FWIW.....this comes up every couple of years. All I can say is that I have traders who make millions and that we have no desire nor time to attempt to either figure out exactly what they're doing or how to "piggyback" - .... That being said, if I were just a trader and found out that a Firm was doing something like this....I would head straight for the regulators and a lawyer. And, even if you sat right next to one of my most successful traders, I doubt that anyone could reallyduplicate their thought process. As far as "systems" go....most tend to have a short shelf life ... meaning that they must be constantly tweaked to stay effective. All the bsst, Don
i totally agree with you. its also just a simple fact that the most profitable (at least from my experience ) equity traders are not scalpers, period. ( i.e., if you can't be profitable at 4 bucks a ticket, consider yourself a scalper or just unprofitable) and from your point of view, i completely agree. the most profitable traders you, or anyone knows is not vulnerable to this, i mean nobody at your shop is really that vulnerable to this, so I understand your point of view. (i mean they are vulnerable in the sense that we're all dying....buts its not the same thing...old age vs. you got some deadly cancer. what i am speaking about is a different kind of trader...if its not immediate to a trader why this type of automation within an llc would pose a problem, well it either it doesn't actually effect you, or by the time it does (if it hasn't already) it'll be a little late.
and you mention something about a lawyer, and regulators. Everything i've been talking about has been about the shortest time frame discretionary equities scalper. I'm not sure what I signed with my sub llc, but are you suggesting that if they watched over my pnl, saw decent numbers, then watched all my orders and pendings then essentially stole my strategy that I would actually have a reasonable case in court? I mean as far as I know I didn't copyright my strategy if you know what I mean. ( i mean, it would seem 'wrong' for a sub llc to do this...but i mean if its wrong, i wouldn't wanna be right if i was in their shoes.)
I'm always watching the tape and level2 to see if someone is piggy backing me. If you place a bid and you always see another bid appear at the same price or the price above you, then you should suspect something is wrong. And I'm not talking about the bots that out-penny you on thin stocks. If you take liquidity and someone else is always taking liquidity with you on the tape, then you should suspect something is wrong too. My strategies are so simple that a monkey could do them as they can be explained in a single sentence. So it's something I always fear. And my paranoia is high because I believe I'm the only profitable trader at my firm and its quite small and I know they would do anything to make money. So I've been thinking that it would be a better idea to go to a large firm where you're just a small fish and nobody would be interested in some guy making 6 figures when there's dudes making 7-8. So if you're able to read the L2 and tape which I assume you can since you're a scalper, you should easily be able to detect a piggy backer. But I suppose it would be more difficult to know if they had stolen your strategy and used it themselves as is or in a modified version. Why take a small percentage of your trader's pay when you could be taking 100% of your own. You'd be an idiot not to. Anyways, that's my take on it.
I switched to a firm not long ago and a month into it I noticed my orders getting frontrunned. Since I trade stocks with low volume the program would take my out and I'd get a very bad price but usually it costed me an extra cent to get in and out so 2c every trade in slippage was very annoying. Sometimes you want to place a bid or offer to attract people which is normal but in my case I was placing my orders at market and getting filled after someone else often. I just had to close my account and find a different firm.
well, to be totally honest I had some paranoid thoughts about this a year ago when my llc manager started asking me questinos, and then i started randomly posting on obscure ecns and noticed someone else was doing it for the same size...who knows. And who knows even now, really. But what I DO KNOW, is that the technology to do these kinds of things has existed, but its never been offered on a wide scale, user friendly manner. well its gonna be, very, very soon, which is why its more concerning now. all the evidence I need is the fact that this technology will be offered and usable by people who can't setup microsoft outlook, and what I know about myself as a trader (how tempted I would be)
The firm doesn't have to figure out anything they just need a program that mimics the trades. It's not that hard to do....
also, when it comes to switching to a bigger llc so you won't be noticed, probably doesn't make a difference. if you haven't noticed yet, most 'fly by night' (whatever the @#$! that means) are scum. Scum or not, they seem to be the only ones I'm able to be net profitable at. I mean how many damn times has your ecn rebate been off by just a hair. How many times has your sec fee stayed the same, even though you know it was just lowered. these fools will do ANYTHING to squeeze an extra 1/10 of a penny out of you. Just add it up. 300 traders, just screw around with the numbers, skim 1,2,3 bucks a day, and they either a. never know, b. don't care, c. care, but then forget to keep checking. you'll always find a 'mistake'. You know, i've always wondered about what don was talking about when he'd say you need a mill to make a decent living. might of been you need a mill because a) can't pick a direction b) scalping is dead c) other capital intensive strategies are just more profitable and blah blah blah. it could of been anything. But i always wondered if there was D d) if you're a uber short term grinder relying on an inefficiency, your llc will probably mess with the liquidity by getting involved. i mean, you never know the man might know a little more about the business than some guy, hoping in front of big quotes, paying low offers, hitting hi bids, buying the his, selling the lows, watching an ecn come back a few times (whupty fucking do), looking for stupid dark prints, i mean it could just go on, and on, and on, and on....basically stuff that DOESN'T AMOUNT TO EVEN 300k a year. yessss we've all seen blotters of folks with 4k updays for a month...but what you don't know is how the year turns out...i'll just put it this way, there are some fine scalpers out there doing just fine, having 2-3-4-even 10k up days and even having 30-60k months. BUT you ask them what they made at the end of the year....and its not that fantasy land projection based on a few months and a couple good weeks. no shame in that, all i'm saying is that when somebody with 20 years more experience than you says something, its not always a 'scam' because quite frankly, everything in this business is a scam from someone's point of view. now is he gonna go out there and say crap like ,"hey you little shits, stop trying to scrape for pennies i've seen enough pnl's to last a lifetime and guess what nobody is pulling in crazy dough, why don't you come on over to my place where i'll charge you 7 times more but maybe that might force your retarded ass to learn something thats actually a trading strategy you don't have to equate to a videogame and one that actually has a shot at making 7 figures and won't be utterly destroyed should your llc, which is probably shady as hell because its not mine, decides to copy your gimmick. yeah, he probably wouldn't say that.