The Truth Behind Broker Routing: Don't Believe The Hype Traders Magazine Online News, June 7, 2017 John D'Antona Jr. inShare When we have asked most traders what their ideal liquidity seeking algorithm does, we usually hear something like “find the contra side of an order as quickly as possible, preferably without moving the price too much.” If a trader was working an order manually—that is, without using an algorithm, liquidity seeking would also be described in terms of urgency, but, a fairly typical answer for a non-urgent order would be, “check the blotter scrapers for naturals, then find active contras in dark pools, and finally clean up the order by crossing the spread and taking in lit markets.” If buy-side traders were constructing liquidity seeking algorithms, this is how they would behave—and the best algorithms feel like an extension of a good trader’s thought process. Unfortunately, as many of us know (and a recent SEC fine confirmed), just because an algorithm should behave this way doesn’t mean that it will. A Real-Life Example of Bad Routing Here is client data that shows a broker's conflicted routing strategy. In this example, 3,100 shares were executed in Venue A as a result of sending 1,200 shares (fully filled) and then 1,900 shares (fully filled) 2 milliseconds later. The concerning part is that 19 routes to other venues took place before the algorithm went back to Venue A. Of these 19 routes, 7 were to the algorithm provider’s own venue, which resulted in only 100 shares executed. Later in the routing sequence, even after getting full fills back at Venue A – the router still decides to go back and check their own pool and a new venue (Venue H). All things being equal, executing in fewer places is preferable to executing in more places. Sources of liquidity should be tapped until they are dry, especially if that liquidity can be accessed without adverse price movements. So clearly this type of routing should be a concern to all buy-side traders and requires analysis to uncover. http://www.tradersmagazine.com/news...l?ET=tradersmagazine:e3048:1175783a:&st=email
There should be a one second minimum to post a bid/offer before it can be canceled. Enough of this bullshit High Frequency Theft.
not quite. one second is too long to reverse a fat finger error. furthermore one can change their mind on direction. people who complain about hft traders should not blame others for their own deficiencies. spreads would be much wider if not for hft traders. the current experiment in .05 spread in some stocks is for the benefit of wall street firms,not for the retail traders,
If HFT adds liquidity, why are there massive liquidity and price vacuums whenever volume comes in to a stock? HFT adds liquidity ONLY WHEN YOU DON'T NEED IT. Edit- I don't want to get into another HFT good/bad debate so let's just agree to disagree. But if you traded pre-HFT there is no way you could say that it's easier to move size now than before. That's not even a debate.
The NYSE is following the IEX by placing a speed bump to keep the HFTs from running their predatory thievery. https://www.forbes.com/sites/greats...peed-bump-and-how-it-could-help/#4c7cd1c777a2
As per below article not all speed bumps the same... https://www.elitetrader.com/et/threads/is-the-nyse-bumping-up-its-listings.306553/#post-4402578
If you think you have such grand ideas to improve execution algorithms then you should work for IB or sell your ideas to banks and buy side firms. Unless you are an absolute specialist and have actually verified the data yourself the claim that more execution venues than less is suboptimal is nothing but an empty claim. As with everything in life... "it depends"...
1 second too long for a fat finger error? Fat finger errors are human errors and take seconds to be even recognized (at the earliest), let alone a decision made how to act upon such error. I came across a study a while ago that provided an average of almost 20 minutes before fat finger errors were corrected. It sometimes even takes a call to the exchange to clarify whether trades can be busted or not.
There was so much liquidity being provided by HFT in AMZN yesterday that it flash crashed 40 points and back in seconds. Thanks HFT liquidity providers! Wonderful job. Keep up the good work/theft.