4 ms·

An example would be your market maker knowing all stops. When price drops from 100 to 90, there may be a few people that have stops at 89.90. Someone with fire

An example would be your market maker knowing all stops. When price drops from 100 to 90, there may be a few people that have stops at 89.90. Someone with firepower could go short at 90 (which is not so risky if you know the order book), go down the 10 ct, trigger the stops and cover your short when you see the orders are getting filled. I read about much more sophisticated variants out there, e.g., the market maker selling order book information for high prices or selling high-speed access to this information but I'd have to search for it.

kasey_junk 11y ago
I'm not an expert on all the various orders that are in play at every exchange, but in the venues I traded in you don't actually see stops in an order book feed. They are orders that do not appear in the book until the stop has been hit at which point they appear (or fill) as regular orders. Someone with more knowledge of equities platforms could chime in if I am wrong about those venues. I don't understand your trade at all. Could you explain it precisely with the orders someone would put in to take advantage of that trade?
- peejaybee 11y ago
  The technique is known as "running the stops." There's a description here: http://www.mypivots.com/dictionary/definition/121/running-the-stops http://www.mypivots.com/dictionary/definition/121/running-th... Basically, you don't know the stops are there; you make an educated guess.
  - kasey_junk 11y ago
    Ok, if that is what the OP is describing than I guess I understand. But that trade does not have any part of it where the user of the stop loss order shows their hand to someone with inside access. Further, that trade is far from riskless to the people attempting it.
patio11 11y ago
the market maker selling order book information for high prices In 2015, at most exchanges dealing in US equities, the "market maker" is reading the same tape as everyone else hooked up to the exchange. Your scenario is literally selling access to the outdated output of an API to which non-outdated output is available for the usual subscription fee. This sounds far-fetched. I also think anyone who believes this scenario to be plausible has an idea of what "order book information" contains which is likely not an accurate representation of what they actually expose over the wire. (It's like folks who think Facebook sells customer data to advertisers. Seriously -- where's the API you can hit that does that? That needs to be a thing that exists in the world for this claim to be true.)
- dmichulke 11y ago
  The way I see it, the retail clients connect to a broker platform (IB, ..) and it is there that the above scenario can happen. The broker has an account in the exchange and uses this account to offset the global position of all his clients in his system. Using this information is generally possible for any intermediary (bank, broker, ..) To be clear, I am not saying everybody does it but I think that they can, they want to and regulatory oversight in the past could not even keep track of the total stock of a broker (see MF Global).

kasey_junk 11y ago

I'm not an expert on all the various orders that are in play at every exchange, but in the venues I traded in you don't actually see stops in an order book feed. They are orders that do not appear in the book until the stop has been hit at which point they appear (or fill) as regular orders. Someone with more knowledge of equities platforms could chime in if I am wrong about those venues. I don't understand your trade at all. Could you explain it precisely with the orders someone would put in to take advantage of that trade?

peejaybee 11y ago
The technique is known as "running the stops." There's a description here: http://www.mypivots.com/dictionary/definition/121/running-the-stops http://www.mypivots.com/dictionary/definition/121/running-th... Basically, you don't know the stops are there; you make an educated guess.
- kasey_junk 11y ago
  Ok, if that is what the OP is describing than I guess I understand. But that trade does not have any part of it where the user of the stop loss order shows their hand to someone with inside access. Further, that trade is far from riskless to the people attempting it.

patio11 11y ago

the market maker selling order book information for high prices In 2015, at most exchanges dealing in US equities, the "market maker" is reading the same tape as everyone else hooked up to the exchange. Your scenario is literally selling access to the outdated output of an API to which non-outdated output is available for the usual subscription fee. This sounds far-fetched. I also think anyone who believes this scenario to be plausible has an idea of what "order book information" contains which is likely not an accurate representation of what they actually expose over the wire. (It's like folks who think Facebook sells customer data to advertisers. Seriously -- where's the API you can hit that does that? That needs to be a thing that exists in the world for this claim to be true.)

dmichulke 11y ago
The way I see it, the retail clients connect to a broker platform (IB, ..) and it is there that the above scenario can happen. The broker has an account in the exchange and uses this account to offset the global position of all his clients in his system. Using this information is generally possible for any intermediary (bank, broker, ..) To be clear, I am not saying everybody does it but I think that they can, they want to and regulatory oversight in the past could not even keep track of the total stock of a broker (see MF Global).