60 Minutes: HFT

Discussion in 'Automated Trading' started by nitro, Jul 11, 2011.

  1. nitro

    nitro

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  2. Thanks.
     
  3. Bob111

    Bob111

    sponsored by viagra! love it :D :D :D
     
  4. Jon Stewart's brother featured... I'm sure it just slipped his mind to mention this fact back when he did his scathing indictment of Wall Street
     
  5. Very interesting. Thank you.
     
  6. Thanks for the link, very interesting, but it seems that the video link does not show the entire program on this subject (after all, it should be 60 minutes and not 13 minutes...) Is there any link to the entire video? thanks
     
  7. I wonder who is more impacted by HFT, among short-term traders, those who use market orders or those who use limit orders? If it those who use market orders, I would say that it is just a reflection of the fact that those traders tend to be less-informed, on average, than other traders, as was found in this research (which looked more at "private information" but any proprietary strategy a trader employs which has positive expectancy can also be considered "private information"):

    http://www.cxoadvisory.com/individu...-versus-limit-orders-informed-traders-prefer/

    I would venture to say that those traders would be losers regardless of whether or not HFT existed.

    Personally, I only use limit orders because I know well in advance the price I want to get in at and if the market doesn't go there, I don't get in.
     
  8. the1

    the1

    If HFT is front running orders -- and it seems they are -- then it's highly illegal but to say the market has changed because of HFT is false. The market is the same as it has always been. For every HFT going long there's a HFT going short. The markets behave like they've always behaved.
     
  9. But the definition of "front-running" is at issue here. From the video, all the people who are "against" HFT can claim is that they are faster, not that they can actually get in front of orders. Seems like two different things that need to be distinguished. One is a competitive advantage and the other is, as you say, illegal.

    I agree with you that the market is the same as it ever was. I argue that if you show a person who is anti-HFT a hundred charts that are randomly split between charts of stocks frequently traded by HFT algos and charts of stocks that aren't, there would be no way to systematically identify which is which. Absent the ability to do that, it's impossible to identify any impact on actual price action, regardless of how much electronic signaling is going on behind the scenes. It's a red herring and I would suggest to any trader that is not profitable and who is spending time worrying about HFT, that time would be better spent working on your strategy. The payoff for the former is nil while the potential payoff for the latter is practically unlimited.
     
  10. vikana

    vikana Moderator

    The HFT crow is faster than "you and I" for several reasons:
    1. They have sponsored access, whereby they often avoid having account checks done before placing a trades (saves milliseconds)
    2. They co-locate very close to the exchange and get direct exchange feeds (micro to millisecond advantages)
    3. They have access to orders, such as sub-pennying, most do not have

    #3 combined with #1 gives them the ability to front-run by fractions of cents quicker than you can enter/cancel orders. Retail can never compete with that, and have to accept being front-run by fractions of cents.

    HFT also tends to exploit the well-documented holes in NMS to jump the order queues.

    That's how HFT generally front-run.
     
    #10     Jul 16, 2011