brokers' monitoring of customers' trading patterns

Discussion in 'Trading' started by andrewbee, Jun 27, 2008.

  1. Hi,

    If I ran a broker firm, it would occur to me that a few percent of my customers would be good traders. It would not be hard to run reports that look at account growth over time. I could then look at their trades, and potentially reverse engineer their systems, or follow their trades, for my own profit.

    Anyone know if this type of thing actually takes place? Just curious, and before the flames come, I know how to stop, drop and roll.

    Thank you
  2. I'm not sure but it wouldn't surprise me. Several years ago a large broker was analyzing orders placed before the open by their customers. They used this to estimate the opening price, and when possible, to buy or sell in the pre-market to take advantage of this.
  3. big lawsuit...
  4. rosy2


    its not worth the effort to do anything more than front run orders. brokers and anyone working at a broker are not bright enough to do something that would tae advantage of their customers. besides almost all customers lose money which is why frontrunning or piggybacking is just easier.

    I dont know about today but in the mid 90s my co-worker piggybacked futures orders and made over 100k one year then lost it when he tried to think for himself. Also, those 2 strategie are quite common in OTC markets...fx in particular.
  5. search for a simular ET thread...from few years back
  6. Unless it was something obvious, it would be very hard to reverse-engineer someone's trading strategy from their buy/sell activity.

    How do you even know that the high-performing trader you're looking at even has a "system" per se? S/he could be reading tea leaves and simply be very lucky and how would you know?

    They can look all they want and it won't buy them anything.
  7. FYI this is 100% standard for any broker that routes retail orders to its own trading desk, and completely legal as long as the customer can cancel up to a reasonable window before the open (< 1 min). The customer's defense is to cancel if they don't like the premarket action and/or send phantom orders to fuck with the dealer if they believe they're being gamed; nothing new.

    Regarding OP if you're paranoid about being flagged a "winning account" just spread your trades around different brokers and reverse engineering becomes impossible. Besides, unless I'm working a size order on a scale, piggybacking is welcome 99% of the time and exploitable.
  8. zdreg


    hubris goeth before the fall. what a joke.
    next they will reverse somebody's blackbox.

    "solution to avoid Profitable Strategies Copied by a Broker?"
  9. Several years ago I used a smaller daytrade broker which also ran a small prop shop. I became friends with one of the staff, who told me they had fired a customer who they realized was using big orders to trigger alerts in a scanning service.