just a tempest in a tea pot. The practice was clearly in the gray area and should not have been used by the exchanges, but it was. It gave preferential treatment to the most valuable liquidity providers (remember, without the liquidity providers the trading venues are worthless). I'm sure the high-frequency firms were happy to watch the flash orders, but very few if any built their business around them. This is why you see most (all?) high-frequency firms encouraging that the practice be formally banned.
Take care,
Louis
Thanks for the reply. Could you elaborate on how this could hypothetically be used to screw someone out of their money?
Quote from lrm:
It's simple really:It's important to remember that flash orders were a practice that exchanges created to encourage liquidity towards their venues. The practice has stopped and is no longer used by any venue that I know of.
- BATS receives an order to BUY 100 shares of CSCO at market
- BATS "asks" traders using the BATS direct feed with the appropriate entitlement if they can fill that order. These traders have a certain amount of time to respond. I believe it was 50ms.
- If no response, the order proceeds into the BATS market for matching and then, potentially, is routed cross-venue to other NMS participants.
Flash trades were just a tempest in a tea pot. The practice was clearly in the gray area and should not have been used by the exchanges, but it was. It gave preferential treatment to the most valuable liquidity providers (remember, without the liquidity providers the trading venues are worthless). I'm sure the high-frequency firms were happy to watch the flash orders, but very few if any built their business around them. This is why you see most (all?) high-frequency firms encouraging that the practice be formally banned.
Take care,
Louis
Quote from lrm:
It's simple really:
- BATS "asks" traders using the BATS direct feed with the appropriate entitlement if they can fill that order. These traders have a certain amount of time to respond. I believe it was 50ms.
- If no response, the order proceeds into the BATS market for matching and then, potentially, is routed cross-venue to other NMS participants
I think it was a bit different.
First they tried to executed the order against the BATS book, then the remaining was posted on the book for 25 msec, so it could interact with incoming orders and get a passive execution with a rebate.
In fact this order type was good for the retailer investor. It allowed it to get passive execution and rebate.
You're right, of course, I over simplified. Perhaps too much. Most importantly the order is executed against the BATS book first, then it is posted to the market participants for execution for 500ms (not 50ms as I erroneously said) before being disseminated to the national market. One key fact is that after executing against the book, the price of the order is improved by 1 cent before being sent to BATS market participants. This is good for the trader who placed the order because they have an opportunity to automatically receive a better price.Quote from d138:
I think it was a bit different.
First they tried to executed the order against the BATS book, then the remaining was posted on the book for 25 msec, so it could interact with incoming orders and get a passive execution with a rebate.
In fact this order type was good for the retailer investor. It allowed it to get passive execution and rebate.
For folks interested in doing some Google research look into BATS BOLT order types. BOLT stands for BATS Optional Liquidity Technology and is the order type used for BATS flash orders. NASDAQ called it Flash orders, I believe: read more here.
Take care,
Louis
I don't think it could, really. Unfortunately, most folks don't understand this type of order beyond what they hear on CNBC, and those folks certainly don't understand it. Therefore, myths begin to perpetuate. I'd suggest trying to track down an interview or two of the BATS CEO talking about their BOLT order type. He explains it fairly clearly.Quote from johnnyqpublic:
Thanks for the reply. Could you elaborate on how this could hypothetically be used to screw someone out of their money?
Take care,
Louis
Quote from thstart:
http://blog.t3live.com/2010/02/hft-forcing-traders-to-become-more.html
So, what is the active trader to do?
"Clearly, any strategies that have an edge based on speed are out the window with the increase in high frequency trading. While the active trader used to front run the order of the institutional desk that was inefficient in execution, now even the small traderâs order is front run by the computer algorithm. Every human trader is now the inefficiency with their slower execution. Entering and exiting stocks will also be tougher. Any active trader is quite used to seeing his order front run immediately as he shows his bid or offer making it more difficult for him to get a fill. There is a high likelihood that active traders must become used to paying an added toll to HFTs for entering and exiting their positions.
The trading business is forever changing, that we know for sure. Level II strategies based on speed of execution are certainly on the decline. Active human traders must therefore become more sophisticated. First, minimize the impact of HFT by trading âin-play� stocks that have large volume from âreal� players. Second, avoid non-volatile stocks trading below average volumes. Third, greater anticipation based on sound technical analysis is also needed. Most of us will need to fight hard for better prices and avoid the temptation to buy highs or short lows as algos are programmed to manipulate prices around these areas. Fourth, many of us will need to cut down our size and look for larger moves in stocks. Scalping very small moves is not nearly as profitable when a predatory algo scalps 3 cents from you on your buy and another 3 cents on your sell, just as a hypothetical. Also, levels in stocks are not as clear-cut because algos are programmed to push stocks through the level to shake out weak holders. But, if you can begin trading for dollar moves on less size, youâre less likely to notice the 6 cents you paid as a toll and youâll be able to give the stock a little extra room around levels.
In order to successfully navigate through the choppiness that HFT has brought into equity markets, traders must spend an increasing amount of their after-hours time researching and learning levels. Spend more time analyzing charts on multiple time-frames. For traders who focus on very small timeframes, now might be the time to take a step back, decrease size, and look for setups and levels on higher timeframes. The higher the timeframe, the more powerful the setup and level and the harder it is for an algo to overtly cloud the area. Additionally, familiarity as to how particular stocks trade around levels helps provide the confidence necessary to follow-through on your ideas. Traders need to develop a universe of familiarity?B]a core group of âin-play� stocks and sectorsâto follow each and every day.The more often you we trade a particular vehicle, the more familiar we become with how algos work in that particular stock.
These are not fail-safe rules but HFT is a reality and it is here to stay. Active traders must adjust and come to find a new edge beyond speed of execution. Where thereâs movement, thereâs opportunity and the survivors in our business will become more sophisticated in order to continue trading profitably."
DJ30 is an obvious choice. [/B]
To sum it up, play DJ30 stocks for points not cents? that's just great. I'd really like to see any daytraders to be successful at this.
The problem lies in that HFT presents unfair advantage over average traders. the details already discussed here. Whatever happened to banning HFT since last year? In September 09, didn't SEC/FED give HFT trading until december(90 days) or so before banning it? Obviously the proposal didn't make it thru, but I can't believe no one is talking about it as if it was never brought up.....