6 ms·

I think to understand most HFT market makers you have to understand how the markets pay. Most work on a maker taker model. Which means the trader who initiate

I think to understand most HFT market makers you have to understand how the markets pay. Most work on a maker taker model. Which means the trader who initiates the trade pays a small fee and the trader who is the passive side, the one who had their order in the market already, gets paid a small fee. as a side note there are inverted markets but lets leave those aside for now. This means to get paid you want to be at the top of the book, which means you are the first order to get filled when someone crosses the spread to get their order filled. the way priority is determined is first by price and second by time. So you have a very vested interest in being the first to cancel and move your order to the newest price level. Exchanges have tried introducing some order types to alleviate this constant send/cancel routine such as the order type "Hide not Slide" but people tend to get upset at these order types. Once you understand this, you start to realize that almost all HFT firms aren't quote stuffing, they are just jockeying for position at the top of the order book. I've never really understood quote stuffing, the same firm that quote stuffs still has to deal with those quotes coming back, its not like the market data has a flag saying ignore this quote change as its caused by your own quote stuffing. The way most markets are setup is that quotes come from gateways and multiple symbols all share a single gateway, usually assigned alphabetically, so A-F tickers all share the same gateway. This means that if someone is actually slowing down market data for say AAPL then they are also slowing down quotes for AMZN as well but again, the same firm that is quote stuffing also has to deal with their own mess so I can't see the benefit. Another comment complains that HFT firms don't like the fragmented market. That is true to a point, but keep in mind most HFT strategies only work due to the fragmented markets and RegNMS. So while they may not like 11 venues, they certainly want atleast 3 or 4, and many of hte top HFT firms run their own dark pools, adding to the problem:) As far as Hillary Clinton introducing legislation to curb HFT trading, she was the senator for New York. I'm dubious of her coming down hard on Wall Street.

dclusin 11y ago
Quote stuffing works because you know before hand which orders to filter out and don't need to expend resources considering them while everyone else does. An advanced player can build this into an FPGA to achieve greater performance.
- chollida1 11y ago
  :) Quote feeds don't work that simply. you still have the following issues: 1) Your quotes are slowed down as the gateway is spammed so legitimate quotes are delayed to you as well as everyone else. So you are still blind as to where the market is just like everyone else. 2) The quote feed doesn't just say, "hey a new order was added and guess what, its yours!!" You still need to parse the entire message to determine if the order matched one you sent, and even then it won't say its yours, it could be someone else putting in the same 100 share order at the NBBO. I'll admit this can be helped if you have your own number at the exchange to identify the order sender, but then this only applies to exchanges that release that information and even then you still need to parse the order to find out if its yours, so you're basically back to square one. Now you might say, well then I'll just submit orders far away from the market so that I can more easily identify them as my own, but by doing so you've already outed your self as a quote stuffer and its game over. It's one thing to rapidly CFO your orders to keep up with the NBBO and changes on other markets, its another to rapidly CFO orders out in the weeds. The latter will get your direct access yanked if abused. So ignoring your own quote spamming is almost impossible as you still need to assume every order might not be your own. FPGA's don't help at all here, except to make the parsing faster but they do that regardless of if someone is quote stuffing or not.
  - apple_II 11y ago
    Quote stuffing works because you can adjust your trade pressure indicators because you know the quote size and thus fair price is fake. It has nothing to do with overloading systems. To overload competitor systems, you would flicker a 100 share quote on an instrument you don't care about and trade on a different, potentially correlated, instrument.
brianwawok 11y ago
I am pretty sure if you have the tech to stuff, you have the same tech to see your own stuff coming back in a few ms...
- MoOmer 11y ago
  That timeframe is too long (few ms)
  - kasey_junk 11y ago
    Few ms is for the round trip from the exchange which is right in line with what exchanges tend to provide. I have it on good authority that Brian knows what he talks about in that regard...
    - MoOmer 11y ago
      My understanding was that he was talking about the 'few ms' to parse out whether or not this is you
      - brianwawok 11y ago
        Parsing is definitely not a few ms. Maybe using Apache and parsing an XML message with a bad XML library it is a few ms... grabbing a message off a Solar Flare card with some good code is a few micros. if you are in hardware on your NIC you can be even faster. Time from message sent to seeing back on marketdata feed can be a few ms, or it can be faster. Depends on exchange and traffic. Few ms didn't use to be totally uncommon on CME, but it may be closer to 1ms in the 95th percentile these days, for sure.
blazespin 11y ago
Hillary will come down on the part of the market that hasn't contributed to her campaigns. Structurally, this means she will make it good for GS who will help write the legislation but bad for anyone else that doesn't belong to the financial hegemony. Politicians say they're protecting the innocent, but really they're just tipping the scales for whoever is backing them. This is how they do.
- arbitrage 11y ago
  What you are describing is not reality.
  - pg_is_a_butt 11y ago
    yes, what you are describing is not reality.
  - jsprogrammer 11y ago
    What do you mean? GS can already bend the FBI and NY State to their will: https://en.wikipedia.org/wiki/Sergey_Aleynikov https://en.wikipedia.org/wiki/Sergey_Aleynikov
- gooseus 11y ago
  Too true... which is why I'm supporting Lawrence Lessig's Democratic bid which is based on fixing this single issue: https://lessig2016.us/ https://lessig2016.us/ Might be futile effort though since the DNC isn't even inviting him to the debates despite his having raised 1M in a single month.
norea-armozel 11y ago
Oddly this reminds me of station trading in Eve Online where users fight over the price of their goods based on mere cents on an ISK.
- WhoBeI 11y ago
  Ah, yes, good old Jita. In Eve market bots aren't allowed though, they are considered unfair, so there is some difference.
  - rancur 11y ago
    so a game that's more fair than real life. weird....
  - norea-armozel 11y ago
    Thank God too since only those with the wherewithal would bother with building trading toons. I did it for fun on the side while I missioned for the bulk of my ISK (boring as hell).
jessaustin 11y ago
So you have a very vested interest in being the first to cancel and move your order to the newest price level. ISTM this would only work in one direction? That is, if you're moving closer to the other side, you can just put in a new order. Cancelling the old one isn't such a priority because no one would pass up the more enticing new price to get to the old price. If they did, free money for you! If this phenomenon isn't clear from the data, that would argue against the hypothesis that maker-taker accounts for the cancellations. IANAHFTrader.
- lmm 11y ago
  You still want to cut your exposure. If you were resting a bid for 100 shares at 99 for 100 shares and an offer for 100 shares at 100, and the market's falling, then sure your highest priority is cancelling your bid at 99 and putting in your new one at 98, as well as putting in your new offer at 99. But you also want to cancel your old offer sharpish, otherwise if the price shoots up to 101 then you'll end up selling 200 shares instead of 100 and exposing yourself to more risk than you intended, potentially exceeding your position limits etc. Also most of the cost is fixed. If you've already built a super-fast cancelling system that can cancel an order in 8 microseconds, there's no value in running a slower cancelling system in parallel for your less important trades, you'd just run all your cancels through the same system.
jsprogrammer 11y ago
>This means that if someone is actually slowing down market data for say AAPL then they are also slowing down quotes for AMZN as well but again Why should one symbol be tied to a completely unrelated symbol? This doesn't engender confidence in the architecture of these markets (which markets are you referring to, specifically)? >you start to realize that almost all HFT firms aren't quote stuffing, they are just jockeying for position at the top of the order book. I'm not sure this is an important distinction. What is quote stuffing but position jockeying?
- consz 11y ago
  Equity exchanges run the matching engines for a ton of symbols on one core. For example, Arca load balances 3000+ US equities across four cores -- island does it across a 24 core machine, but the outgoing message queue is shared across all 24 cores, so any increase in message rates from one core slows down the outgoing traffic from all matching engines.

dclusin 11y ago

Quote stuffing works because you know before hand which orders to filter out and don't need to expend resources considering them while everyone else does. An advanced player can build this into an FPGA to achieve greater performance.

chollida1 11y ago
:) Quote feeds don't work that simply. you still have the following issues: 1) Your quotes are slowed down as the gateway is spammed so legitimate quotes are delayed to you as well as everyone else. So you are still blind as to where the market is just like everyone else. 2) The quote feed doesn't just say, "hey a new order was added and guess what, its yours!!" You still need to parse the entire message to determine if the order matched one you sent, and even then it won't say its yours, it could be someone else putting in the same 100 share order at the NBBO. I'll admit this can be helped if you have your own number at the exchange to identify the order sender, but then this only applies to exchanges that release that information and even then you still need to parse the order to find out if its yours, so you're basically back to square one. Now you might say, well then I'll just submit orders far away from the market so that I can more easily identify them as my own, but by doing so you've already outed your self as a quote stuffer and its game over. It's one thing to rapidly CFO your orders to keep up with the NBBO and changes on other markets, its another to rapidly CFO orders out in the weeds. The latter will get your direct access yanked if abused. So ignoring your own quote spamming is almost impossible as you still need to assume every order might not be your own. FPGA's don't help at all here, except to make the parsing faster but they do that regardless of if someone is quote stuffing or not.
- apple_II 11y ago
  Quote stuffing works because you can adjust your trade pressure indicators because you know the quote size and thus fair price is fake. It has nothing to do with overloading systems. To overload competitor systems, you would flicker a 100 share quote on an instrument you don't care about and trade on a different, potentially correlated, instrument.

brianwawok 11y ago

I am pretty sure if you have the tech to stuff, you have the same tech to see your own stuff coming back in a few ms...

MoOmer 11y ago
That timeframe is too long (few ms)
- kasey_junk 11y ago
  Few ms is for the round trip from the exchange which is right in line with what exchanges tend to provide. I have it on good authority that Brian knows what he talks about in that regard...
  - MoOmer 11y ago
    My understanding was that he was talking about the 'few ms' to parse out whether or not this is you
    - brianwawok 11y ago
      Parsing is definitely not a few ms. Maybe using Apache and parsing an XML message with a bad XML library it is a few ms... grabbing a message off a Solar Flare card with some good code is a few micros. if you are in hardware on your NIC you can be even faster. Time from message sent to seeing back on marketdata feed can be a few ms, or it can be faster. Depends on exchange and traffic. Few ms didn't use to be totally uncommon on CME, but it may be closer to 1ms in the 95th percentile these days, for sure.

blazespin 11y ago

Hillary will come down on the part of the market that hasn't contributed to her campaigns. Structurally, this means she will make it good for GS who will help write the legislation but bad for anyone else that doesn't belong to the financial hegemony. Politicians say they're protecting the innocent, but really they're just tipping the scales for whoever is backing them. This is how they do.

arbitrage 11y ago
What you are describing is not reality.
- pg_is_a_butt 11y ago
  yes, what you are describing is not reality.
- jsprogrammer 11y ago
  What do you mean? GS can already bend the FBI and NY State to their will: https://en.wikipedia.org/wiki/Sergey_Aleynikov https://en.wikipedia.org/wiki/Sergey_Aleynikov
gooseus 11y ago
Too true... which is why I'm supporting Lawrence Lessig's Democratic bid which is based on fixing this single issue: https://lessig2016.us/ https://lessig2016.us/ Might be futile effort though since the DNC isn't even inviting him to the debates despite his having raised 1M in a single month.

norea-armozel 11y ago

Oddly this reminds me of station trading in Eve Online where users fight over the price of their goods based on mere cents on an ISK.

WhoBeI 11y ago
Ah, yes, good old Jita. In Eve market bots aren't allowed though, they are considered unfair, so there is some difference.
- rancur 11y ago
  so a game that's more fair than real life. weird....
- norea-armozel 11y ago
  Thank God too since only those with the wherewithal would bother with building trading toons. I did it for fun on the side while I missioned for the bulk of my ISK (boring as hell).

jessaustin 11y ago

So you have a very vested interest in being the first to cancel and move your order to the newest price level. ISTM this would only work in one direction? That is, if you're moving closer to the other side, you can just put in a new order. Cancelling the old one isn't such a priority because no one would pass up the more enticing new price to get to the old price. If they did, free money for you! If this phenomenon isn't clear from the data, that would argue against the hypothesis that maker-taker accounts for the cancellations. IANAHFTrader.

lmm 11y ago
You still want to cut your exposure. If you were resting a bid for 100 shares at 99 for 100 shares and an offer for 100 shares at 100, and the market's falling, then sure your highest priority is cancelling your bid at 99 and putting in your new one at 98, as well as putting in your new offer at 99. But you also want to cancel your old offer sharpish, otherwise if the price shoots up to 101 then you'll end up selling 200 shares instead of 100 and exposing yourself to more risk than you intended, potentially exceeding your position limits etc. Also most of the cost is fixed. If you've already built a super-fast cancelling system that can cancel an order in 8 microseconds, there's no value in running a slower cancelling system in parallel for your less important trades, you'd just run all your cancels through the same system.

jsprogrammer 11y ago

>This means that if someone is actually slowing down market data for say AAPL then they are also slowing down quotes for AMZN as well but again Why should one symbol be tied to a completely unrelated symbol? This doesn't engender confidence in the architecture of these markets (which markets are you referring to, specifically)? >you start to realize that almost all HFT firms aren't quote stuffing, they are just jockeying for position at the top of the order book. I'm not sure this is an important distinction. What is quote stuffing but position jockeying?

consz 11y ago
Equity exchanges run the matching engines for a ton of symbols on one core. For example, Arca load balances 3000+ US equities across four cores -- island does it across a 24 core machine, but the outgoing message queue is shared across all 24 cores, so any increase in message rates from one core slows down the outgoing traffic from all matching engines.