The Holy Grail Of Trading Has Been Found: HFT Firm Reveals 1 Losing Trading Day In 12

Discussion in 'Wall St. News' started by Cdntrader, Mar 10, 2014.

  1. It's mkt-making, no? If you're just dumbly collecting the bid/ask spread, why would you expect losing days?

    Again, I am not saying that they are white as the driven snow, but should we be automatically assuming they're guilty?
     
    #11     Mar 11, 2014
  2. baglunch

    baglunch

    +1 on provide vs take definition. One places resting orders by joining the bid or ask, the other removes orders existing on the book.

    It really depends on the strategy but market making hft can trade passively using limit orders. For example in index or etf arbitrage. But there will be taking to hedge the providing side of the strategy.
     
    #12     Mar 11, 2014
  3. baglunch

    baglunch

    I agree, not to say that these guys are legit, but we cannot assume that because they participate in hft that they front run or are crooks. Entirely possible but it's not a guarantee.

    If it's their risk system that protected them from exposure, in some systems if the market turns against you it usually stops trading to minimize loss until you figure out why you're losing money.
     
    #13     Mar 11, 2014
  4. The real issue with this Virtu shop is this (from their pre-IPO disclosure, as discussed here: http://www.bloombergview.com/articles/2014-03-11/high-speed-trader-isn-t-so-good-with-numbers):

    "we and our independent registered public accounting firm identified a material weakness in our internal controls over financial reporting... This material weakness related to our inability to prepare accurate financial statements, resulting from a lack of reconciliations, a lack of detailed review and insufficient resources and level of technical accounting expertise within the accounting function,"

    Who would wanna get involved in this particular IPO, I dunno...
     
    #14     Mar 11, 2014
  5. achilles28

    achilles28

    Lets say your right. Have you heard of any other firm engaged solely in market making, that enjoyed a win:loss ratio of 1300:1 (days)?

    I haven't.
     
    #15     Mar 11, 2014
  6. In my neck of the woods? Maybe not a whole firm, but individual desks which only engage in mkt making, yes, for sure... If you have a good franchise and/or decent mkt share, you should never lose money. You should never make a lot of money either, unless you start punting, but that's where it all changes.
     
    #16     Mar 11, 2014
  7. Well, the reason why you aren't hearing about it is because they aren't going public. They usually won't open their mouths with that information because then everyone screams murder.
     
    #17     Mar 11, 2014
  8. achilles28

    achilles28

    I stand corrected. How much is "too much"? How much daily profit is normal for market making?
     
    #18     Mar 11, 2014
  9. It can vary a LOT...

    In the settings I have encountered, we're talking about $10 - $50 bucks (mil) for a medium-sized desk per annum as normal. If they make $100 or more, it's an anomaly. If it's a big desk, with a really well-developed franchise, it's an order of magnitude more.

    Again, I dunno what exactly this Virtu place does, but it could be that they operate sort of like an electronic broker. If that's the case, you can see if it makes sense by comparing them to someone like ICAP, whose electronic mkts division had arnd $220mil revenue and arnd $90mil operating profit in H1 2013. That comes mostly from BrokerTec and EBS. Nobody asks questions why ICAP doesn't have any losing days (why would they?), so maybe it makes sense here. I dunno...
     
    #19     Mar 11, 2014
  10. Eyez

    Eyez


    'Thievery' is a far fetched claim; whats more likely is that you can't/don't know how to compete. if you put out a limit order, you are providing liquidity. does not matter if its manual, automated or HFT
     
    #20     Mar 11, 2014