7 ms·

At least in the abstract this study doesn't seem to differentiate between market making and more agressive HTF strategies, furthermore the firms involved and st

by msy 16y ago

At least in the abstract this study doesn't seem to differentiate between market making and more agressive HTF strategies, furthermore the firms involved and strategies they are running aren't listed. The potential bias in both these factors is enormous. Given there is significant empirical evidence that at least some HFT strategies have involved market manipulation and in one notable example, the temporary total destabilisation of the entire market I'm extremely dubious as to the origins and motivations behind this paper and the data used. That the author appears to run a high-freq quant fund hardly helps: http://www.linkedin.com/pub/jonathan-brogaard/22/b04/b60 http://www.linkedin.com/pub/jonathan-brogaard/22/b04/b60

yummyfajitas 16y ago
Given there is significant empirical evidence that at least some HFT strategies have involved market manipulation and in one notable example, the temporary total destabilisation of the entire market... [citation (or even a few google keywords) needed]
- jbarham 16y ago
  Try these keywords: "flash crash" HFT
  - yummyfajitas 16y ago
    The first page of google results provides no empirical evidence that either HFT involves market manipulation or that HFT caused the flash crash. All it provides is speculation.
    - msy 16y ago
      Ask and ye shall receive. http://www.zerohedge.com/article/its-not-market-its-hft-crop-circle-crime-scene-further-evidence-quote-stuffing-manipulation- http://www.zerohedge.com/article/its-not-market-its-hft-crop... If detailed, fully sourced graphs, demonstrating deliberate use of quote stuffing to essentially jam markets isn't good enough for you I suggest you consider carefully your own bias.
      - yummyfajitas 16y ago
        How do the graphs demonstrate deliberate use of quote stuffing, let alone market manipulation or a link between HFT and the flash crash? Rather than repeating myself, I'll link to my own comment on that exact article explaining why I'm almost certain those graphs are not deliberate. http://news.ycombinator.com/item?id=1564445 http://news.ycombinator.com/item?id=1564445 Also from your FT article: Regulators such as the SEC are still puzzling over exactly what caused the flash crash. (Full disclosure: I work in HFT.)
        msy 16y ago
        Are you kidding me? Are you honestly denying there's no connection between the stuffing of the order book with hundreds of thousands of orders and the crash? Please. As for whether it's deliberate - I think you're right in the sense that something acted in a way which its creators did not intend if you think quote stuffing is a legitimate trading strategy we're clearly poles apart in what purpose we believe markets are meant to serve. I hear a lot of about how HFT creates liquidity and reduces volatility without much reference to quite what time periods they're talking about, what you don't hear them say is what it does to liquidity volatility, particularly in nervous markets and around announcements. I've done HFT too, I understand the game, the difference is I realise it's at best an illegitimate quirk of technology and at worst legalised front-running and the turning of the execution environment into a trading weapon.
        yummyfajitas 16y ago
        Are you honestly denying there's no connection between the stuffing of the order book with hundreds of thousands of orders and the crash? Perhaps you missed it, but most of the graphs in your link are from July. The flash crash was May 6. So unless you want to assert that the flash crash caused the weird graphs, no, I don't see the connection. That's not to say you couldn't find similar graphs on May 6 - I guarantee that you could. In fact, you can find graphs like this almost every day (pre and post crash) if you look hard enough. And yet, we don't have flash crashes every day. We've only had two (the first was in 1962 http://online.wsj.com/article/SB10001424052748703957604575272791511469272.html http://online.wsj.com/article/SB1000142405274870395760457527... ). So yeah, I do expect you to do more than point out an everyday occurrence and then assert that it (and not thousands of other things, including things which don't happen every day) caused a once-in-a-lifetime event. I expect, I dunno, correlations at the very least. Maybe even a mechanism, rather than just a theory that "I don't understand everyday event A or once in a lifetime event B, they must be related."
    - msy 16y ago
      and in case that source isn't reliable enough for you, try the FT http://www.ft.com/cms/s/0/b2373a36-b6c2-11df-b3dd-00144feabdc0.html http://www.ft.com/cms/s/0/b2373a36-b6c2-11df-b3dd-00144feabd... HFT has chilling associations with the “flash crash” of May 6, when rapid, computer-driven orders were seen as a main culprit in sending the Dow Jones Industrial Average down by 1,000 points in 20 minutes – a fall unprecedented in its depth and speed. “We want to be able to look them in the eye and say the market is fair. And unfortunately, at the moment it’s quite difficult to do that.”
  - gxti 16y ago
    My understanding was that an issue with quotes lagging behind at the NYSE precipitated a kind of "order avalanche" where NYSE's quotes appeared to be better than the rest of the market, thus inviting more order flow, thus pushing their delay even further back until the NBBO spread was big enough to kick a spaceship through. I'm not an expert but I do love studying all sorts of systems and this seems like an extremely plausible explanation. Pinning it on the HFT bogeyman, less so. http://www.theatlantic.com/science/archive/2010/08/nyse-tech-delays-contributed-to-the-may-6-flash-crash/61987/ http://www.theatlantic.com/science/archive/2010/08/nyse-tech...

by msy 16y ago

yummyfajitas 16y ago

Given there is significant empirical evidence that at least some HFT strategies have involved market manipulation and in one notable example, the temporary total destabilisation of the entire market... [citation (or even a few google keywords) needed]

jbarham 16y ago
Try these keywords: "flash crash" HFT
- yummyfajitas 16y ago
  The first page of google results provides no empirical evidence that either HFT involves market manipulation or that HFT caused the flash crash. All it provides is speculation.
  - msy 16y ago
    Ask and ye shall receive. http://www.zerohedge.com/article/its-not-market-its-hft-crop-circle-crime-scene-further-evidence-quote-stuffing-manipulation- http://www.zerohedge.com/article/its-not-market-its-hft-crop... If detailed, fully sourced graphs, demonstrating deliberate use of quote stuffing to essentially jam markets isn't good enough for you I suggest you consider carefully your own bias.
    - yummyfajitas 16y ago
      How do the graphs demonstrate deliberate use of quote stuffing, let alone market manipulation or a link between HFT and the flash crash? Rather than repeating myself, I'll link to my own comment on that exact article explaining why I'm almost certain those graphs are not deliberate. http://news.ycombinator.com/item?id=1564445 http://news.ycombinator.com/item?id=1564445 Also from your FT article: Regulators such as the SEC are still puzzling over exactly what caused the flash crash. (Full disclosure: I work in HFT.)
      - msy 16y ago
        Are you kidding me? Are you honestly denying there's no connection between the stuffing of the order book with hundreds of thousands of orders and the crash? Please. As for whether it's deliberate - I think you're right in the sense that something acted in a way which its creators did not intend if you think quote stuffing is a legitimate trading strategy we're clearly poles apart in what purpose we believe markets are meant to serve. I hear a lot of about how HFT creates liquidity and reduces volatility without much reference to quite what time periods they're talking about, what you don't hear them say is what it does to liquidity volatility, particularly in nervous markets and around announcements. I've done HFT too, I understand the game, the difference is I realise it's at best an illegitimate quirk of technology and at worst legalised front-running and the turning of the execution environment into a trading weapon.
        yummyfajitas 16y ago
        Are you honestly denying there's no connection between the stuffing of the order book with hundreds of thousands of orders and the crash? Perhaps you missed it, but most of the graphs in your link are from July. The flash crash was May 6. So unless you want to assert that the flash crash caused the weird graphs, no, I don't see the connection. That's not to say you couldn't find similar graphs on May 6 - I guarantee that you could. In fact, you can find graphs like this almost every day (pre and post crash) if you look hard enough. And yet, we don't have flash crashes every day. We've only had two (the first was in 1962 http://online.wsj.com/article/SB10001424052748703957604575272791511469272.html http://online.wsj.com/article/SB1000142405274870395760457527... ). So yeah, I do expect you to do more than point out an everyday occurrence and then assert that it (and not thousands of other things, including things which don't happen every day) caused a once-in-a-lifetime event. I expect, I dunno, correlations at the very least. Maybe even a mechanism, rather than just a theory that "I don't understand everyday event A or once in a lifetime event B, they must be related."
  - msy 16y ago
    and in case that source isn't reliable enough for you, try the FT http://www.ft.com/cms/s/0/b2373a36-b6c2-11df-b3dd-00144feabdc0.html http://www.ft.com/cms/s/0/b2373a36-b6c2-11df-b3dd-00144feabd... HFT has chilling associations with the “flash crash” of May 6, when rapid, computer-driven orders were seen as a main culprit in sending the Dow Jones Industrial Average down by 1,000 points in 20 minutes – a fall unprecedented in its depth and speed. “We want to be able to look them in the eye and say the market is fair. And unfortunately, at the moment it’s quite difficult to do that.”
- gxti 16y ago
  My understanding was that an issue with quotes lagging behind at the NYSE precipitated a kind of "order avalanche" where NYSE's quotes appeared to be better than the rest of the market, thus inviting more order flow, thus pushing their delay even further back until the NBBO spread was big enough to kick a spaceship through. I'm not an expert but I do love studying all sorts of systems and this seems like an extremely plausible explanation. Pinning it on the HFT bogeyman, less so. http://www.theatlantic.com/science/archive/2010/08/nyse-tech-delays-contributed-to-the-may-6-flash-crash/61987/ http://www.theatlantic.com/science/archive/2010/08/nyse-tech...