Hey Prop, When you say "vanilla market making on stat arb books", are you referencing Pairs Trading based on intraday support resistance levels with the pairs? Walt
i'm referencing any relative value type trading with a market making bent. so, could be pairs, could be larger baskets, etc. i don't integrate s/r, but i'm sure you could.
- Prop trading was banned at banks. Market making was not. - Bank market makers are prop trading in disguise. - Banks should not be making markets utilizing public FDIC deposits. - Somehow, this was ignored in Finreg as possible systemic risk even after the CDO mess and financial crisis which was not about housing prices, but lack of liquidity in the derivative market. and most importantly... HFT market makers DO NOT ADD LIQUIDITY. They add VOLUME. And there is a big difference between liquidity and volume. Say volume is 12 billion shares, who cares. 75% of volume isn't even real. when the news event occurs, or the HFT programs which trade off technical analysis and open interest watch the trap door opens, then there's nobody there to buy. You can see this when VIX volatility increases there is much more volume yet more slippage ie in 2008 bear. In 1987, liquidity wasn't dependent on an inverse head and shoulder pattern or whatever. Specialists weren't sentiment analyzing machines studying real time technical analysis to pre-emptively figuring if they should be providing liquidity. I do expect the regulators get it all wrong tho and keep a blind eye. A simple bank run would create illiquid markets. Then, markets will inevitably crash.
thanks Prop... Do you know of a Trading Chat Room for traders with statistical arb m/m ideas to bounce off each other and to collaborate? thanks, Walt
I disagree, because if I'm an HFT trader and using the same technical analysis trigger points, there is no trap door waiting for me, I know where other HFTs are setting their marks, and if I don't happen to be focused on a specific mark of another HFT when a so-called trap door opens, I'm not exposed to that trade anyway, I'm focused on something else. And, any trap doors that do open, I'm going to see or be alerted to after they occur to react accordingly, whether I'm watching that stock to make a trade or not. One does not have to be in a position all the time to make a position. Most of the time, I'm waiting on someone else to make the first move, let them leap off the cliff first so I can decide if I want to follow them or not. Some of us aren't the lemmings like others that appear to be in this thread... And since I'm always watching the VIX and have my own alerts and triggers set, as soon as it moves, I'm moving with it as quickly as any other HFT is. Just because a non-HFT or automated trader is stuck in retail, or isn't as closely (as in a higher execution latency time across the network) as an HFT is connected to their broker/dealer or the exchange directly as the IBs or BDs are themselves, doesn't mean there's something wrong with the system. What's wrong is that you're not keeping up with technology, and getting burned by it, or blaming market makers allegedly hiding as props, is nothing but sour grapes. Don't blame the game, blame the player. In this case, it's you for not being able to play as well as the competition to win. The markets aren't fair, it is war by all definitions, the rules of the playground are always in effect, and may the best man get rich.
Lights, I liken you to an analogy of a seal in the surf in an ocean full of sharks, a sitting duck among hunters, waves floating you up and down at the surface like dinner waiting to be served, completely oblivious to your impending doom, your perception as if nature has a conscience when it comes to predator v. prey. If this is the case, I'd love to know what you're trading. I've been looking at this R8 now for a year, waiting to pull the trigger for my birthday present.
Question Lights: Do you have sufficient capital to access/utilise SigmAX (or any of the major dark pool systems) as do clients using GS as their prime broker? Are you moving millions of shares in one transaction, or per day, or per week, or per whenever, to justify the expense of needing a much wider spectrum in which to execute your trades? If not, then what are you complaining about? If you're retail, or even low-level prop trading a few thousand shares, then the information provided to you at whatever level quotations you are paying for, is your swimming pool. Anything larger, is out of your reach and not relevant to you, nor are or you relevant to the larger fish, playing in deeper, darker seas. If you can't be profitable at the level in which you are competing, then you should consider not competing at all.