4 ms·

I've argued in the past that we should have batch settlements every 30 seconds, instead of in real time. We don't really need microsecond based skimming/front

I've argued in the past that we should have batch settlements every 30 seconds, instead of in real time. We don't really need microsecond based skimming/front running.

biomcgary 2y ago
30 seconds seems reasonable. Don't the markets themselves make a fair amount of money off of providing fast access to the HFTs? Is that the primary perverse incentive?
Loughla 2y ago
I've read the arguments that the microsecond trading serves a purpose that benefits all of us, but I fail to see how, even with the explanations. I'm with you. Every 30 seconds. Cap the power of connection speed in trading. Trading should be based on the value of the item being traded, not on how short the fiber run is.
- mhmmmmmm 2y ago
  CLOB's force market participants to compete on pricing (which is only indirectly related to latency, since you can quote tighter if you know your orders won't get picked off by other, faster, traders) Taiwan used to have Batching style auction and it ultimately led to worse prices: https://focus.world-exchanges.org/articles/citadel-trading-auctions https://focus.world-exchanges.org/articles/citadel-trading-a... > Our analysis of the TWSE’s transition clearly demonstrates that continuous trading results in better liquidity provision, lower bid-ask spreads, more stable prices and enhanced price discovery, as well as higher trading volumes.
- JumpCrisscross 2y ago
  > read the arguments that the microsecond trading serves a purpose that benefits all of us, but I fail to see how, even with the explanations What about an empirical argument? Microsecond trading reduces spreads and decreases volatility. It looks useless, so people try to regulate it away, and every time they do spreads widen and trading firms' and banks' profits fatten. > Every 30 seconds. Cap the power of connection speed in trading I'd go back to Wall Street if this happened: it would make market making profitable again.
harry8 2y ago
so now the race is to get the order in (or out) @ 29.999999985 seconds or 15nS before the batch deadline. Interesting twist on the game. Unlikely to change who wins it, could it be worse for retail punters? We need to kill "front running" as a criticism of low-latency algo trding with fire. It's garbage. Front running is highly illegal and is where a broker knows a client is going to do a big trade due to inside information and trades on the account of others (themselves, typically) to exploit that inside information. It's a straight up cheat. Inferring from market data alone which way a price will move is legal, honest, been attempted since forever and absolutely fine. Also very, very difficult. Anyone who can do it makes the market more efficient, reduces the money available by doing it (which goes into investors pockets through tighter spreads) and really earns their money. You don't have to like them if you don't want to but it's worlds apart from front running using inside information. Where did algo trading profit come from? Won by being more competitive from brokers profit with a good chunk of that broker profit going to investors. Spreads are tighter. Where are the clients' yachts? Well tech did something about the some of the broker ripoffs earning their yachts - which puts money in your pocket.
- aeries 2y ago
  You could randomize the batching deadline.
  - harry8 2y ago
    and it won't help retail investors either.
    - deleted 2y ago
      [deleted]
- anonymoushn 2y ago
  Batching can greatly lower the returns to speed, which would be sufficient to get participants to invest less in speed. It doesn't need to reduce the returns to speed to 0, and indeed reducing the returns to speed to 0 is sort of an incoherent idea to begin with.
infecto 2y ago
Why not 1 minute then? You have ignored the whole issue of how are you then ordering those contracts in 30second batches?
- mikewarot 2y ago
  We already have systems for that, I believe it's the highest prices get filled first, but I'm not a trader.
  - infecto 2y ago
    Certainly systems exist, it was mostly a rhetorical question though. People love to say just run batches every N without diving into the complexity that exists. All they would accomplish by creating batches is wider bid/ask spreads.
usefulcat 2y ago
If there are multiple orders at the same price on the same side, how should we determine which ones are filled first? Or put another way, how should we determine which orders are least likely to get filled?
- hcks 2y ago
  Well either volume weighted or randomised then
  - Kstarek 2y ago
    HFT is still a massive thing in volume weighted (we call them pro-rata) markets, and it's even more toxic for retail as lots of people submit large orders that are unlikely to get filled immediately (which retail doesn't have the $ to do) to secure a bigger share of the pie
renewiltord 2y ago
I have made many very good arguments before that 45 seconds is ideal.

I've argued in the past that we should have batch settlements every 30 seconds, instead of in real time. We don't really need microsecond based skimming/front running.

biomcgary 2y ago

30 seconds seems reasonable. Don't the markets themselves make a fair amount of money off of providing fast access to the HFTs? Is that the primary perverse incentive?

Loughla 2y ago

I've read the arguments that the microsecond trading serves a purpose that benefits all of us, but I fail to see how, even with the explanations. I'm with you. Every 30 seconds. Cap the power of connection speed in trading. Trading should be based on the value of the item being traded, not on how short the fiber run is.

mhmmmmmm 2y ago
CLOB's force market participants to compete on pricing (which is only indirectly related to latency, since you can quote tighter if you know your orders won't get picked off by other, faster, traders) Taiwan used to have Batching style auction and it ultimately led to worse prices: https://focus.world-exchanges.org/articles/citadel-trading-auctions https://focus.world-exchanges.org/articles/citadel-trading-a... > Our analysis of the TWSE’s transition clearly demonstrates that continuous trading results in better liquidity provision, lower bid-ask spreads, more stable prices and enhanced price discovery, as well as higher trading volumes.
JumpCrisscross 2y ago
> read the arguments that the microsecond trading serves a purpose that benefits all of us, but I fail to see how, even with the explanations What about an empirical argument? Microsecond trading reduces spreads and decreases volatility. It looks useless, so people try to regulate it away, and every time they do spreads widen and trading firms' and banks' profits fatten. > Every 30 seconds. Cap the power of connection speed in trading I'd go back to Wall Street if this happened: it would make market making profitable again.

harry8 2y ago

so now the race is to get the order in (or out) @ 29.999999985 seconds or 15nS before the batch deadline. Interesting twist on the game. Unlikely to change who wins it, could it be worse for retail punters? We need to kill "front running" as a criticism of low-latency algo trding with fire. It's garbage. Front running is highly illegal and is where a broker knows a client is going to do a big trade due to inside information and trades on the account of others (themselves, typically) to exploit that inside information. It's a straight up cheat. Inferring from market data alone which way a price will move is legal, honest, been attempted since forever and absolutely fine. Also very, very difficult. Anyone who can do it makes the market more efficient, reduces the money available by doing it (which goes into investors pockets through tighter spreads) and really earns their money. You don't have to like them if you don't want to but it's worlds apart from front running using inside information. Where did algo trading profit come from? Won by being more competitive from brokers profit with a good chunk of that broker profit going to investors. Spreads are tighter. Where are the clients' yachts? Well tech did something about the some of the broker ripoffs earning their yachts - which puts money in your pocket.

aeries 2y ago
You could randomize the batching deadline.
- harry8 2y ago
  and it won't help retail investors either.
  - deleted 2y ago
    [deleted]
anonymoushn 2y ago
Batching can greatly lower the returns to speed, which would be sufficient to get participants to invest less in speed. It doesn't need to reduce the returns to speed to 0, and indeed reducing the returns to speed to 0 is sort of an incoherent idea to begin with.

infecto 2y ago

Why not 1 minute then? You have ignored the whole issue of how are you then ordering those contracts in 30second batches?

mikewarot 2y ago
We already have systems for that, I believe it's the highest prices get filled first, but I'm not a trader.
- infecto 2y ago
  Certainly systems exist, it was mostly a rhetorical question though. People love to say just run batches every N without diving into the complexity that exists. All they would accomplish by creating batches is wider bid/ask spreads.

usefulcat 2y ago

If there are multiple orders at the same price on the same side, how should we determine which ones are filled first? Or put another way, how should we determine which orders are least likely to get filled?

hcks 2y ago
Well either volume weighted or randomised then
- Kstarek 2y ago
  HFT is still a massive thing in volume weighted (we call them pro-rata) markets, and it's even more toxic for retail as lots of people submit large orders that are unlikely to get filled immediately (which retail doesn't have the $ to do) to secure a bigger share of the pie

renewiltord 2y ago

I have made many very good arguments before that 45 seconds is ideal.