Funny how it's always the ad hominem jerk who makes the most uniformed statements. This is true for exchanges, but not dark pools. Dark pools use all sorts of different flash messages. The exact details vary. Sometimes they will give a price and a buy/sell indication, allowing the firm to take the other side. Sometimes they will give a price without a buy/sell indication and allow the firm to join either side. Sometimes, such as in the Getco dark pool, the order flow data remains private to Getco only. Other pools actively recruit "market makers" who trade for free and get flash quotes from the pool. Furthermore, if you look at a flow chart of some of the large execution services (like Redi Sigma X, or Knight execution) each order will make at least 5, usually more, stops BEFORE the trade ever hits a public exchange. I have spoken with management of a proprietary options trading copany in Chicago that makes markets on dark pools, which gives them edge and information. They then lay off their positions as customers in public exchanges, where they get paid for their order flow. They literally quote each option half a penny wide, and trade huge size, though the only liquidity they provide comes from the public exchange market makers that they are canabalizing.
B.O.B. I'm in complete agreement with you. I also see you are new here. Do not get too upset by the Muppets here - they will never get it, and that's a good thing! If you like, use this site purely for entertainment purposes, prod a few of the local deranged monkeys with a stick every now and then, that sort of sheah. Good trading to you.
I don't think this is accurate at all. To better undersatnd your perspective, at what exchange were/are you a pit trader? I traded options, mostly at the CBOE and a bit at the CME/CBOT. There were undoubedly some horrendous business practices on a day to day basis in the pits. Some of these practices were illegal, but left large grey areas. Some were perfectly legal, but really should not have been. At the CME brokers used to be able to take positions in the same products that they were brokering. This incidious practice was not allowed at the CBOE, where you were either representing a customer or yourself, not both. Over time these practices are sniffed out, and slowly eliminated. Better technology/transparency has typically helped this process. HFT is perfectly legal, but many facets of it shouldn't be. The big difference is the scalability of the technology used today. Whereas technology helped to eliminate some of the scuminess from the floor, the current rules are such that the suspect practices used in HFT are scaled out massively. This results in scum profits far exceeding anything the pit traders ever saw. HFT is a cancer in our markets. Here's the real rub: to compete in this new era, my company is starting to roll out our first HFT strategies. Whereas in the past we were actually providing liquidity, now we make money by playing HFT trading games, that take more liquidity than they add. In short, we are a HFT company that would love to see regulations eliminate some of the HFT bullshit. We would much rather provide liquidity and add value to the marketplace, than play these silly rebate/flash quote/payment for order flow games.
Quote from bevo96: This is one of the most uninformed, idiotic statments I have ever read. Flash orders no longer exist anywhere except Direct Edge and the buy side traders choose to use them with hopes of price improvement. re: ad hominem quote from jerkstore- Funny how it's always the ad hominem jerk who makes the most uniformed statements. learn the meaning of "big words" before posting. bevo96 attacked the statement not the person. the ad hominem fallacy fallacy One of the most widely misused terms on the Net is "ad hominem". It is most often introduced into a discussion by certain delicate types, delicate of personality and mind, whenever their opponents resort to a bit of sarcasm. As soon as the suspicion of an insult appears, they summon the angels of ad hominem to smite down their foes, before ascending to argument heaven in a blaze of sanctimonious glory. They may not have much up top, but by God, they don't need it when they've got ad hominem on their side. It's the secret weapon that delivers them from any argument unscathed. In reality, ad hominem is unrelated to sarcasm or personal abuse. Argumentum ad hominem is the logical fallacy of attempting to undermine a speaker's argument by attacking the speaker instead of addressing the argument. The mere presence of a personal attack does not indicate ad hominem: the attack must be used for the purpose of undermining the argument, or otherwise the logical fallacy isn't there. It is not a logical fallacy to attack someone; the fallacy comes from assuming that a personal attack is also necessarily an attack on that person's arguments. Therefore, if you can't demonstrate that your opponent is trying to counter your argument by attacking you, you can't demonstrate that he is resorting to ad hominem. If your opponent's sarcasm is not an attempt to counter your argument, but merely an attempt to insult you (or amuse the bystanders), then it is not part of an ad hominem argument. Actual instances of argumentum ad hominem are relatively rare. Ironically, the fallacy is most often committed by those who accuse their opponents of ad hominem, since they try to dismiss the opposition not by engaging with their arguments, but by claiming that they resort to personal attacks. Those who are quick to squeal "ad hominem" are often guilty of several other logical fallacies, including one of the worst of all: the fallacious belief that introducing an impressive-sounding Latin term somehow gives one the decisive edge in an argument. But enough vagueness. The point of this article is to bury the reader under an avalanche of examples of correct and incorrect usage of ad hominem, in the hope that once the avalanche has passed, the term will never be used incorrectly again. I will begin with some invented examples, before dealing with some real-life misuses of the term at the end.
Ad hominem isn't a "big word", and as you already stated it is used colloquially in a slightly more inclusive manner than its exact definition. This is true with many words, not just "big words". This fact of communication only bothers the mental bullies, who desperately try to show they are more intellectual than those around them. Grow up dude. No one is immune to colloquial use of language. In your case you are misusing quotes in your "big words" section. Who exactly are you quoting, again? Honestly though, who cares? I am interested in having a discussion about HFT. Take your English lessons to a different thread.
Exactly. Many HFT firms offer a distinct benefit to our markets in the form of added liquidity. However, there are a few firms that prey on other liquidity providers, and only add liquidity at the expense of passive limit orders. Like Jerkstore has said, technology has allowed these abuses to be scaled out massively. It is these abusive practices that are giving the industry a bad name. We need to further regulate the abusive HFT strategies that compromise the NBBO and discourage real liquidity providers from placing passive orders.
If in fact this is true, can't the idiot regulators pay some MIT grads to audit some of these HFT outfits, and prove they're front running? And if this is true, HFT's are scary to me as while the rest of the Country gets dumber watching reality t.v, and getting fatter, the computer geeks out there get smarter. I'm interested in reading more about this one!
if you really are a hft trading firm, you certainly have very little knowledge of what the majority of the industry is actually doing. hft is just that: high frequency trading, ie trading a lot of times with computers. the BULK of high frequency trading is automated market making. period. rebate programs are there for a reason: to attract liquidity by reducing transaction costs for market makers. it's not a 'payment for order flow game'. it's an effective incentive exchanges provide to attract liquidity to the marketplace. you still need to be able to value the spread so you don't lose money, you're still taking risk, you're still taking on exposure, you still need to be able to know how to make a market. even if you were solely trading for rebates, how is that not a value add to the market place? how are you not providing liquidity when getting rebates? your comments regarding this are contradictory and absurd. flash quotes are a non-issue. what most people are referring to when they're demonizing 'flash orders' is the uqdf arb which only a tiny fraction of hft firms are exploiting. you don't like the arb, then you blame the people who are inefficiently implementing the reporting system, not the people who legally exploit it. arbs provide a valueable service to the market by exposing its structural weaknesses (which when identified, can be corrected) and by keeping prices at or near fv. literally, without arbitrageurs, markets would be exponentially more expensive to operate in. what you, the majority of posters on this thread, and the media in general are doing, is demonizing the exploitation of exchange/market inefficiencies (legal btw) and associating it with an entire industry of which only a segment actually participate in. propaganda and scapegoatism at its best. it's a lot easier though, to follow the herd and bash a fall guy then to actually take the time to really understand the issues.
btw, thought i'd point a term which is being used incorrectly. ISO orders are intermarket sweep orders. they're NOT a hft tool used to front run and they're NOT interchangeable with the term 'flash orders'. what they are, is an exchange based order WIDELY available (arca, naz, nyse, bats, etc) that allows ANY market participant to opt-out of inter-exchange route-outs. they're used by to target liquidity on a single book vs risking the inherent ineficiency in exchange based route-out algorithms. that's it. these orders are available on most trading platforms.