HFT are modern day market makers or specialists by computers, anybody can be specialist are make markets these days,,it's low cost barrier to entry market making business. without these HFT or market makers there would no liquidity at all for some of these stocks....there is only 250 firms trading ES on intra-day..only 250 firms in a room.and 20% control the market meaning 50 guys own the market. and for some stocks there is only one market maker . even the NYSE specialist don't do much on the floor these days, most of the market is automated. and as for frontrunning, it's a gray area,,everybody does it in those broker/dealer firms
it was pre-planned robbery okay. some brokers give you 3 days to cover margins.. not like IB or some brokers who give 10 minutes to cover margin calls. they'll tell you to read the fine print.. these brokers are not liable for computer failure or if your computer failed...it's was clearly a computer failure. but the exchange and some brokers would not or refuse to cancel erroneous trades between 2:30pm 3pm may 6,,,why? cause they stole too much money...
Bar - if you are still around can you elaborate on this a bit? I followed the flash trading issue from a distance (I have not involved in equities much and never at high frequency), and my impression is that they serve a useful purpose and the side effects are not that bad. I am interested to hear an opinion from an insider who disagrees. My understanding is that flashing an order is/was voluntary. You trade off the possibility of price improvement with the possibility of being front run. So you don't flash the orders worth front running, and maybe you don't follow up with a market order all the time if you don't get filled so front running them is less profitable. Out of all the complaints I have heard about flash orders, I can only pick out two credible sounding problems. One is that not all brokers would give the "don't flash" option to their clients, or make them opt out instead of opting in, so they weren't as voluntary (for the naive) as they should have been. The other is that by filling a flash you are stepping in front of a limit order that should have rightfully been filled. But the first problem is a fixable implementation issue, and the second problem is something allowed in lots of other cases so it doesn't seem like either is a reason for an outright ban. So if I want to flash my order hoping for price improvement, why shouldn't I be allowed to? What am I missing?
The very fact HFT firms have to come out here and elsewhere to try to explain that what they do is legit contradicts their defense. And the very fact thât they have lobbyists and friends in the right places by their own admittance is disgusting. Real legit traders don't need PR firms !! I am sorry but did you ever hear a hedge fund manager defend his strategy and way of making money ? They don't have to except on a case by case basis, because they make money by making bets like everyone else. HFT firms don't bet , they exploit loopholes and the technical inferiority of other participants . In fact looking at those HFT people, they are not traders, they are just programmers, they are not unlike hackers, they find vulnerabilities and they exploit them. First off all, there would probably not be any discussion of transaction tax without these HFT firms, they are part of what ruined the market by exacerbating volatility and so the transaction tax now appears to some as a viable fix to this higher volatility. Everyone is going to be impacted by this, and it's all the fault of HFT . Secondly none of HFT people have addressed what I said in my previous post, besides the fact that someone mentioned they base their trading on the work of one or two mathematicians, so they use similar models, just like I suspected. Prove that this does not exacerbate volatility and herd behavior ! I predict HFT will be found to be a chief factor in the extend of the next great crash that is coming. If all these firms trade using similar strategies, one day there will be a HFT black swan, and they will take down the markets with them , 1987 style. This is close to a certainty as far as I am concerned. Thirdly I you use any information before it's published for everyone to see, your business is not legit , and regulators need to address that issue NOW and in a way that does not impact regular participants to the market.
I have one simple question: Do high frequency traders "see" order flow before the open market can trade against it? We know that with ISO orders, HFT'ers jump the order queue and front-run pending orders.
Obviously by analyzing Level I or Level II order placements, movements and volume. It's a well-known HF strat. Yes, but then they effectively go market with their order and bid the Ask or bid 1 tick above the NBBO (buy) or vise-versa on the sell side. So it costs them a tiny bit to do that.
Sorry, what I meant to ask is this: Say a large remote trader sends in a market buy order for 500K shares. Is that market order routed to a data feed viewed by HFT'ers before it's routed to the exchange and placed in the order queue? If yes, are HFT'ers given a few sub-seconds to trade with or against the market order before it's shuttled off to the exchange? Is that how it works? Sure, but HFT'ers wouldn't use them if they were losing money, net-net. If the non-ISO market order promises to move the instrument a couple ticks, it makes sense to use the ISO to jump the queue, even if it costs a tick to do it, right?
"Thirdly I you use any information before it's published for everyone to see, your business is not legit , and regulators need to address that issue NOW and in a way that does not impact regular participants to the market." from trade to live poster there will always be people who have an edge over you. if i am at analyst meeting and i figure out the ceo is lying do u think i am going to tell you?
not the issue, the exchange is where info is disseminated , everyone should have equal access to the data, when it's published and not before when it's still in the pipe.
See this. http://www.elitetrader.com/vb/showthread.php?threadid=127957 I would be amazed to see a study that imperatively shows and proves there is a distinct advantage for ISO orders as it applies to HFT.