What are we gonna do about Exchanges revealing our positions and size to Firms

Discussion in 'Order Execution' started by JamesHDL, May 12, 2010.

  1. JamesHDL


    Most institutional and retail investors have no idea that the private trade information they are entrusting to the market centers is being made public by the exchanges. The exchanges are not making this clear to their clients, but instead are actively broadcasting the information to the HFT’s in order to court their order flow. The exchanges are likely to counter that when a subscriber signs up to their exchange they then allow the exchange to use this data as they see fit. However, how many investors would have signed that agreement knowing that their hidden orders were being exposed? This practice has been going on for years but not many investors have read the market data specifications. Every day high frequency traders are using the information that some exchanges are supplying to disadvantage unsuspecting investors. Every time a trader places an order in certain market centers, whether at the market centers directly, or through a third-party DMA, those market centers are collecting data regarding the trader’s order flow. They are supplying the information to HFT’s that allows them to track when an investor changes price and how much stock has been accumulated. This information is helping HFT’s predict short term price movements. Institutional as well as retail footprints are being detected, and “modus operandi” and trading profiles are being created. Traders believe that their trading strategies are protected, when actually their strategies (personal data) -- including variables such as displayed quantity, time stamp, side, revisions, reserve orders, linked executions, order id numbers, accumulations, number of shares -- are being misappropriated for sale by the market centers. The exchanges seem to think that they own the data and have the right to sell it. Why are the exchanges allowed to do this? We think this is an outrage and demands immediate action by the SEC. How can the public trust the very organizations that are supposed to be protecting them, when these organizations are turning around and selling their personal data. The only difference between personal data theft, and the data-feed issue we highlight in this paper, is the degree of public awareness.

  2. Aok


    James do you think Kobe Bryant cares what Zydrunas Ilgauskas does in the offseason?

    Goldman Sachs, John Paulson, BATS, CME, NYSE and all the rest could not care less about your 500 share piker position.

    The only thing you can do is...

    A) Not trade in their sandbox

    B) Not trade at all and let these mutts play arcade games with each til they blow out the market entirely and the rubes go back to putting their $ in their mattress for a generation.

    C) Hope the toothless wonder that was the SEC under Bush/Cox finds their dentures and puts em back in their mouth and does something other than watch porn on your dime.

    D) Find a way to adapt, improvise, overcome.
  3. JamesHDL


    Are you saying that nothing can be done so we might as well give up. No contacting your representatives. No protesting. No rallying up the people who are getting screwed.

    Is that what you are saying to give up.
  4. Doesn't really seem like a big deal. So NASDAQ and BATS do this, but no one else... that's really not enough to create an accurate profile. Whether a reserve order is a buy or sell is fair information to display - I can usually figure it out anyway (all you have to do is test it, sell 100 shares). The data isn't enough to realistically track someone's position or reverse engineer a trading strategy - besides, who just executes on BATS and NASDAQ anyway? If you're so worried, just use ARCA, EDGA, EDGX, and NYSE. Problem solved.
  5. JamesHDL


    I am not really interested in conversing with you. You sound like a simpleton.
    NASDAQ and BATS handle a lot of volume. And these are exchanges that we know are trouble. What about others.

    I don't know in what world you live in or if you are even a trader. This is a "big F-ing deal" to quote Vice President Biden.
  6. I am indeed very much a simpleton.
  7. d138


    What's a big deal? Everybody can get direct feed from Nasdaq or BATS, it's not exclusive at all. Every serous market participant is using it.
    Are you placing a lot of hidden or reserved orders?
  8. where the hell do people like u come from?! Spare me the 'this is an out-rage, that WE, the people need to do something about'. No WE dont need to do anything about this. You have your freedom and if you dont like the exchange's rules, FIND ANOTHER EXCHANGE.

    Delete your account and never come back.
  9. Occam


    I largely agree with you, NY0BScalper -- although I'm definitely not a fan the many proprietary feeds popping up in a seemingly ever-more fragmented marketplace, I don't think the information leakage described here is really such a big deal, as a lot of this information can be reconstructed/guessed, anyway, from the consolidated feeds (without using any order ID's at all).

    I'm glad that people are looking at and thinking about these issues, but I think that the authors are blowing this way out of proportion, which makes me wonder where they really want to see markets headed.