Thinking back, I probably mis-construed it, but I use the term to refer to orders that hedge/offset a position. So if I get filled on the bid, a subsequent sell order that I enter is my "offset" order.
Decimation changed market dynamics quite a bit, though I think the end result (bid/ask spread and liquidity) is negligible now that they're back in half-ticks instead of tenth-ticks. Their volume tanked quite a bit after the tenth-tick changes, but have come back decently after the move back to half-ticks. Then again, so much changed in the fx world over that timespan that it's hard to isolate the effect of the tick size change. Same as before, the lead/lag between spot/futures has changed a lot over the past decade, but hard to say exactly what effect the tick size change had on it.
Can most active market makers and HFT tell the type of a buyer or seller currently working an order? What I mean by that is can you tell by maybe how I sweep the book using different smart routers how big of a participant I am. Or maybe I'm a largre fund and the way my algo buys continuously slowly throughout the day gives off a different signature. Is there merit in trying to figure these things out? Thanks so much!
It may depend on the market but for equities and futures you can only tell the size, price and side of the taker there aren't any indicators about the algo. Someone could try to derive if there was a big order that lifted a lot of size off the market but at that point it is too late to catch the taker. If you are asking if you can tell you're executing a twap or vwap, no one can tell.
I trade a few rather illiquid stocks (holding for days to weeks) and my position is typically about 2 to 4 times the size at NBBO. I've seen what you're saying but I've sent my computer to send orders to the ECNs that do not exceed the size they're quoting. The result is that I get fills from all the ECNs and then that tier disappears. I'm *very* satisfied with my fills. But from what happens in the seconds afterwards, I can imagine that someone moving even slightly more shares might feel upset about the "front running". No, I think what they really want is a mythical market maker who supplies huge liquidity and tight spreads (and loses money on every institutional order). I started trading back in the teenie days and for a while traded on 256ths. What's not appreciated, I think, is the difficulty that cents give to market makers. Making market was a heck of a lot easier back then. And with the decreases in volume, we really can't expect the spreads to have done anything other than widen. The way I see it, the effect of HFTs is to narrow the spreads but only for small customers like me. I have to say that I think they're good for my style of trading. What's going on is that the spreads for high volume are roughly equal to what they were in the teenie days, the cent spreads only apply to small size players like me.
Does anyone here got experience or know how with High Frequency Market Making in FX? Pm me please thanks