Fast traders are getting data from SEC seconds early
http://finance.yahoo.com/news/fast-traders-getting-data-sec-235200711.html
Fair. Even CFAI ethics say so. Multiple tiers are OK as long as SEC discloses fully (I assume they do.)
^It’s been a while, but I believe that particular rule has to do with things like sellside research reports and giving them to certain clients before others. HFT is another animal altogether, and I’m leaning towards saying no, it’s not right.
^ True, also, one thing I didn’t consider is that SEC is not an investment advisor full of CFAs. It is a government body, so should not favor any one group of investors over another, whether they pay some third party money or not. In fact, SEC should have banned the contractor from giving out documents to anyone but the SEC, period.
But then, SEC coulda/woulda/shoulda caught Madoff a long time ago. They are not exactly brimming with competence and impartiality over there.
^ Aye, Not fair. Taxpayers fund the SEC.
…
It’s clearly not right and it adds even less to the economy than human traders. A vocal minority talks about how these clowns add liquidity to the market. It’s true that algos add total volume but they don’t really add liquidity in my direct experience watching a lot of prices. What they actually do is try to lure unsophisticated traders into getting their faces ripped off, at least that’s true in illiquid securities. There’s a lot of trolling around limit orders to see if you’re willing to take the algo bait and then get ripped for a couple of cents here and there. You can sometimes see a tiny stock spike 10-20% because some pour soul put in a market order for a big trade and got taken to the shed on the fill. Usually the price will drop back down almost immediately.
If your strategy involves having the fastest processing equipment available and having your servers located directly at the exchange, that is not a strategy, you are just ripping people off.
Basically, f–k these guys and their market manipulation.
How does that happen ? Wouldn’t the market order tap the best ask prices in the order book before reaching the more expensive ask prices ? I mean algos can do what they want, but they cannot reach the front of the order book when their prices are worse than the rest of the book ???
What if the order book is thin and trades sporadically? A stock with a sub-$100mm cap (i.e., hundreds of stocks) don’t have deep liquidity. AAPL or something like that clearly is not a great place for the majority of algos to be playing because the bid-ask is already really tight and the market is always liquid.
^ i still think algos rape retail on AAPL prob not as much as the thinly traded stuff.
retail is def at the bottom of the food chain. i dont think the sec cares. the sec is fine as long as the bug guys are making money and keeping out of the news.
There is a guy I follow on Twitter who is always posting about SEC fines,discoveries he makes to prove algo trading, and other interesting stuff. He likes to break down the fines to per day costs. It’s absurd how low a lot of those fines are on a per day basis – it’s almost an operational cost at that point
by “big buys” i mean their friends
who ?
*JPMORGAN: DOJ CONDUCTING CRIMINAL PROBE ON ITS FOREX TRADING
+1
So Imagine that i place o1,o2,o3,o4,o5,o6,o7… with small increments. Large order comes in, i get filles on o1, i immideatly cancel all other orders and place order with higher ask… so whoever came with market order gets screwed. I later readjust my position
Eric Scott Hunsader, the scourge of Wall Street’s high-frequency traders, operates out of an office above the Bliss Salon—manicure/pedicure $45—on Elm Street in the Chicago suburb of Winnetka. Hunsader is the founder of Nanex, a 13-year-old firm that operates as a “ticker plant,” taking price streams from U.S. exchanges and distributing the data to clients through software that allows them to analyze and chart it and write their own trading programs.
Spending long hours staring at four computer monitors, he looks for signs of illicit trading hidden in psychedelic images of triangles dancing with dots. Each dot and triangle represents a trade or a quote to buy and sell U.S. stocks by the millisecond. To him the images provide evidence that high-frequency trading firms are exploiting market rules to turn a profit in a lawless environment. “You ever see Lord of the Flies or read that book?” he asks. “When you don’t have a parent around, things fall apart.”
http://www.businessweek.com/articles/2013-11-27/high-speed-traders-nemesis-nanexs-eric-hunsader
I understand and thanks for the explanation.
But my point still stands. The new orders with higher asks (that replace the first fake o2,o3,…,) do not replace existing better asks on the market. One could argue that they still provide the stock at a lower price than what a bidder would have had to pay.
I totally get that they is very misleading though, and the buyer relied on that fake order book to place an market order.
been following for a few weeks, pretty interesting fella