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(Devil's advocate disclaimer) I worked in High Frequency Trading for a TBTF bank alongside the former Automated Trading Desk employees and spoke with their quan

(Devil's advocate disclaimer) I worked in High Frequency Trading for a TBTF bank alongside the former Automated Trading Desk employees and spoke with their quants a few times. And I literally worked on a Dark Pool Crossing Engine myself at the the time, and here's my take: Having multiple algorithms running at the same time was...unremarkable. And since they're all running different algorithms and all trying to game the market, it wouldn't surprise me if they ended up trading with each other by accident, especially if they had multiple accounts to trade with. What's honestly more surprising is that they only had two running at once. And further, if they both traded through a dark pool, then there's no way they could know they were trading with each other, because that's one of the intended features of a dark pool. So accidental seem plausible, but then again so does malice. Now if it wasn't through a dark pool, and the algos could see each other's accounts, then naughty naughty, and they deserved every cent of the fine.

Galanwe 6y ago
Sorry but I have to disagree strongly here. Having two separate algos directly and actively trading in the wild is highly unusual. There are obvious reasons for which you don't want your algos to trade one against the other on the market. First, it's very dangerous as you can end up in the situation described here where you essentially self make the market. But more directly for simple execution costs/fees reasons. I don't know of any single player that has concurrent algos where there is not a "netting" layer between algos and the market, so that concurrent trades are matched internally before reaching the market.
- NaturalPhallacy 6y ago
  >Having two separate algos directly and actively trading in the wild is highly unusual. No it's not. ATD had like 50. >There are obvious reasons for which you don't want your algos to trade one against the other on the market. Who said they're trading against each other? Just look at GME. Swapping shares back and forth makes trading volume go up. Every imbalance is gameable, and they have armies of people whose job is to find every gameable imbalance and make money off of it. >First, it's very dangerous as you can end up in the situation described here where you essentially self make the market. As we've seen when traders have bankrupted themselves. >I don't know of any single player that has concurrent algos where there is not a "netting" layer between algos and the market, so that concurrent trades are matched internally before reaching the market. Well I know of one that had 15+, and coinbase just got busted with two so...
klyrs 6y ago
I'm not of this realm, but you've convinced me that dark pools are harmful, and intentionally so.
- NaturalPhallacy 6y ago
  One reason for it is so that Citigroup can't see that Goldman Sachs is buying 500K of some stock and fuck over retail investors by buying up theirs cheaply and selling to GS. They're not evil, just another tool. I don't (and won't) work for them again, but there were non-evil reasons for a dark pool. Anonymous trading (dark pools) also prevents favoritism and collusion too. You're trading based on nothing but the price and public information about the company. So it's less gameable.
bluecalm 6y ago
It's understandable that exchange participants run multiple algorithms but what about the exchange itself? Why would it run any trading algorithms at all?
deleted 6y ago
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Galanwe 6y ago

Sorry but I have to disagree strongly here. Having two separate algos directly and actively trading in the wild is highly unusual. There are obvious reasons for which you don't want your algos to trade one against the other on the market. First, it's very dangerous as you can end up in the situation described here where you essentially self make the market. But more directly for simple execution costs/fees reasons. I don't know of any single player that has concurrent algos where there is not a "netting" layer between algos and the market, so that concurrent trades are matched internally before reaching the market.

NaturalPhallacy 6y ago
>Having two separate algos directly and actively trading in the wild is highly unusual. No it's not. ATD had like 50. >There are obvious reasons for which you don't want your algos to trade one against the other on the market. Who said they're trading against each other? Just look at GME. Swapping shares back and forth makes trading volume go up. Every imbalance is gameable, and they have armies of people whose job is to find every gameable imbalance and make money off of it. >First, it's very dangerous as you can end up in the situation described here where you essentially self make the market. As we've seen when traders have bankrupted themselves. >I don't know of any single player that has concurrent algos where there is not a "netting" layer between algos and the market, so that concurrent trades are matched internally before reaching the market. Well I know of one that had 15+, and coinbase just got busted with two so...

klyrs 6y ago

I'm not of this realm, but you've convinced me that dark pools are harmful, and intentionally so.

NaturalPhallacy 6y ago
One reason for it is so that Citigroup can't see that Goldman Sachs is buying 500K of some stock and fuck over retail investors by buying up theirs cheaply and selling to GS. They're not evil, just another tool. I don't (and won't) work for them again, but there were non-evil reasons for a dark pool. Anonymous trading (dark pools) also prevents favoritism and collusion too. You're trading based on nothing but the price and public information about the company. So it's less gameable.

bluecalm 6y ago

It's understandable that exchange participants run multiple algorithms but what about the exchange itself? Why would it run any trading algorithms at all?

deleted 6y ago

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