3 ms·

Some people I work with (at a HFT firm), joke that it's someone warming up their JVM by placing clearly unfillable IOCs ;-). My personal pet theory (for some o

by smanek 16y ago

Some people I work with (at a HFT firm), joke that it's someone warming up their JVM by placing clearly unfillable IOCs ;-). My personal pet theory (for some of the graphs) is that someone is just loading up the book at many price levels with unlikely-to-be-filled limit orders to gain priority (for the rare occasions the market makes big swings). It's a perfectly legit tactic, that would help the market by providing liquidity and support against other players' big orders. Some other graphs have perfectly innocuous explanations - for example someone probing the depth of the book or filling a big order piece-by-piece. FWIW, you can't really pull a serious DoS against most exchanges. Most decent ones have pretty strict rolling-window rate limits. And no other firm is going to have much trouble processing the maximum number of orders one firm is allowed to place within their limit. Even if you could get away with a DoS once (and I suspect you could), who's going to risk it? The exchange knows who you are and will punish you when you do.

thesnark 16y ago
Did you read about this: http://www.businessinsider.com/huge-first-high-frequency-trading-firm-is-charged-with-quote-stuffing-and-manipulation-2010-9 http://www.businessinsider.com/huge-first-high-frequency-tra...
- yummyfajitas 16y ago
  Trillium was not DOSing the market, they were layering.
  - d_c 16y ago
    What does that mean exactly?
    - yummyfajitas 16y ago
      A more complete explanation than I can give: http://blogs.reuters.com/felix-salmon/2010/09/14/trillium-wasnt-quote-stuffing/ http://blogs.reuters.com/felix-salmon/2010/09/14/trillium-wa... Basically, it's submitting hidden sell orders at a high price, and submitting a lot of visible buy orders in the hopes that other people pile on and bid the price up to your sell order. It's market manipulation, and it wouldn't even work if you DOSed other people's computers. The goal is to fool them into filling your orders at unfavorable prices - a DOS would simply shut them down.
    - noname123 16y ago
      When you look at quotes on Yahoo Finance, you are not looking at the whole quotebook. The whole quotebook lists the whole bid side and ask side. e.g., Bid Size Bid Ask Ask Size 100 4 4.02 50 50 3.99 4.03 200 The whole quotebook could stretch quite long depending on the numbers of buyers and sellers on the market. Algo's and human traders use the quote books to analyze sell or buy interest. For example, if the quote book has a lot of bid size and very little ask size, it means that there are a lot of buyers than sellers which could prompt traders to buy the stock at a much more expensive price in hopes that the stock will go up due to the demand. However, what Trillium did was that they stuffed the quote book with a bunch of buy orders just slightly out of money to make for the appearance of more buy interest. e.g., Bid Size Bid Ask Ask Size 100 4 4.02 50 50 3.99 4.03 200 300 3.98* 300 3.98* 300 3.97* Other algo machines or human traders will now jump to buy the stock at $4.02 (which Trillium is short selling) in hopes that the buy side's demand will propel the stock past $4.02. But what happens next as soon Trillium short sells $4.02, they will cancel the bid orders. Now the buy-side interest is back to normal, un-inflated side and whoever bought the stock at the inflated price is left holding the bag. The pricing of stock will go down due to reduced buy interest, Trillium buys to cover at $4, netting $0.02/share profit.
CGamesPlay 16y ago
Yes, but if every other firm besides you is doing a DoS at their maximum rate, then you have the distinct disadvantage of having one more source of quotes to deal with than every other firm.
- smanek 16y ago
  There are enough market participants that the difference between N and N-1 is negligible. Do you really think you're at much of an advantage if you 'only' have to sort through 9,999 people screaming at the top of their lungs instead of 10,000?
noname123 16y ago
> My personal pet theory (for some of the graphs) is that someone is just loading up the book at many price levels with unlikely-to-be-filled limit orders to gain priority (for the rare occasions the market makes big swings). Only works if big swings deviate from intrinsic value of the stock. Let's say a biotech stock fails its FDA panel and drops like a rock, its fair-value suddenly drops from $8 to $2; your 100 limit buy orders at $6 suddenly gets hit and you'll have to sell them at $2/share. > Some other graphs have perfectly innocuous explanations - for example someone probing the depth of the book or filling a big order piece-by-piece. You probe the depth of the book by building the book not by submitting out of the money orders. You sell block order periodically over a day or days via VWAP by not revealing your true order size. Submitting a bunch of limit buy orders at once even if they are out of money, especially under the same MPID will reveal your hand and the size of the buy/sell interest. > FWIW, you can't really pull a serious DoS against most exchanges. Most decent ones have pretty strict rolling-window rate limits. The point is not DoS against exchange but to make your competitors process messages slower than you do. They can still process messages 15ms at a time, but you could do it at 10ms. In this game where everyone's colo'd to the exchange and have the same arbitrage algo, having a 5ft. cable to the exchange trading server vs. a 7ft. cable is a competitive advantage. The same case is with slowing your opponents' message processing rate down by 5ms.
- jrockway 16y ago
  having a 5ft. cable to the exchange trading server vs. a 7ft. cable is a competitive advantage Incidentally, light travels this far in one clock cycle for a 2GHz processor. I have a feeling that the interrupt handling machinery and the network card and the Layer 2 and Layer 3 inefficiencies add more latency than two feet of Ethernet cable, though. (But I guess a pair of scissors is cheaper than a processor fab.) The HFT world reminds me a lot of the audiophile world. Sure, two feet of Cat-5 cable introduces measurable latency. Sure, using 1% tolerance resistors instead of 0.001% tolerance resistors affects the performance of your amplifier. Whether or not this makes any difference in the real world, though... nobody ever has the answer to that question.
- nl 16y ago
  having a 5ft. cable to the exchange trading server vs. a 7ft. cable is a competitive advantage. The same case is with slowing your opponents' message processing rate down by 5ms. I get your point, but 5ft vs 7 ft cable isn't going to make any[1] difference. [1] light travels 2 ft in 2.033 × 10-9 seconds. According to http://en.wikipedia.org/wiki/Memory_latency http://en.wikipedia.org/wiki/Memory_latency, A memory seek on DDR3-1600 takes 0.6 x 10-9, but reading one word takes around 10 x 10-9. Given the amount of processing needed to process a single packet, I cannot see anyway 2ft of network cable is significant.

by smanek 16y ago

thesnark 16y ago

Did you read about this: http://www.businessinsider.com/huge-first-high-frequency-trading-firm-is-charged-with-quote-stuffing-and-manipulation-2010-9 http://www.businessinsider.com/huge-first-high-frequency-tra...

yummyfajitas 16y ago
Trillium was not DOSing the market, they were layering.
- d_c 16y ago
  What does that mean exactly?
  - yummyfajitas 16y ago
    A more complete explanation than I can give: http://blogs.reuters.com/felix-salmon/2010/09/14/trillium-wasnt-quote-stuffing/ http://blogs.reuters.com/felix-salmon/2010/09/14/trillium-wa... Basically, it's submitting hidden sell orders at a high price, and submitting a lot of visible buy orders in the hopes that other people pile on and bid the price up to your sell order. It's market manipulation, and it wouldn't even work if you DOSed other people's computers. The goal is to fool them into filling your orders at unfavorable prices - a DOS would simply shut them down.
  - noname123 16y ago
    When you look at quotes on Yahoo Finance, you are not looking at the whole quotebook. The whole quotebook lists the whole bid side and ask side. e.g., Bid Size Bid Ask Ask Size 100 4 4.02 50 50 3.99 4.03 200 The whole quotebook could stretch quite long depending on the numbers of buyers and sellers on the market. Algo's and human traders use the quote books to analyze sell or buy interest. For example, if the quote book has a lot of bid size and very little ask size, it means that there are a lot of buyers than sellers which could prompt traders to buy the stock at a much more expensive price in hopes that the stock will go up due to the demand. However, what Trillium did was that they stuffed the quote book with a bunch of buy orders just slightly out of money to make for the appearance of more buy interest. e.g., Bid Size Bid Ask Ask Size 100 4 4.02 50 50 3.99 4.03 200 300 3.98* 300 3.98* 300 3.97* Other algo machines or human traders will now jump to buy the stock at $4.02 (which Trillium is short selling) in hopes that the buy side's demand will propel the stock past $4.02. But what happens next as soon Trillium short sells $4.02, they will cancel the bid orders. Now the buy-side interest is back to normal, un-inflated side and whoever bought the stock at the inflated price is left holding the bag. The pricing of stock will go down due to reduced buy interest, Trillium buys to cover at $4, netting $0.02/share profit.

CGamesPlay 16y ago

Yes, but if every other firm besides you is doing a DoS at their maximum rate, then you have the distinct disadvantage of having one more source of quotes to deal with than every other firm.

smanek 16y ago
There are enough market participants that the difference between N and N-1 is negligible. Do you really think you're at much of an advantage if you 'only' have to sort through 9,999 people screaming at the top of their lungs instead of 10,000?

noname123 16y ago

> My personal pet theory (for some of the graphs) is that someone is just loading up the book at many price levels with unlikely-to-be-filled limit orders to gain priority (for the rare occasions the market makes big swings). Only works if big swings deviate from intrinsic value of the stock. Let's say a biotech stock fails its FDA panel and drops like a rock, its fair-value suddenly drops from $8 to $2; your 100 limit buy orders at $6 suddenly gets hit and you'll have to sell them at $2/share. > Some other graphs have perfectly innocuous explanations - for example someone probing the depth of the book or filling a big order piece-by-piece. You probe the depth of the book by building the book not by submitting out of the money orders. You sell block order periodically over a day or days via VWAP by not revealing your true order size. Submitting a bunch of limit buy orders at once even if they are out of money, especially under the same MPID will reveal your hand and the size of the buy/sell interest. > FWIW, you can't really pull a serious DoS against most exchanges. Most decent ones have pretty strict rolling-window rate limits. The point is not DoS against exchange but to make your competitors process messages slower than you do. They can still process messages 15ms at a time, but you could do it at 10ms. In this game where everyone's colo'd to the exchange and have the same arbitrage algo, having a 5ft. cable to the exchange trading server vs. a 7ft. cable is a competitive advantage. The same case is with slowing your opponents' message processing rate down by 5ms.

jrockway 16y ago
having a 5ft. cable to the exchange trading server vs. a 7ft. cable is a competitive advantage Incidentally, light travels this far in one clock cycle for a 2GHz processor. I have a feeling that the interrupt handling machinery and the network card and the Layer 2 and Layer 3 inefficiencies add more latency than two feet of Ethernet cable, though. (But I guess a pair of scissors is cheaper than a processor fab.) The HFT world reminds me a lot of the audiophile world. Sure, two feet of Cat-5 cable introduces measurable latency. Sure, using 1% tolerance resistors instead of 0.001% tolerance resistors affects the performance of your amplifier. Whether or not this makes any difference in the real world, though... nobody ever has the answer to that question.
nl 16y ago
having a 5ft. cable to the exchange trading server vs. a 7ft. cable is a competitive advantage. The same case is with slowing your opponents' message processing rate down by 5ms. I get your point, but 5ft vs 7 ft cable isn't going to make any[1] difference. [1] light travels 2 ft in 2.033 × 10-9 seconds. According to http://en.wikipedia.org/wiki/Memory_latency http://en.wikipedia.org/wiki/Memory_latency, A memory seek on DDR3-1600 takes 0.6 x 10-9, but reading one word takes around 10 x 10-9. Given the amount of processing needed to process a single packet, I cannot see anyway 2ft of network cable is significant.