3 ms·

Could rules such as order matching within coarse-grained time increments level the playing field ? What would the drawbacks be ?

carterschonwald 4y ago
There’s actually 1-2 venues that have launched in the past year that do something like that.
- chollida1 4y ago
  > There’s actually 1-2 venues that have launched in the past year that do something like that. interesting, i've not heard about this. Which venues are you referring to that don't just do price time broker priority matching?
  - carterschonwald 4y ago
    One chronos is the main one. I’m not sure what their current state of play is.
seanhunter 4y ago
The evidence I read (it was 10+ years ago) suggests that rolling auctions reduces intraday price volatility and and reduces standard dev of many measures of transaction cost (eg implementation shortfall). If you think about this variance since there is a party on either side of the trade, and one will benefit and one will lose out. The downside of reduced variance is you will never gain a “lucky fill” that is much better than you expect. But you will also never get a really bad fill either. Since the whole purpose of hfts In market making is essentially to try to always be the ones yo get the lucky fills, they will on average do this and everyone else will on average lose out (from high execution cost variance). That’s why I said on net retail investors should benefit from this (I think). I hope that explanation makes sense.
baandang 4y ago
You first have to define what playing field are we talking about? The playing field in this context is basically latency arbitrage. Who cares what hedge fund is collecting what alpha? We live in the most golden age for retail trading. Retail electronic trading inside a Roth is basically perfection for the individual right now. I think people are confusing the market micro structure for the account returns in a bear market.

carterschonwald 4y ago

There’s actually 1-2 venues that have launched in the past year that do something like that.

chollida1 4y ago
> There’s actually 1-2 venues that have launched in the past year that do something like that. interesting, i've not heard about this. Which venues are you referring to that don't just do price time broker priority matching?
- carterschonwald 4y ago
  One chronos is the main one. I’m not sure what their current state of play is.

seanhunter 4y ago

The evidence I read (it was 10+ years ago) suggests that rolling auctions reduces intraday price volatility and and reduces standard dev of many measures of transaction cost (eg implementation shortfall). If you think about this variance since there is a party on either side of the trade, and one will benefit and one will lose out. The downside of reduced variance is you will never gain a “lucky fill” that is much better than you expect. But you will also never get a really bad fill either. Since the whole purpose of hfts In market making is essentially to try to always be the ones yo get the lucky fills, they will on average do this and everyone else will on average lose out (from high execution cost variance). That’s why I said on net retail investors should benefit from this (I think). I hope that explanation makes sense.

baandang 4y ago

You first have to define what playing field are we talking about? The playing field in this context is basically latency arbitrage. Who cares what hedge fund is collecting what alpha? We live in the most golden age for retail trading. Retail electronic trading inside a Roth is basically perfection for the individual right now. I think people are confusing the market micro structure for the account returns in a bear market.