Real-Time Limit Order book allows for exploitive HFT algo's?

Discussion in 'Economics' started by PragmaticIdeals, Aug 13, 2009.


    NYSE Amex OpenBook provides a real-time view updated every second of the Exchange's limit-order book for all NYSE Amex-traded securities. NYSE Amex OpenBook lets traders see aggregate limit-order volume at every bid and offer price, thus responding to customer demand for more depth-of-market data and raising the NYSE Amex market to an even greater level of transparency. NYSE Amex OpenBook is available directly from the NYSE Amex via a direct data feed and via most market data vendors.


    My question: what prevents adaptive algorithms from identifying price levels with large buy / sell support for a given security in order to set up a natural hedge against adverse price movements?

    EG: If I know there is lots of limit buy-side interest in a security @ 50 and it is currently selling at $50.50, shouldn't I buy NOW and be rewarded with limited downside risk?
  2. kxvid


    This is outrageous but at least it will level the playing field somewhat. Prior to this only a few big firms on wall street could get this type of data. Now every botique trading firm will deep enough pockets will be able to get resting limit orders data.

    Imagine the possibilities for market manipulation with access to this type of data. You would know the levels of the stops of some traders and resting buy orders of others. Wallstreet always finds a new way to cheat people out of their money and this is just their latest invention. The game never changes, only the suckers do.
  3. what the hell are you guys' talking about?

    to the op? if you can see a bid half a buck below current mkt... how exactly do you think that that is in anyway predictive? why are you assuming it's static? hint, it isn't necessarily so... so how would algos who would stupidly use book size so far out of mkt be exploiting anything? even if you make your example more interesting and put that fat quote a penny away from the nbbo, regardless if you stuff it or trade ahead you're taking a risk because of all the unknowns... so again, how is that exploiting anything?

    to the last poster? do you know what a limit order book is? it has _zero_ to do with stops. the only thing outrageous are all the newbie's on here thinking everything is a scam. not that there aren't scams, but at least get educated enough to be able identify what they are.
  4. Of course it doesn't eliminate unknowns, but it sure reduces the unknowns...

    And then when you add in the ability for HFT to front-run Market orders... then they have market and limit orders covered... further reducing the unknown..

    I'm not a trader but sometimes it takes people outside of an industry to comment on it.

    Can you further describe how a good and dynamic algo couldn't abuse less sophisticated traders with a full-scale real-time limit order book updated every second or faster?

    When Goldman can make $100 a day and not lose more than 2 days a month, they have some sick and twisted abusive algorithms no doubt about it.
  5. no, you're not a trader, and sure sometimes people outside an industry should comment. however, it should be informed and objective. that's not what you're doing.

    what you're doing is helping to brand hft as evil. this isn't your decision. you learned it on the tv, or the radio, or somewhere on the internet. but instead of thinking you were overcome by the emotional sound bites. which, in a surge of indignancy, you're now helping to spew. which is easy enough to do because more than likely you or someone you know has been negatively affected by the devaluation in asset prices and you all need someone to demonize. what you don't understand, is that the information you're receiving is purposefully flawed, it's called propaganda/disinformation. using emotional language to garner public support to do bad things to the public. flash orders were the current victim and because of this not only will exchange competition be hurt but the buyside (ie the mutual funds your mom and dad invest in) and any liquidity taker will now see their transaction costs go up and guess who this benefits? not you or i kai-kai.

    so, why don't you remove the emotion for a second and think about it from a perspective you can understand. like, buying a car. don't you think it would help you value the car you're going to buy if you knew what other interested buyers were willing to pay for it? it would help you to know not to pay too much, and would also help you have a minimum amount that would still get interest from the dealer. this is called _transparency_. in any open society or commercial exchange, _the more transparency the better_. this allows people to become more informed and make better intelligent decisions. when lacking it allows power to consolidate. what you're emotionally arguing for is for _less_ transparency. _less_ transparency that will only hurt _you_ and that will only enrich those who you feel so victimized by... now who do you suppose influenced you to feel that way and why?

    i've lived in many places in the world, and i have to say, the propaganda machine in this country is second to none.