HFTs shouldnt get to smug, it will just take a small change to how orders are handled to kill hft outright, like making a minimum time before being allowed to cancel. If orders had to be live for just a half second this would end hft tomorrow. Reg NMS almost killed the day trader, it wont take much to kill HFT.
I wonder about unintended consequences. If I'm a HFT mm, what motivates me to keep my book open as the VPIN climbs? You say I'm hedged and won't take losses; true, but if I turn off my box, I gain on the VPIN future side! Why settle for a hedge when I have gains?
I think you misunderstand how the futures markets work, at least SIFs. There are no designated market makers, so the DOM that you see is a mirage that gives the illusion of depth and liquidity. People believe that this liquidity would always be there no matter what happens in the market, but every system playing the high frequency and acting as a "market maker" in existence has a button they can press that will remove their quotes, and they can legally do so. Some systems even have an auto pull quotes on "events." The quote stuffing, if it works, does so when there is quiet markets, which is 99% of the time. I am not sure what quote stuffing has to do with flash crashes, but I think you have not thought this through well. I am not saying I like these quote stuffers, just don't see the connection...
It's quite clear when someone is unprofitable, frustrated, seeking excuses, and blaming others... [/B][/QUOTE] LOL another one. Look at my post prior to this. That's all you HFT scum have got. I can predict the way you lot act, you only have this as an excuse to your criminal activity. Unprofitable?, I clip 30 in the emini going up to 150 which is no great shakes but given that 6 months ago i was clipping 5 and 10 you can presume I'm not losing money. Think what you like, it's the only excuse you have. And you don't even know what a flash order is or how it caused the crash. No wonder you need a box to generate your trading decisions.
Thanks for the enlightening comment. I suggest you turn your box on and ask it to help generate more useful comment on this board and then charge the website for the privilege of your comment volume.
Expand on what? I will say this, Markets are almost certainly dominated by Cauchy distributions. That means that once in a while, when the alpha gets lower and away from two, we see monster moves like we saw in the flash crash. Are we blaming the wrong thing? Regulation will help, it will make alpha closer and closer to two, which is a standard Gaussian. But in this case, I am afraid that blaming anyone is ill-founded. This event was natural, imo.
JJ, if you are trading ES, stop whining about HFT. Futures market are perfectly fair. ES is FIFO based, there is no front-running possible, no way to step in front of you in the queue, no way to stuff quotes long enough to make it your strategy( your phone will ring after 1-2 days ). Some people have better technology, invest and work on it, they happen to get quotes and transmit orders faster, deal with it...
<b>What makes order flow toxic to market makers?</b> Lopez de Prado: An order flow is considered toxic when market makers provide liquidity at their own expense. Market makers are constantly in the market providing bids and offers, or providing a trading range around the bid and offer. But if toxicity increases, they start to accumulate inventory on a particular side and this inventory begins to lose money. In many cases they shut the portfolio down and call it a day or they have to widen the spread they're providing liquidity at. So order flow becomes toxic when it selects market makers adversely. Market Makers should be exposed to market risk like the rest of us, and isn't it illegal for them to "call it a day"? Widen the spreads, fine, but to give them more advantage to not have to accept risk than they already have is BS.