HFT GOOD or Bad for Market

"I have heard of them going back as far as 2002 (currently) to fine and ban traders who have had algo HFT strats"


wtf are talking about?

 

Quote stuffing, orders that cancel HFT strats

 

High Frequency Trader Fined: ‘Quote-Stuffing’ Crackdown Afoot?

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Dow Jones Newswires Nathan Becker reports:

The Financial Industry Regulatory Authority said it had censured and fined Trillium Brokerage Services LLC $1 million and fined and suspended 11 of its employees in connection with using an “illicit high-frequency trading strategy and related supervisory failures” to gain an advantage.

The financial regulator said that through nine proprietary traders, Trillium entered “numerous” layered, market-moving orders that generated selling or buying interest in specific stocks. By entering those orders, Trillium traders “created a false appearance of buy- or sell-side pressure,” Finra said, noting that because of the strategy, the traders got advantageous prices that otherwise wouldn’t have been available to them on 46,000 occasions.

Finra said it fined the traders, Trillium’s director of trading and its chief compliance officer a total of $802,500 and ordered a combined $292,000 of disgorgements. The 11 people were suspended from the securities industry or as principals for periods ranging from six months to two years.

In settling the case, the small New York brokerage and the employees didn’t admit or deny the charges but consented to the entry of Finra’s findings.

The ‘illicit high-frequency trading strategy’ in question sounds quite a bit like the “quote-stuffing,” a practice spotlighted by The Journal in a front-page story earlier this month. That piece defines quote stuffing “unusually large numbers of orders to buy or sell stocks … placed in a fraction of a second, only to be canceled almost immediately.” Some, theorize that the practice may have played a role in the May 6 “Flash Crash.” A joint SEC/CFTC report on the “Flash Crash” is due sometime this month.

 

There is no proof that HFT caused the flash crash. To this day, we don't know what caused the flash crash. It could have been a fat finger error. Sudden market plunges have happened b4 in the US and in other countries but of a smaller magnitude. Both were fat finger mistakes.

Again, the government needs to study the impact of HFT b4 doing anything. They could create problems or make the problems worse.

The current circuit breakers/speed bumps might be enough to stop sudden plunges.

 

They are just looking to blame someone for it, HFT gets the blame here, im with you ITS WRONG, but "it is what it is"...

 

That's an entirely different question than suggested by the thread title.

What, specifically, do you want to ask?

 

The article seems to indicate market manipulation.

What types of stocks was Trillium quote-stuffing?

Are we talking about illiquid stocks that have average daily volume in the 100k's or liquid stocks that have average daily volume in the millions?

Regardless, this strategy seems risky and could cause a firm to blow up any day. What if they get filled on the fake orders and they end up holding huge positions and the positions go against them quickly?

They might take huge losses to get out of their losing positions.

In other words, they pick up pennies with their HFT but on a few occasions, they lose dollars when things go wrong.

 

In my opinion, after we ban hft, we should look into banning traders who aren't using 15 minute delayed quotes.

 

absolutely. but what about those of use who do not have continual access to the information superhighway? we need to make it fair for all

 

Only the Amish trade fairly. The rest are trying to ruin America with their devil machines.