3 ms·

This is a fairly typical Nanex piece: start with loaded language before you've made your case, be "data-centric" yet leave out important details, intentionally

by sambe 11y ago

This is a fairly typical Nanex piece: start with loaded language before you've made your case, be "data-centric" yet leave out important details, intentionally exclude obvious details. By now this is all explained publicly many times over and Nanex are definitely aware of it. In the follow-up they admit that by not being stupid you get the fill you want. Hence not rigged or stolen, just that naive execution is a poor choice: same as in unfragmented markets, same as before HFT. A good reference is http://www.amazon.com/Flash-Boys-Insiders-Perspective-High-Frequency-ebook/dp/B00P0QI2M2 http://www.amazon.com/Flash-Boys-Insiders-Perspective-High-F....

RachelF 11y ago
Why can you cancel orders in a few milliseconds? It looks very much like a great opportunity to rig the marker.
- fleitz 11y ago
  Because you may no longer wish to sell at that price. Similar to the way that if you have a house on the market and someone makes an offer you don't have to accept it.
  - greghatch 11y ago
    It's not reasonable to assume that a human changed their mind that quickly. The idea of putting out an offer with the intention of changing your mind and letting a computer handle that process cements the point that its not a change of mind here, more likely an intentional misrepresentation of buying pressure - otherwise what's the point? This is not what changing someone's mind looks like.
    - fleitz 11y ago
      The point is to sell your shares at the highest price possible. Computers help you do that by reacting quickly to market information. If someone sends a buy order to the exchange that quote is listed on for the same amount of shares, it will fill the entire order. What is happening here is that there are multiple exchanges and when the algo sees an order come in on one exchange it cancels orders on other exchanges quickly disseminating price information as liquidity evaporates at the current price. The point of price is to disseminate information about the supply and demand of a good. When demand goes up price increases. The buyer is buying because he thinks the price will be higher in the future. Both are motivated by profit, at a certain point the buyer will no longer be interested in buying at that price. The buyer obviously has a piece of information the algo doesn't and is equally trying to capitalize on the algos lack of knowledge of that information. In the case in point the order was ~60% filled. The price the order was submitted at reflects the 'current' demand, not the demand after the order is submitted. It's pretty good to get a 60% fill when you are buying 83% of the currently available stock.
    - omgtehlion 11y ago
      > It's not reasonable to assume that a human changed their mind that quickly Those orders were resting there for a long time, it was not flashing. Like you selling two adjacent houses and see a buyer purchasing one and wanting to purchase another. You understand that he/she wants the house really badly and increase the price for the second house.
- signet 11y ago
  Market makers put lots of quotes (orders) out on the various exchanges hoping to buy low and sell high, collecting the spread between the two. These days spreads are very small so market makers have to rely on automated quoting in order to make a profit. A side effect of this is that when markets are moving quickly the algorithms tend to take a conservative approach so the firm doesn't end up extremely long or short in a position. So when someone comes in and tries to buy up all the open orders at once they'll cancel their orders on other exchanges that haven't been executed yet so they can reprice to reflect the increased demand. The phantom liquidity really isn't much of a mystery when you look at it this way.
panic 11y ago
Which important details are they leaving out?

by sambe 11y ago

RachelF 11y ago

Why can you cancel orders in a few milliseconds? It looks very much like a great opportunity to rig the marker.

fleitz 11y ago
Because you may no longer wish to sell at that price. Similar to the way that if you have a house on the market and someone makes an offer you don't have to accept it.
- greghatch 11y ago
  It's not reasonable to assume that a human changed their mind that quickly. The idea of putting out an offer with the intention of changing your mind and letting a computer handle that process cements the point that its not a change of mind here, more likely an intentional misrepresentation of buying pressure - otherwise what's the point? This is not what changing someone's mind looks like.
  - fleitz 11y ago
    The point is to sell your shares at the highest price possible. Computers help you do that by reacting quickly to market information. If someone sends a buy order to the exchange that quote is listed on for the same amount of shares, it will fill the entire order. What is happening here is that there are multiple exchanges and when the algo sees an order come in on one exchange it cancels orders on other exchanges quickly disseminating price information as liquidity evaporates at the current price. The point of price is to disseminate information about the supply and demand of a good. When demand goes up price increases. The buyer is buying because he thinks the price will be higher in the future. Both are motivated by profit, at a certain point the buyer will no longer be interested in buying at that price. The buyer obviously has a piece of information the algo doesn't and is equally trying to capitalize on the algos lack of knowledge of that information. In the case in point the order was ~60% filled. The price the order was submitted at reflects the 'current' demand, not the demand after the order is submitted. It's pretty good to get a 60% fill when you are buying 83% of the currently available stock.
  - omgtehlion 11y ago
    > It's not reasonable to assume that a human changed their mind that quickly Those orders were resting there for a long time, it was not flashing. Like you selling two adjacent houses and see a buyer purchasing one and wanting to purchase another. You understand that he/she wants the house really badly and increase the price for the second house.
signet 11y ago
Market makers put lots of quotes (orders) out on the various exchanges hoping to buy low and sell high, collecting the spread between the two. These days spreads are very small so market makers have to rely on automated quoting in order to make a profit. A side effect of this is that when markets are moving quickly the algorithms tend to take a conservative approach so the firm doesn't end up extremely long or short in a position. So when someone comes in and tries to buy up all the open orders at once they'll cancel their orders on other exchanges that haven't been executed yet so they can reprice to reflect the increased demand. The phantom liquidity really isn't much of a mystery when you look at it this way.

panic 11y ago

Which important details are they leaving out?