HFT robots seeing orders before the exchange ?

Discussion in 'Order Execution' started by softdown, Dec 12, 2012.

  1. Here's an interesting, documented example of bad execution where the HFT robots are suspect:


    If what the guy says is true than I cannot see other explanation than that the robot "saw" his order before it reached the exchange.

    Is it possible for a HFT robot to see someone's order before it is executed by the exchange ?

    It used to be legal in the US with the "flash orders".
    Is that still legal in the US or EU ?
  2. Typical zerohedge BS.

    The "Guest Poster"... Who was his broker/platform? Is he/she retail, prop or institutional? How was his/her order placed? Direct to each exchange or just conveniently decided to leave those details out…??

    Put all the facts out on the table and things look differently than most people see them and most certainly differently than how zerohedge presents them.
  3. The entire ZH post is completely idiotic.

    The stock in question trades < 5,000 shares 50% of days...
    Most of that on the NYSE.

    Only a complete amateur would believe such a stock...
    Is manipulated by "HFT robots"...
    But most ZH readers are complete amateurs...
    Coiled in a fetal position with their little gold bar under a bed.

    Maybe if you are stupid enough to direct route to EDGX or PCSE...
    For some completely inexplicable reason...
    Hell, why not route it to the Elite Trader ECN.
  4. If you are going through a broker, yes, of course, as there is a "robot" living in your broker's SOR (or the SOR of whoever bought the broker's flow). But I doubt that is what the author meant by "HFT" - by the author's likely meaning of the word, very unlikely, those guys aren't sitting around looking for 500 share orders on a nothing-volume stock, as there is no money in it.

    The author's problem isn't HFT, it's expecting good execution on an illiquid stock. That simply isn't a reasonable expectation.
  5. Bob111


    it's been posted here,on ET few days ago..
  6. The author doesn't know how to trade an illiquid stock.

    How does that turn into a ZH piece on "HFT robots"?

    They may as well have done a major piece on "breast implants".
  7. Hilarious.
  8. Some even know what your looking at on your screen. This is no joke.

    I would suggest against laughing so loud.
  9. The full ZeroHedge article

    Via Dennis Dick of PreMarketInfo.com

    I was trying to buy 500 shares of a preferred stock this morning, Principal Financial Group Inc. series B (NYSE:pFG-B). It is such a challenge to trade any type of illiquid issue as the execution of orders is nearly impossible in this HFT world. Here is the sequence of events.

    At 09:39:08, the stock is offered on EDGX at $26.29.


    I place an order to lift the offer. The shares trade but I get filled on zero shares. Knowing that my bid will cause a bunch of HFT programs to penny-jump me (step ahead of my order by a penny - which they immediately do), I cancel the order. The HFT penny jumper cancels their order as well.


    At 09:39:29, the stock is offered on EDGX again at $26.32. I place an order to lift the offer. The stock trades at the exact same second. Again, I get filled on zero shares. I cancel the order.


    At 09:39:41, the stock is offered on PCSE at $26.29. I place an order to lift the offer. The stock trades at the exact same second again, but I get filled on zero shares. I cancel the order.

    At 09:39:50, I place a hidden order to buy the stock at $26.32. Five second later the stock prints in front of me at $26.33 (Obviously these hidden orders aren’t as hidden as they should be). I leave the hidden order to buy at $26.32.

    At 09:40:05, the stock prints right through my hidden order on another exchange at $26.30. So despite my bid being higher at $26.32, thanks to the fragmentation in the market, I get filled on zero shares again (and the seller gets a worse price!)

    At 09:40:20, the stock prints through my hidden order again at $26.30. Again, no execution for me. Frustrated, I cancel my order.

    A few seconds later, at 09:40:36 a couple of HFT programs battle out for the top of the order queue, and the bid changes rapidly, as you can see below:


    At 09:40:40, the HFT programs go to battle again fighting for the best bid.


    This battle continues for the next few minutes. In fact, during one period of time from 09:44:53 – 09:46:35 (a total of just over a minute and a half), the best bid changes over 800 times, as these two HFT algorithms battle to be at the top of the queue.

    At 10:07:14, I finally lift an offer and pay up to $26.35. The HFT firms scalps their few cents from me, and all the games are over.

    Some serious issues are highlighted in these few minutes of activity:

    1) Inability for market participants to access a quote.

    2) Excessive quote pollution as HFT algorithms battle each other.

    3) Market fragmentation can lead to inferior execution.

    4) HFT penny jumping can discourage market liquidity.

    The bottom line is that all of these issues discourage participants from trading illiquid securities – making these securities even more illiquid.
  10. Not true at all...
    They're illiquid because they have a small float and zero interest.

    This stock trades about 2,000,000 shares/YEAR...
    I've traded about 125,000 shares or 6% of total volume.
    But I trade HUNDREDS of stocks of varying liquidity...
    So it all adds up.

    Again, the Dude just doesn't know how to trade illiquid stocks...
    It has almost nothing to do with HFT...
    *** Market Makers would have screwed you over just as bad 7-8 years ago ***...
    It's a silly post put together by people who don't trade professionally.

    If they wanted to screw the Dude...
    They would have sold him 2 shares.

    A Pro would have 500 orders out there...
    It's like fishing with 500 lines...
    You don't care which lines hit...
    They are all normalized to be the same.

    Plus the 500 share order to hit the bid is a mistake.

    Plus a Pro would use a broker with intelligent routing like IB...
    90% of your fills on low volume stocks would be NYSE/ARCA...
    The NYSE is the only thing that keeps stock trading semi-legit.
    #10     Dec 15, 2012