"Enhanced Data Feeds"

Discussion in 'Retail Brokers' started by Rod Shaft, Aug 7, 2012.

  1. So I was reading an interview in zerohedge the other day and this caught my eye...

    http://www.zerohedge.com/news/interview-high-frequency-trader

    A second example: HFTs can model other traders’ behavior. When someone trades through Scottrade or Interactive Brokers, their order has a unique number attached to it – the same number every time a client places an order. This number is bundled with all relevant trade information (time, price, etc.) and sold as an encrypted “enhanced data feed.” An HFT can then use those past results to predict the trader’s behavior.

    TCR: So HFTs try to predict what you’re going to do before you do it. Do the brokers admit to selling this information? Can traders opt out?

    GARRETT: This data is standard and available to anyone who wants to buy it, so it’s not that HFTs are purchasing illegal information. But the data set is huge and is only of practical use to players with very fast and powerful computers – meaning HFTs. And yes, most brokers I have encountered will allow you to opt out of having your unique number attached to your information.

    To be clear, I’m not saying HFTs track your individual account and literally jump in front of you right before you trade. But they do use this information on the aggregate to model traders’ behavior. So an HFT could have a very good idea of when traders on, say, E*TRADE’s book will enter into a certain transaction.


    This is the first I've ever heard of this. I have done a bit of google searching and have failed to gather any additional mentions of this sort of behavior. So is this actually happening? If so, it really ought to be illegal (especially if it's in real time). Aside from compromising the integrity of the markets, this would just add fuel to the fire of the increasingly prevalent populist sentiment that seems eager to implement reactionary anti-market policies such as transaction taxes.
     
  2. ocean5

    ocean5

    This sort of activity is based more on the hypothetical data,then on the insider`s information.So there is nothing illegal here.

    Most traders enter on 50 line xover,so tweak your stoch and enter on 48 line xover.:D don`t tell anyone.
     
  3. vikana

    vikana Moderator

    This is actually explained very well in the excellent book "Broken Markets".

    It basically means that if you sit e.g. on the bid and decide to take the ask, they can tell it's "the guys from the bid" and move the ask away. I've seen that many many times, so this is a real problem, a really is a form of cheating. Since they are co-located they get the rich data feed quicker than your updated order allows you to hit the ask, and they thus have time to re-price.

    If I recall, some of the re-use of order IDs have been stopped, so the problem is not as extreme as described, but it still is.

    A simple answer is to not update your order, but to cancel and submit a new one. That helps a bit with being profiled.
     
  4. Bob111

    Bob111

    yep..'they' literally running away when you placing the order. specially visible on low volume stocks,when you try to buy or sell a basket of them. this market is beyond FUBAR(talking about stocks). you can't even buy 50 shares on 3 dollar stock without being raped. forget about getting anything at the bid, if you are buying..hey ..you can forget about buying anything at ask either. you try to hit ask-there is will be a trade right before you and shares that you are about to buy will be gone... OR they will move the ask,before your order will reach the exchange. cause they know everything about you.
    everybody like low commissions? exchanges and brokers have to find some 'other' sources of income..they now in business to sell any type of data to a higher bidder..just like those 'social media networks'..
     
  5. Dustin

    Dustin

    I don't remember this part of the book unless you are referring to the section on hidden order ID's. Either way, I hope to see you in Vegas this year, it's been a while!
     
  6. This has no bearing on anyone's trading performance. If you're a winner, they will piggy back your trades and push the market in your direction. if you're a loser, they will fade your trades and you will still be a loser.

    Runningbear
     
  7. Bob111

    Bob111

    heh..i wish it was that easy...it's begins with an entry.. see my previous 5000+ posts ..today-it is nearly impossible to get into a winning trade. at least to me. i can be a 10-20 times right EVERY SINGLE DAY about picking a top or bottom, but it's all useless,when you place an order and there tens of thousands shares traded at your price and you got no fill...yeah..it's has no bearing on performance..when you can't get into a winners and losers are all yours..same at exit..(see my post above). closing some 100 shares position is fucking problematic today..even if you sell at bid or cover at ask..i guess i'm living in some different world than you are..

    here is some guy having same problems-
    http://www.elitetrader.com/vb/showthread.php?threadid=247164

    can't even sell at bid..