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His examples are just flat-out wonky. For instance, his key opener is a trader that is shocked to find out that when he buys tens of thousands of shares, the pr

His examples are just flat-out wonky. For instance, his key opener is a trader that is shocked to find out that when he buys tens of thousands of shares, the price, gasp, moves. Or another one, where the price moves before the guy hits enter. So either he's saying HFT's have trojan'd traders' workstations or ...? Instead of investigating this, he just writes more "ooh spooky" lines. At one point, he spins regulations requiring customer orders use the best price as a bad thing. Basically, you get the feeling from his book that he'd feel better if we went back to specialists on the floor with quotes in 1/8th, doing stuff you can understand as a human. That somehow, all this tech is bad. Hell he even makes fun of colocation - not adding multiple third-party providers of fibre to a connection to make it faster and less likely to break is obviously evil because... well he says it so ominously it must be true! He doesn't say HFT provides no value. He says everything's a huge conspiracy (involving, apparently, everyone) and HFT is stealing money. He fails to realise there's risk. Instead he makes it out like HFTs can just buy so fast that money falls out (that if they buy at one price, the only possible outcome is a sale at a higher price, that the market can never move in the other direction). He even gives them magical capabilities, implying that they can determine total order sizes from a single trade.

harmegido 11y ago
That part about Brad Katsuyama in the beginning made me so angry. Here's a 'hero' trader making literally millions of dollars per year, and he has no idea how the stock market actually works. It would be like UPS getting pissed off at Fedex for using this crazy contraption called the airplane to get freight overseas faster.
gammarator 11y ago
> where the price moves before the guy hits enter. Can you give a page # reference for this? In the scene I recall, the price is stable on all exchanges for minutes--until they hit enter on very small order to BATS, at which point the prices increase on the exchanges further away.
- MichaelGG 11y ago
  “I hadn’t even hit Execute,” says the hedge fund president. “I hadn’t done anything but put in a ticker symbol and a quantity to buy. And the market popped.” From location 142/505. And this is supposed to be the guy in charge of a $9B fund. The next page continues to state that all the big players (like Vanguard) have no clue how markets work. As if these evil HFT wizards live in another dimension where you can't just, I dunno, interview them. Or hire them. Or buy their companies. The lulz never stop. Next paragraph has an amazing quote about colocation "What the fuck??!! That's got to be illegal!" I guess if you act incredulous, insulted, upset, and bewildered, any mundane thing can turn into a sinister conspiracy. The sad part is that people are taking this book seriously, and politicians even seem to be "addressing" it as a campaigning point? Sigh.
sjg007 11y ago
The reason the price moved is because his trades were being front run. Otherwise the market had said there were 10k shares at X but when he tried to buy them he could not because an HFT bought those shares before he did.
- MichaelGG 11y ago
  No, no, no. The reason the price moved is because market makers saw the trades on one exchange, then updated their quotes on others. This is normal, regular, to-be-expected, good behaviours. Calling it front running just shows a lack of basic understanding. Or in Brad/Lewis case, probably an ulterior motive (selling Thor or promoting IEX). In fact, the book even shows it's not front running because Thor just delays orders so they hit all market makers simultaneously, so they cannot react. There's no "market", but a group of exchanges. The orders to a single exchange execute immediately; there's no way to do what you're saying. And across exchanges, this behavior is exactly like it should be. Here's how to verify: increase the times. Suppose the trader moving a big block sent an order to one market to buy up 10K shares. Then he sits for an hour. In that scenario, do we expect the price to stay the same? Of course not! Everyone sees the one order on that one market and reacts (canceling their outstanding quotes on other markets, for instance). That's all that's going on, except faster than humans can react. Why is it suddenly bad when a computer does it? Front running is well defined. Front running is not just acting like a normal intelligent person and updating your quotes (or even trading) after a large order executes.

harmegido 11y ago

That part about Brad Katsuyama in the beginning made me so angry. Here's a 'hero' trader making literally millions of dollars per year, and he has no idea how the stock market actually works. It would be like UPS getting pissed off at Fedex for using this crazy contraption called the airplane to get freight overseas faster.

gammarator 11y ago

> where the price moves before the guy hits enter. Can you give a page # reference for this? In the scene I recall, the price is stable on all exchanges for minutes--until they hit enter on very small order to BATS, at which point the prices increase on the exchanges further away.

MichaelGG 11y ago
“I hadn’t even hit Execute,” says the hedge fund president. “I hadn’t done anything but put in a ticker symbol and a quantity to buy. And the market popped.” From location 142/505. And this is supposed to be the guy in charge of a $9B fund. The next page continues to state that all the big players (like Vanguard) have no clue how markets work. As if these evil HFT wizards live in another dimension where you can't just, I dunno, interview them. Or hire them. Or buy their companies. The lulz never stop. Next paragraph has an amazing quote about colocation "What the fuck??!! That's got to be illegal!" I guess if you act incredulous, insulted, upset, and bewildered, any mundane thing can turn into a sinister conspiracy. The sad part is that people are taking this book seriously, and politicians even seem to be "addressing" it as a campaigning point? Sigh.

sjg007 11y ago

The reason the price moved is because his trades were being front run. Otherwise the market had said there were 10k shares at X but when he tried to buy them he could not because an HFT bought those shares before he did.

MichaelGG 11y ago
No, no, no. The reason the price moved is because market makers saw the trades on one exchange, then updated their quotes on others. This is normal, regular, to-be-expected, good behaviours. Calling it front running just shows a lack of basic understanding. Or in Brad/Lewis case, probably an ulterior motive (selling Thor or promoting IEX). In fact, the book even shows it's not front running because Thor just delays orders so they hit all market makers simultaneously, so they cannot react. There's no "market", but a group of exchanges. The orders to a single exchange execute immediately; there's no way to do what you're saying. And across exchanges, this behavior is exactly like it should be. Here's how to verify: increase the times. Suppose the trader moving a big block sent an order to one market to buy up 10K shares. Then he sits for an hour. In that scenario, do we expect the price to stay the same? Of course not! Everyone sees the one order on that one market and reacts (canceling their outstanding quotes on other markets, for instance). That's all that's going on, except faster than humans can react. Why is it suddenly bad when a computer does it? Front running is well defined. Front running is not just acting like a normal intelligent person and updating your quotes (or even trading) after a large order executes.