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In what way is he incentivized? What advantage does he get from waiting till the last possible moment? He has no clue what the current bids are, so whether he b
by orclev 9y ago
In what way is he incentivized? What advantage does he get from waiting till the last possible moment? He has no clue what the current bids are, so whether he bids at the start or the end he still has exactly as much information. He'll have more information after the bidding closes and the winner is announced of course, but by then it's too late, only thing he can do then is participate in the next round of bidding, but that puts him right back in the situation he was in before where until the close the only thing he knows is what the previous winning bid was.
- harryh 9y agoThere are lots of other forms of information in the world other than the orders in a closed auction. Serious question: Why do people always forget this? This comes up ALL THE TIME when people talk about quantized auction times.
- osrec 9y agoYour definition of a quantised auction is a bit different to mine. In my definition, you submit at the start and get an outcome at the end. You have no ability to modify the contents of the auction during the auction itself. I feel what you're describing is still a continuous auction... I mean if you can continually modify your order, or indeed submit at different times, at which point in time do you do your matching?
- harryh 9y agoTBH I don't really understand what you are trying to say, but if you submit at "the start" and that is a single moment in time then participants have every incentive to wait until the last possible microsecond before that moment to determine their bids/asks.
- URSpider94 9y agoThere always has to be a moment when you lock in the bids, and a non-infinitescimal window before that time when bids are accepted. As long as that window has a start and an end, there will still be traders who write algorithms to deliver their orders at the final microsecond the window is open. 99.999999% of the time, nothing happens. But, in that one case where the articles of impeachment are released just before the window closes, those algos will pay for themselves a billion times over. Separating the last moment when bids are accepted from the time when the auction closes has no practical effect, other than just a simple time delay.
- sseveran 9y agoFirst off a trader with the results of all previous auctions should be able to make some educated estimates about what the auction contains. Secondly prices are formed by incorporating information into the price. Supply and demand information is only one type of information. Say that we have an auction expiring at 10AM. At 9:59:59.500 Goldman's equity research desk announces that it is downgrading a security. Our trader can now in the remaining 500 milliseconds place aggressive asks to take advantage of what is likely to be a downward price movement. Other's in the auction with resting bids are now going to trade into a price that is moving lower. And arguing against colocation will not help here. There will always be traders who are able to place themselves at whatever the closest allowed point, whether inside the exchange or not.
- Retric 9y agoSure, but this is combined with all other information over that minute/hour. Suppose you had exactly 1 price exchange per day, now yes you might gain incite waiting for that last millisecond, but you have to weigh all other information over the day, approximate it's changes in the price, and then make a bid. Further if the ticks are say every 15 minutes it's easy to not disclose information on a tick boundary. (Simply because of relative time frames.)
- deleted 9y ago[deleted]
- harryh 9y agoFurther if the ticks are say every 15 minutes it's easy to not disclose information on a tick boundary. This is not true. Lots of things are happening in the world all of the time. You can't tell everyone to stop what they are doing every 15 minutes and wait for the stock market auction to close.
- Retric 9y agoIf ticks are 15 minutes, then 99.9% of all things don't happen in that last 1/2 second. Compared to the current situation where every single piece of news is a race for 1/1,000th of a second head starts. So rather than a race vs time, it's a race to better interpret information. And considering that's basically the point of the stock market in the first place I would call that a net win.
- stale2002 9y ago"What advantage does he get from waiting till the last possible moment? " He gets more advantage from outside information sources. You are correct that you cannot gain info from the bids that are happening on THAT market, but you can instead get bid/price info on OTHER markets/auctions.