3 ms·

It's not a dumb idea, but you certainly should give up. The high frequency game is one you will lose, because many of the large investment banks have relationsh

by nudge 16y ago

It's not a dumb idea, but you certainly should give up. The high frequency game is one you will lose, because many of the large investment banks have relationships with the stock exchanges allowing them to get information faster - and respond to that information faster - than other traders. See this NYT article (including the graphic) for more: http://www.nytimes.com/2009/07/24/business/24trading.html http://www.nytimes.com/2009/07/24/business/24trading.html

zemblamatic 16y ago
Attempting to do this through (presumably) a retail brokers public API is doomed and dumb. The only serious way to do this is with sponsored access via a tier 1 participant. This is quite obviously not something for dabblers
vecter 16y ago
That article is 85% hype. It reads like an editorial, not a news article. What exactly do you mean by "relationships with the stock exchanges"? If by that, you mean they pay the exchanges for colocation (which anyone can do), then yes, I would agree. If you mean the banks and exchanges are cronies and that the exchanges give the banks free perks because they're golf buddies, then that's wrong. The edge you are talking about in terms of "previewing orders" seems to refer to flash orders. Those no longer exist (which I think is good), but I doubt they were a high source of revenue or edge, given their low volume relative to the rest of market activity.
- nudge 16y ago
  I meant colocation - the costs of which I assume to be too high for individuals - and flash orders - which I did not know were no longer operating. My general point was just that the playing field is not exactly level - the banks have resources the individual does not have, if speed is the game you're playing. I didn't mean anything at all to do with personal relationships.
- wglb 16y ago
  There are several problems with this article; some errors (or simply incorrect terminology) and some things that are no longer true. There is a difference between "algo" trading, also known as "program trading" and HFT. The algorithms in HFT kind of boil down to "get it there fast". The thing that is no longer true is the flash orders (pointed out elsewhere in these comments) are no longer allowed. This is the reference to flash orders. The trick to being a HFT is to be big enough and fast enough that the exchanges pay you to trade. Thus, you don't necessarily have to make a profit on these trades. Then you are really a liquidity provider. Being an HFT is about size, speed and execution mostly, and ideas not so much. My advice is to not go after that market. It is likely that you are three or five orders of magnitude too small. Other strategies are more interesting for the small guy. Maybe become a MFT (medium frequency trader), whatever that is.
kranner 16y ago
The old metaphor of 'picking pennies in front of a steamroller' still holds in high-frequency trading. Except that without (at least) a few million in cash deposited with a prime broker you need to pick up a lot more pennies than a bank. (You'll be giving a lot back on a day-to-day basis)
arethuza 16y ago
If I understood that article correctly it looks like the "high frequency" traders pay the exchanges to get access to trades before everyone else. So it's not really the fact that these guys are trading at high frequency that gives them the edge (although that is necessary) it's the fact that they get to operate a few milliseconds ahead of the rest of the market. I wonder how much much you have to pay to get that access?
cynicalkane 16y ago
It seems like you're describing flash trading, in which some customers pay to receive market data a split second before everyone else. In particular, this is not the same as co-locating to reduce latency: it's programatically implemented on the exchange side. Flash trading no longer exists on any major exchange. AFIAK only the relatively minor exchange Direct Edge has them. http://en.wikipedia.org/wiki/Flash_order http://en.wikipedia.org/wiki/Flash_order

by nudge 16y ago

zemblamatic 16y ago

Attempting to do this through (presumably) a retail brokers public API is doomed and dumb. The only serious way to do this is with sponsored access via a tier 1 participant. This is quite obviously not something for dabblers

vecter 16y ago

That article is 85% hype. It reads like an editorial, not a news article. What exactly do you mean by "relationships with the stock exchanges"? If by that, you mean they pay the exchanges for colocation (which anyone can do), then yes, I would agree. If you mean the banks and exchanges are cronies and that the exchanges give the banks free perks because they're golf buddies, then that's wrong. The edge you are talking about in terms of "previewing orders" seems to refer to flash orders. Those no longer exist (which I think is good), but I doubt they were a high source of revenue or edge, given their low volume relative to the rest of market activity.

nudge 16y ago
I meant colocation - the costs of which I assume to be too high for individuals - and flash orders - which I did not know were no longer operating. My general point was just that the playing field is not exactly level - the banks have resources the individual does not have, if speed is the game you're playing. I didn't mean anything at all to do with personal relationships.
wglb 16y ago
There are several problems with this article; some errors (or simply incorrect terminology) and some things that are no longer true. There is a difference between "algo" trading, also known as "program trading" and HFT. The algorithms in HFT kind of boil down to "get it there fast". The thing that is no longer true is the flash orders (pointed out elsewhere in these comments) are no longer allowed. This is the reference to flash orders. The trick to being a HFT is to be big enough and fast enough that the exchanges pay you to trade. Thus, you don't necessarily have to make a profit on these trades. Then you are really a liquidity provider. Being an HFT is about size, speed and execution mostly, and ideas not so much. My advice is to not go after that market. It is likely that you are three or five orders of magnitude too small. Other strategies are more interesting for the small guy. Maybe become a MFT (medium frequency trader), whatever that is.

kranner 16y ago

The old metaphor of 'picking pennies in front of a steamroller' still holds in high-frequency trading. Except that without (at least) a few million in cash deposited with a prime broker you need to pick up a lot more pennies than a bank. (You'll be giving a lot back on a day-to-day basis)

arethuza 16y ago

If I understood that article correctly it looks like the "high frequency" traders pay the exchanges to get access to trades before everyone else. So it's not really the fact that these guys are trading at high frequency that gives them the edge (although that is necessary) it's the fact that they get to operate a few milliseconds ahead of the rest of the market. I wonder how much much you have to pay to get that access?

cynicalkane 16y ago

It seems like you're describing flash trading, in which some customers pay to receive market data a split second before everyone else. In particular, this is not the same as co-locating to reduce latency: it's programatically implemented on the exchange side. Flash trading no longer exists on any major exchange. AFIAK only the relatively minor exchange Direct Edge has them. http://en.wikipedia.org/wiki/Flash_order http://en.wikipedia.org/wiki/Flash_order