GammaJammer
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The mainstream media are suddenly running stories in this stuff as though it's all new and secret. It's not particularly new at all, it's just that the people who engage in it protect any edge they do have pretty assiduously. And that goes for the ones that are NOT abusing the system, but of course it's doubly true for those that are basically raping and pillaging.
But HFT firms are as often as not price makers these days, so they are imho a key liquidity source for the market at times. It's all part of the changing trading landscape. Main thing is to be aware of it....
But HFT firms are as often as not price makers these days, so they are imho a key liquidity source for the market at times. It's all part of the changing trading landscape. Main thing is to be aware of it....
kaciara
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SEC Votes to Abolish "Flash" Fills :: more transparency on the way?
Washington, D.C., Sept. 17, 2009 — The Securities and Exchange Commission today unanimously proposed a rule amendment that would prohibit the practice of flashing marketable orders.
A flash order enables a person who has not publicly displayed a quote to see orders less than a second before the public is given an opportunity to trade with those orders. Investors who have access only to information displayed as public quotes may be harmed if market participants are able to flash orders and avoid the need to make the order publicly available.
"Flash orders may create a two-tiered market by allowing only selected participants to access information about the best available prices for listed securities," said SEC Chairman Mary Schapiro. "These flash orders provide a momentary head-start in the trading arena that can produce inequities in the markets and create disincentives to display quotes."
Currently, flash orders are permitted as result of an exception to Rule 602 of Regulation NMS that exempts these orders from requirements that apply generally to other orders. The Commission is concerned that the Rule 602 exception may no longer be necessary or appropriate in today's highly automated trading environment.
The Commission today voted unanimously to propose the elimination of the flash order exception from Rule 602. If adopted, the proposed amendment would effectively prohibit all markets - including equity exchanges, options exchanges, and alternative trading systems - from displaying marketable flash orders.
In its proposal, the Commission is seeking public comment and data on a broad range of issues relating to flash orders, including the costs and benefits associated with the proposal. It also seeks comment on whether the use of flash orders in the options markets should be evaluated differently than their use in the equity markets.
* * *
Public comments on today's proposal must be received by the Commission within 60 days after its publication in the Federal Register.
The full text of the proposed rule amendment will be posted to the SEC Web site as soon as possible.
Press Release: SEC Proposes Flash Order Ban; 2009-201; Sept. 17, 2009
Washington, D.C., Sept. 17, 2009 — The Securities and Exchange Commission today unanimously proposed a rule amendment that would prohibit the practice of flashing marketable orders.
A flash order enables a person who has not publicly displayed a quote to see orders less than a second before the public is given an opportunity to trade with those orders. Investors who have access only to information displayed as public quotes may be harmed if market participants are able to flash orders and avoid the need to make the order publicly available.
"Flash orders may create a two-tiered market by allowing only selected participants to access information about the best available prices for listed securities," said SEC Chairman Mary Schapiro. "These flash orders provide a momentary head-start in the trading arena that can produce inequities in the markets and create disincentives to display quotes."
Currently, flash orders are permitted as result of an exception to Rule 602 of Regulation NMS that exempts these orders from requirements that apply generally to other orders. The Commission is concerned that the Rule 602 exception may no longer be necessary or appropriate in today's highly automated trading environment.
The Commission today voted unanimously to propose the elimination of the flash order exception from Rule 602. If adopted, the proposed amendment would effectively prohibit all markets - including equity exchanges, options exchanges, and alternative trading systems - from displaying marketable flash orders.
In its proposal, the Commission is seeking public comment and data on a broad range of issues relating to flash orders, including the costs and benefits associated with the proposal. It also seeks comment on whether the use of flash orders in the options markets should be evaluated differently than their use in the equity markets.
* * *
Public comments on today's proposal must be received by the Commission within 60 days after its publication in the Federal Register.
The full text of the proposed rule amendment will be posted to the SEC Web site as soon as possible.
Press Release: SEC Proposes Flash Order Ban; 2009-201; Sept. 17, 2009
BSD
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Good stuff, seems like for once common sense has prevailed to put an end to this:
Goldman Sach's stolen algo: Tool for Legal Frontrunning
Political pressure had been on them to ban this legal highway robbery anyway:
"July 24 (Bloomberg) -- Senator Charles Schumer asked the U.S. Securities and Exchange Commission to ban “flash orders,” saying the transactions give high-speed traders an unfair advantage over other investors.
“Flash orders allow certain members of these exchanges to obtain access to order flow information before that information is made available to the public,” Schumer wrote. That allows “those members to use rapid trading programs to trade ahead of those orders and profit from advanced knowledge of buying and selling activity,” he added.
The senator said that if the SEC doesn’t prohibit flash orders, he will introduce legislation that would."
Goldman Sach's stolen algo: Tool for Legal Frontrunning
Political pressure had been on them to ban this legal highway robbery anyway:
"July 24 (Bloomberg) -- Senator Charles Schumer asked the U.S. Securities and Exchange Commission to ban “flash orders,” saying the transactions give high-speed traders an unfair advantage over other investors.
“Flash orders allow certain members of these exchanges to obtain access to order flow information before that information is made available to the public,” Schumer wrote. That allows “those members to use rapid trading programs to trade ahead of those orders and profit from advanced knowledge of buying and selling activity,” he added.
The senator said that if the SEC doesn’t prohibit flash orders, he will introduce legislation that would."
GammaJammer
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how on earth would that even work? Dream on.
cuotes
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Just for information purposes:
Flash Trade Halt Backed for Nasdaq, Bats as SEC Votes (Update1)
Flash Trade Halt Backed for Nasdaq, Bats as SEC Votes (Update1) - Bloomberg.com
SEC’s flash in the pan
Commentaries Blog Archive SEC’s flash in the pan | Blogs |
U.S. Proposes Ban on ‘Flash’ Trading on Wall Street
http://www.nytimes.com/2009/09/18/business/18regulate.html?hp
Flash Trade Halt Backed for Nasdaq, Bats as SEC Votes (Update1)
Flash Trade Halt Backed for Nasdaq, Bats as SEC Votes (Update1) - Bloomberg.com
SEC’s flash in the pan
Commentaries Blog Archive SEC’s flash in the pan | Blogs |
U.S. Proposes Ban on ‘Flash’ Trading on Wall Street
http://www.nytimes.com/2009/09/18/business/18regulate.html?hp
cuotes
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After information, opinion:
You're right guys, I'm afraid.
Probably, if this system is forbidden, another similar will be used. Actually it is likely that other advanced system will be on use at the time being.
Anyway, I consider good to remove that software. Why? Because I can't use it!!!
Now seriously, as GJ says that would be daydreaming. Or not?
Any opinion?
You're right guys, I'm afraid.
Probably, if this system is forbidden, another similar will be used. Actually it is likely that other advanced system will be on use at the time being.
Anyway, I consider good to remove that software. Why? Because I can't use it!!!
Now seriously, as GJ says that would be daydreaming. Or not?
Any opinion?
GammaJammer
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Interestingly, otc FX, the last of the wild west markets, is moving in a similar direction, with some of the interbank ecns etc (such as EBS) limiting the speed with which quotes can be displayed / cancelled on the system and even going as far as publishing stated desired hit ratios for quotes / matches.
But it's still not going to make much difference imho. For three reasons;
1) All the HFT guys need to operate profitably, at the margins, is a level-ish playing field rules wise. Their investment in technology - vis a vis stuff like proximity hosting, fibre optics, low latency lines, pcs with cooling fans the size of chinook rotor blades etc etc still gives them an edge
2) The various ecns etc are actually not even remotely agnostic on this issue. Bottom line (and I do mean bottom line, in the accepted sense of the word) they get paid bro for flow.
3) Further to (2); The HFT firms are (and I have touched upon this before) as often as not net price MAKERS rather than takers. The old model of market makers and clients, never the twain shall meet is dead. More and more the lines are blurred. So remove all those guys and not only will an ecn or exchange lose the money from THEIR flow, they'll also lose a concomitant sum from the diminishment of the quality of their marketplace. So, imho, this is all just a bit of turd polishing by the exchanges to placate the regulators.
Sure, it'll have an effect, but so do lots of things. Won't be the end of high frequency trading though - if anything that world's just gonna get bigger and bigger.
My $0.02
GJ
But it's still not going to make much difference imho. For three reasons;
1) All the HFT guys need to operate profitably, at the margins, is a level-ish playing field rules wise. Their investment in technology - vis a vis stuff like proximity hosting, fibre optics, low latency lines, pcs with cooling fans the size of chinook rotor blades etc etc still gives them an edge
2) The various ecns etc are actually not even remotely agnostic on this issue. Bottom line (and I do mean bottom line, in the accepted sense of the word) they get paid bro for flow.
3) Further to (2); The HFT firms are (and I have touched upon this before) as often as not net price MAKERS rather than takers. The old model of market makers and clients, never the twain shall meet is dead. More and more the lines are blurred. So remove all those guys and not only will an ecn or exchange lose the money from THEIR flow, they'll also lose a concomitant sum from the diminishment of the quality of their marketplace. So, imho, this is all just a bit of turd polishing by the exchanges to placate the regulators.
Sure, it'll have an effect, but so do lots of things. Won't be the end of high frequency trading though - if anything that world's just gonna get bigger and bigger.
My $0.02
GJ
Last edited:
GammaJammer
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After information, opinion:
You're right guys, I'm afraid.
Probably, if this system is forbidden, another similar will be used. Actually it is likely that other advanced system will be on use at the time being.
Anyway, I consider good to remove that software. Why? Because I can't use it!!!
Now seriously, as GJ says that would be daydreaming. Or not?
Any opinion?
There's actually two threads running on this at the same time - up to you if you want to go to the mods and ask to be merged. I posted something in the other one a few mins ago.
GJ
GammaJammer
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Cramer also said "The problem is I know too many people and I'm too damn old" whilst having a small but perfectly formed nervous breakdown on live TV in 07. So he's clearly the sanest man on TV.
BSD
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Oh no doubt at all GJ, particularly as far as spot FX goes.
I also have zero doubts that HFT is here to stay.
But in real exchange traded products there is tho a world of difference between the flash trading that was in effect taking advantage of nothing more than insider knowledge and thats gonna be outlawed - we never had that here in Europe at exchanges any way did we -, on the one hand, vs trading that does not have any insider knowledge advantages, but that simply capitalizes on high frequency computer driven strategies that are available to all.
And when the playing field is level again for all we get the usual performance dispersion again as before, where everday normality for all market participants is that many feel called but few are chosen:
Goldman Sachs' Hedge Fund to end 2007 down 39%
Of course the same goes for the buy side, this is from 2001 but fundamentally nothing has changed as far as survivorship bias goes:
The $500 Billion Hedge Fund Folly
or
Quants on Fire: Anatomy of a Bloodbath
November/December 2007
The Blow-Up
or
The Sleaziest Show On Earth
Neil Weinberg Bernard Condon, 05.24.04
Hedge funds will suck in $100 billion this year from an ever-broader swath of investors. Pretty good for a business rife with exorbitant fees, phony numbers and outright thievery.
I mean basically it doesn't matter how much money or talent you throw at some strategy, you'll always only have a small minority of outperformers.
Stands to reason - and I'm not talking about flash trading, but normal high frequency trading or most other computerized and hence highly emulable strategies: the more money is chasing after the same strategy the less there remains in profits to go around for an ever smaller number of players engaged in the same game, the success carries the seeds of its own destruction, in other words.
I mean any bank as prime broker watching some quant fund rolling in the money is obviously gonna start its computers to figure out what the client is doing, as will others eventually, and hey presto thats it basically, and its back to the drawing board for the next round.
Thats why imo computerized trading is pretty much flawed from the outset, you're chasing after strategies with pretty short half lives because of all the competition eyeing your every move with hawks eyes and playing copycat, which is so much easier with computer driven models than trying to emulate a trader who is using visual patterns or even trading fundamentally, you can't really copy those.
I also have zero doubts that HFT is here to stay.
But in real exchange traded products there is tho a world of difference between the flash trading that was in effect taking advantage of nothing more than insider knowledge and thats gonna be outlawed - we never had that here in Europe at exchanges any way did we -, on the one hand, vs trading that does not have any insider knowledge advantages, but that simply capitalizes on high frequency computer driven strategies that are available to all.
And when the playing field is level again for all we get the usual performance dispersion again as before, where everday normality for all market participants is that many feel called but few are chosen:
Goldman Sachs' Hedge Fund to end 2007 down 39%
Of course the same goes for the buy side, this is from 2001 but fundamentally nothing has changed as far as survivorship bias goes:
The $500 Billion Hedge Fund Folly
or
Quants on Fire: Anatomy of a Bloodbath
November/December 2007
The Blow-Up
or
The Sleaziest Show On Earth
Neil Weinberg Bernard Condon, 05.24.04
Hedge funds will suck in $100 billion this year from an ever-broader swath of investors. Pretty good for a business rife with exorbitant fees, phony numbers and outright thievery.
I mean basically it doesn't matter how much money or talent you throw at some strategy, you'll always only have a small minority of outperformers.
Stands to reason - and I'm not talking about flash trading, but normal high frequency trading or most other computerized and hence highly emulable strategies: the more money is chasing after the same strategy the less there remains in profits to go around for an ever smaller number of players engaged in the same game, the success carries the seeds of its own destruction, in other words.
I mean any bank as prime broker watching some quant fund rolling in the money is obviously gonna start its computers to figure out what the client is doing, as will others eventually, and hey presto thats it basically, and its back to the drawing board for the next round.
Thats why imo computerized trading is pretty much flawed from the outset, you're chasing after strategies with pretty short half lives because of all the competition eyeing your every move with hawks eyes and playing copycat, which is so much easier with computer driven models than trying to emulate a trader who is using visual patterns or even trading fundamentally, you can't really copy those.
cuotes
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Terribly sorry, I didn't see the other one
Let's merge them.
(wich one is the other one?)
B
Black Swan
pedro01
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I don't see how these flash traders add any beneficial liquidity.
Let's presume you place a buy order & there is a seller there to sell to you.
The flash order will jump in front of you and take your seller, then he'll become the seller and sell to you.
In that case, I don't see how any beneficial liquidity has been added to the market.
Let's presume you place a buy order & there is a seller there to sell to you.
The flash order will jump in front of you and take your seller, then he'll become the seller and sell to you.
In that case, I don't see how any beneficial liquidity has been added to the market.
Good stuff, seems like for once common sense has prevailed to put an end to this:
Goldman Sach's stolen algo: Tool for Legal Frontrunning
Political pressure had been on them to ban this legal highway robbery anyway:
"July 24 (Bloomberg) -- Senator Charles Schumer asked the U.S. Securities and Exchange Commission to ban “flash orders,” saying the transactions give high-speed traders an unfair advantage over other investors.
“Flash orders allow certain members of these exchanges to obtain access to order flow information before that information is made available to the public,” Schumer wrote. That allows “those members to use rapid trading programs to trade ahead of those orders and profit from advanced knowledge of buying and selling activity,” he added.
The senator said that if the SEC doesn’t prohibit flash orders, he will introduce legislation that would."
Hi, So how do these HFT's get the data feed before anyone else.... do they have a router or computer inline with the main data feed? I guess I am asking..why cant we the retail guys get a tie in to the data feed that goes to the HFT boys? I am guessing this is not data feed 2.... Where physically is the main LAN or network link up based. and how did the HFT guys get ( wire) into it at the first node? If its a private network ( Nasdaq or NYSE) if so, then everyone on the LAN will have almost equal access time to the data.... I mean fast computers today are a dime a dozen ..relatively speaking!
Helio ... nooby....
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