Book and tape hft/mft shenanagans

Discussion in 'Programming' started by windchaser, Oct 19, 2012.

  1. Hello,

    I've been watching the tape and book on some of the less liquid futures both realtime and looking at the ticks trying to pick up some mechanics that can be used for mft/hft trading (meaning retail, something that can be accomplished at the 1-2 second time frame).

    I am noticing a game that is being played over and over when liquidity is not there.

    What I see is a certain number of contracts (5-10-20) which are exchanged over and over between hands, during multiple second periods.

    For example, a number of contracts is bought at the ask price, say:

    1: 4-5-2-1-1 = total of 13 contracts are bought at the ask.
    2: The ask is raised and the bid follows by 1 tick/handle.
    3: You get 1-2-4-2-1-3 contracts SOLD on the bid (i.e. the same price as they were bought earlier).
    4: Ops... bid is lowered and ask follows.

    Then the game restarts perhaps at 1 tick lower/higher level and a different number of contracts.

    The total of contracts is always the same (i.e. zero sum) until something happens and the price goes away to a new level, where all starts again.

    I am puzzled... why is this happening and is it possible to profit from it?
  2. Wiggle the price a little and you might activate a few stops, plus whoever is doing it gets a true picture of the order book. There might be a lot of other possible reasons depending on the exact mechanics and the exchange, but it's also possible you're not getting all of the ticks in your feed, there are SSFs, hedging of all sorts, so who knows in reality?

    Maybe you can profit by running a liquidity adding strat, such as tight mean-reversion (ie 4 ticks apart) what I like to call the slow market making, on two correlated futures and capture this noise being created. Unlikely you'll get filled most of the time but worth a shot, plus the added benefit of messing with someone elses strat. :)