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I was under the impression that retail order flow is mostly useless to HFT and they make money on large institutional moves - retail investors just don't affect
by wgerard 8y ago
I was under the impression that retail order flow is mostly useless to HFT and they make money on large institutional moves - retail investors just don't affect the market enough for it to matter.
Is that a wrong assumption? If not, seems like maybe RH is just taking advantage of the rebate for not much benefit to Citadel?
- anonu 8y agoIt's the other way around. Retail flow is uninformed. Many crossing opportunities as well. It's extremely valuable to hft folks. On the other hand if you're trading against a hedge fund... You don't know what info they have. You also don't know when they'll stop buying or selling. Their orders could come across multiple days. You don't want to touch that stuff
- JumpCrisscross 8y ago> retail order flow is mostly useless to HFT and they make money on large institutional moves This is incorrect. Retail volumes are smaller. (This also makes them less risky to fill and offload.) But spreads are wider. I worked on an algorithmic derivatives desk many years ago. We paid a well-known national broker lots of money to get their options flow. Their customers were notorious for forgetting to exercise slightly in-the-money options, putting in misplaced limit orders, putting in market orders for illiquid names, et cetera. Robinhood has its hands on the money of a generation that was too young to lose money in the last crisis.
- adrr 8y agoDon't most brokerages exercise ITM options at expiration? Here is Etrade's policy: > Equity options $0.01 or more in the money will be automatically exercised for you unless you instruct us not to exercise them.