I don't believe you answered the question. What's wrong with sending a market order if there 'supposedly' are that many shares available on the bid? Are they given a chance to somehow run away? (Very often, yes). How/why are they allowed to get away without being obligated to commit to the prices they were quoting???
What makes you think YOU deserve any protection? You're a high-tech thief. You front-run trade decisions already made and submitted. Nor do you "add liquidity" evidenced by the Flash Crash. You're far worse than the 500K dummy that drops size. You add nothing to the market and steal from honest players. What you're doing is computerized insider trading. Nothing more. So you admit that you pay for order flow, then?
Another issue with a 'dishonest' market which I think the US stock market has become is this... Say the current quote is 10000 shares bid x 10000 shares ask. Many times, as soon as I send a market order, the 10000 shares all of a sudden become 200-300 and prices change by 1-2 cents. And there was no 10,000 shares transacted. Only a few hundred. That's not how other exchanges in other parts of the world work. That's not how the US market *used* to work. This BS practice ought to be illegal! That's not liquidity. That's playing bs games with legitimate participants in the market. These players ought to be either, taxed, removed or jailed. The only reason I can see why they're allowed to continue is because their games generate revenue for the exchanges.
I agree. Another abusive strategy HFT'ers use to poll hidden depth. I think they do this to see how much hidden demand is sitting on the bid or ask, then, again, front run it. They're able to do so because the exchanges let them cancel millions of orders, at no penalty, within a couple seconds. Regulators should impose a small fee on every canceled order. Like a buck.
Well, I explained that in my last post, but I can give you an example. Consider the Getco dark pool business model. Getco convinces Chicago trading companies to route stock and options orders into their ping destination dark pool, where Getco is always providing two sided liquidity on every stock/option in the world. The trading company adjusts their order routing mechanisms to make an IOC stop at the Getco pool first, before sending the order across the country to a public exchnage in NYC. Getco guarantees that they will give a fill equal to or better than NBBO. They offer amazingly cheap rates--possibly even payment for order flow rebates, but don't quote me on that. Additionally they will respond with either a fill or a cancel within 2 miliseconds. The fasest lines between chicago and NYC , like the ones that Getco/GS/IB have, take around 13 ms. Most trading companies will have lines that take closer to 20. Compare this to exchange linkage orders which take closer to 35 miliseconds. Now when the chicago companies route their IOC orders to Getco, Getco gets to internalize the order sucking the liquidity of this order flow from the public exchange participants. In the case that they choose not to take the other side of the trade, they can race orders to NYC to make trades in 13 MS--effectively outrunning (or front running, if you will) this order to NY before it hits a public exchange there. This is the type of advantage that Getco/GS/Citidel/IB/Knight have over the other players in the marketplace. IMHO, internalization should not be legal. Even sending an order directly to a public exchange can open an order up to front running, as well as enormous linkage fees. let's say I send an order to the CBOE to buy XYZ option at the displayed NBO. If that NBO is offered at the ISE, and not the CBOE, the order gets "linked" to the ISE automatically. The CBOE will charge a .50 per contract linkage fee, which is basically an extra brokerage fee for linking your order. As if that isn't bad enough, the CBOE contracts the DPM's to handle this process for them. Therefore the DPM's will take your order, which they can't fill and send your order to the ISE for a fill (which takes 35MS). It would be highly illegal for these firms to front run your order, and buy the exact option which you are trying to buy. However, it is not illegal for them to take the information of your order flow, which only they know instantly, and adjust vol and delta inputs of their systems on this automatically. The param changes might take them 5 ms plus 13 ms to route their own order to NYC, whereas your order will not hit the ISE for 35 ms. Again, structural front running. The only thing the trading companies can do is play along with the very flawed rules of the game. Join the bullshit, or die. Become a legal scumbag or die...unless we can get proper regulation that levels the playing field for everyone. The thing is, no one in congress has enough knowledge of the markets to even know this sort of BS goes on.
Ageed. I explained a little bit about why this might happen in my last post. This is why I would say that the 1 penny wide market is, in fact, an illusion. This is also why the HFT companies can not be considered liquidity providers, rather they are liquidity eliminators. Even a small order will have significant short term price impact. Real liquidity providers cushion the price impact of orders. HFT companies exacerbate price impact.
It seems the US congress only acts if the public gets outraged about an issue and the general public has NO idea of any of this stuff unless someone prints it in the NY Times, raising a stink. The SEC morons seem to be too busy jacking off/watching porn on their pc's. Anytime they even consider a change in the rules, they invite the big crooks to discuss how any proposed regulation would affect them. They probably ask those same thieves about the mechanics of the market as well, so...
Sorry, but that's just an excuse. Nobody has a gun to the head of these HFT'ers that front-run all day. There's thousands of ways to profit fairly in the markets, and these guys abuse the few loopholes that let them steal for a living. There's no excuse for that and it just gives our profession a very bad name.