27 ms·

Actually, it got implemented by most major exchanges in Europe in 2017/2018 and cboe seems to be bringing this to the US now: https://www.cboe.com/us/equities/t

Actually, it got implemented by most major exchanges in Europe in 2017/2018 and cboe seems to be bringing this to the US now: https://www.cboe.com/us/equities/trading/offerings/periodic_auctions/ https://www.cboe.com/us/equities/trading/offerings/periodic_...

kamaitachi 5y ago
Wow - TIL. Thanks. I've been out of the HFT business for a while, so i guess things have moved on.
- hcarlens 5y ago
  Haha yeah! Though times for these auctions are double-digit milliseconds, a lifetime for your fpga strategies! And it's still fairly niche, these are complementing CLOBs/dark pools rather than replacing them. Where did you move to from hft?
  - kamaitachi 5y ago
    Moved into a small company that does process control (SCADA) systems development. Took a fairly large drop in salary but the work/life balance improved and job satisfaction increased. I'd previously done a lot of work in embedded SCADA systems (hence the fit for working with with FPGAs in HFT). I left mainly because I genuinely felt that there was a certain futility with ultra low latency trading...it's less about trading and more an arms race between quants and techies of different companies, all with deep pockets. I guess embedded SCADA systems are my comfort blanket :-)
    - anonymouse008 5y ago
      I'm merely an observer, but it feels, intuitively, that HFT was great when things were fairly predictable -- or more like the major indices and individual names moved a most 2% on any given day -- and now, in the post-covid era, starting with the DPZ spike, and you could argue the TSLA original call buying spree, everything is in shambles. A lot of HFTs I know of suffered serious losses... Could you explain, indirectly or without identifiers, why now is different than back then?
      - ReggieCommaRose 5y ago
        I’m not sure about delta one firms but almost all the options MM firms have been having record years in the COVID / meme stock era. In broad strokes, the things that hurt market makers the most are long winded price trends and accumulation of inventory. So generally MMs can and often will eat large initial losses (depending on how many wings they happened to have owned at the time) when huge volatility spikes happen but when the raised volatility stays at that level for some amount of time (you’ll sometimes hear this referred as market “regimes”) and the MM was able to not blow out from the initial spike they’ll more than make up their losses from the good trading environment after the fact. Market makers as a whole were suffering during the mid 2010s when volatility was low year to year, correlation with SPY was high, and all the indices basically just went straight up every month.
        deleted 5y ago
        [deleted]
      - valkmit 5y ago
        It's kind of an open secret, but retail traders hopping onto meme stocks like DPZ and TSLA is, counterintuitively to an outsider, actually very profitable for HFTs and market makers. A good example might be - imagine you are a car dealership, so serving as a rough approximation of a market maker. What kind of entities do you want to trade against? Other car dealerships (informed counterparties), or your average suburban minivan owner (uninformed counterparties)? It's immediately obvious - the rationale is that when you trade against uninformed order flow, your measure of adverse selection is far lower than if you trade against informed order flow. Your average suburban minivan owner is going to be more time-sensitive and price-insensitive than another car dealership who is willing to look high and low for better deals. Adverse selection, in this context, is that of the orders you're offering to the market, only the subset which have the greatest likelihood of immediately losing you money are selected. From the perspective of your counterparty, they will only lift your offer if they think it will make them an immediate unrealized profit. Keeping track of your adverse selection is an extremely important part of HFT - in fact, HFTers will try to identify informed vs uninformed order flow and only try to trade against the latter, to reduce immediate unrealized losses due to adverse selection. This is why PFOF (payment for order flow) exists. It's because companies like Virtu think that traders on RobinHood have no clue what they're doing, and they [Virtu] can come in and eat all the alpha. Virtu doesn't frontrun RH orderflow - instead, they get what's called "first look" at the flow. They get to decide to either immediately fill the offer, or let it hit the real market. From the perspective of a RH user, this is really no harm, because whether Virtu trades against you, or your offer gets lifted against the broader market, doesn't really matter to you.

kamaitachi 5y ago

Wow - TIL. Thanks. I've been out of the HFT business for a while, so i guess things have moved on.

hcarlens 5y ago
Haha yeah! Though times for these auctions are double-digit milliseconds, a lifetime for your fpga strategies! And it's still fairly niche, these are complementing CLOBs/dark pools rather than replacing them. Where did you move to from hft?
- kamaitachi 5y ago
  Moved into a small company that does process control (SCADA) systems development. Took a fairly large drop in salary but the work/life balance improved and job satisfaction increased. I'd previously done a lot of work in embedded SCADA systems (hence the fit for working with with FPGAs in HFT). I left mainly because I genuinely felt that there was a certain futility with ultra low latency trading...it's less about trading and more an arms race between quants and techies of different companies, all with deep pockets. I guess embedded SCADA systems are my comfort blanket :-)
  - anonymouse008 5y ago
    I'm merely an observer, but it feels, intuitively, that HFT was great when things were fairly predictable -- or more like the major indices and individual names moved a most 2% on any given day -- and now, in the post-covid era, starting with the DPZ spike, and you could argue the TSLA original call buying spree, everything is in shambles. A lot of HFTs I know of suffered serious losses... Could you explain, indirectly or without identifiers, why now is different than back then?
    - ReggieCommaRose 5y ago
      I’m not sure about delta one firms but almost all the options MM firms have been having record years in the COVID / meme stock era. In broad strokes, the things that hurt market makers the most are long winded price trends and accumulation of inventory. So generally MMs can and often will eat large initial losses (depending on how many wings they happened to have owned at the time) when huge volatility spikes happen but when the raised volatility stays at that level for some amount of time (you’ll sometimes hear this referred as market “regimes”) and the MM was able to not blow out from the initial spike they’ll more than make up their losses from the good trading environment after the fact. Market makers as a whole were suffering during the mid 2010s when volatility was low year to year, correlation with SPY was high, and all the indices basically just went straight up every month.
      - deleted 5y ago
        [deleted]
    - valkmit 5y ago
      It's kind of an open secret, but retail traders hopping onto meme stocks like DPZ and TSLA is, counterintuitively to an outsider, actually very profitable for HFTs and market makers. A good example might be - imagine you are a car dealership, so serving as a rough approximation of a market maker. What kind of entities do you want to trade against? Other car dealerships (informed counterparties), or your average suburban minivan owner (uninformed counterparties)? It's immediately obvious - the rationale is that when you trade against uninformed order flow, your measure of adverse selection is far lower than if you trade against informed order flow. Your average suburban minivan owner is going to be more time-sensitive and price-insensitive than another car dealership who is willing to look high and low for better deals. Adverse selection, in this context, is that of the orders you're offering to the market, only the subset which have the greatest likelihood of immediately losing you money are selected. From the perspective of your counterparty, they will only lift your offer if they think it will make them an immediate unrealized profit. Keeping track of your adverse selection is an extremely important part of HFT - in fact, HFTers will try to identify informed vs uninformed order flow and only try to trade against the latter, to reduce immediate unrealized losses due to adverse selection. This is why PFOF (payment for order flow) exists. It's because companies like Virtu think that traders on RobinHood have no clue what they're doing, and they [Virtu] can come in and eat all the alpha. Virtu doesn't frontrun RH orderflow - instead, they get what's called "first look" at the flow. They get to decide to either immediately fill the offer, or let it hit the real market. From the perspective of a RH user, this is really no harm, because whether Virtu trades against you, or your offer gets lifted against the broader market, doesn't really matter to you.