4 ms·

Instead of demanding that your counterparty be uninformed, why not do a market open/close auction every minute?

Onavo 2y ago
Because others may benefit from exploiting your big orders.
JumpCrisscross 2y ago
> why not do a market open/close auction every minute? Reality moves faster. That means whoever can price closer to the auction can incorporate more information.
- modderation 2y ago
  I think it's an interesting thought experiment. What would happen if the stock market were quantized to a blind one trade per-minute granularity? I suspect this would put everyone on more even footing, with less focus on beating causality and light lag, placing more focus on using the acquired information to make longer-term decisions. This would open things up to anyone with a computer and a disposable income, though it would disappoint anyone in the high-frequency trading field.
  - JumpCrisscross 2y ago
    > What would happen if the stock market were quantized to a blind one trade per-minute granularity? Like one share of stock trades each minute in each name? Or one trade randomly executes? If the former, you stop trading the stock and start trading something pointing at it. If the latter, the rich get to trade. > less focus on beating causality and light lag You’d have to ban cancelling orders, otherwise you bid and offer and then cancel at the last minute. Either way, you’d be constantly calculating the “true” price while the market lags and settling economic transactions on that basis. (My guess is the street would settle on a convention for the interauction model price.) If you’re upset about stock markets looking like casinos, the problem isn’t the fast trading. It’s the transparency. Just don’t report trades until the end of the day. If you aesthetically don’t like HFT, that’s a tougher problem as the price of the stock points at something tied to reality, and reality runs real time. Both ideas sort of look like the private markets.
    - shawabawa3 2y ago
      He means every minute a single "opening trade" style trade happens and clears overlapping sections of the order book This has the advantage of every trader getting the same price every minute. And racing against the clock has marginal utility
      - JumpCrisscross 2y ago
        > racing against the clock has marginal utility It has the same utility as in the opening cross, the most algorithmically-trafficked moments of trading after the closing cross. The last order can incorporate more information than an earlier one. Given the book is assembled transparently, that means an order submitted close to the deadline can “see” other orders in a way they couldn’t “see” it.
        sdwr 2y ago
        > blind one trade per-minute granularity "Blind" meaning that no orders can "see" each other.
  - JedMartin 2y ago
    You would change the rules, but I think the result would largely remain the same. As a market participant with the fastest access to data from other markets, news, and similar sources, as well as low order entry latency, you would still be able to profit from information asymmetry. Imagine that a company announces the approval of its new vaccine a few milliseconds before the periodic trade occurs. As an HFT firm, you have the technology to enter, cancel, or modify your orders before the periodic auction takes place, while less sophisticated players remain oblivious to what just happened. The same applies to price movements on venues trading the same instrument, its derivatives, or even correlated assets in different parts of the world. On the other hand, you risk increasing price volatility (especially in cases where there is an imbalance between buyers and sellers during the periodic auction) and making markets less liquid.
superzamp 2y ago
Attempts at doing this are effectively already existing, the IEX [1] exchange being an example, albeit on a less ambitious scale than your idea: > It's a simple technology: 38 miles of coiled cable that incoming orders and messages must traverse before arriving at the exchange’s matching engine. This physical distance results in a 350-microsecond delay, giving the exchange time to take in market data from other venues—which is not delayed—and update prices before executing trades
- JedMartin 2y ago
  IntelligentCross Midpoint (a darkpool) is a better example, since it actually does matching periodically every couple of milliseconds [1]. IEX just introduces additional latency for everyone. [1] https://www.imperativex.com/products https://www.imperativex.com/products
tikkabhuna 2y ago
There are venues that support this. Its called continuous, or periodic, auctions. https://www.fca.org.uk/publications/research/periodic-auctions https://www.fca.org.uk/publications/research/periodic-auctio...
infecto 2y ago
There are exchanges that already do this and it goes back to the whole attack on HFT even though modern markets have the tightest spreads in history.

Because others may benefit from exploiting your big orders.

> why not do a market open/close auction every minute? Reality moves faster. That means whoever can price closer to the auction can incorporate more information.

modderation 2y ago
I think it's an interesting thought experiment. What would happen if the stock market were quantized to a blind one trade per-minute granularity? I suspect this would put everyone on more even footing, with less focus on beating causality and light lag, placing more focus on using the acquired information to make longer-term decisions. This would open things up to anyone with a computer and a disposable income, though it would disappoint anyone in the high-frequency trading field.
- JumpCrisscross 2y ago
  > What would happen if the stock market were quantized to a blind one trade per-minute granularity? Like one share of stock trades each minute in each name? Or one trade randomly executes? If the former, you stop trading the stock and start trading something pointing at it. If the latter, the rich get to trade. > less focus on beating causality and light lag You’d have to ban cancelling orders, otherwise you bid and offer and then cancel at the last minute. Either way, you’d be constantly calculating the “true” price while the market lags and settling economic transactions on that basis. (My guess is the street would settle on a convention for the interauction model price.) If you’re upset about stock markets looking like casinos, the problem isn’t the fast trading. It’s the transparency. Just don’t report trades until the end of the day. If you aesthetically don’t like HFT, that’s a tougher problem as the price of the stock points at something tied to reality, and reality runs real time. Both ideas sort of look like the private markets.
  - shawabawa3 2y ago
    He means every minute a single "opening trade" style trade happens and clears overlapping sections of the order book This has the advantage of every trader getting the same price every minute. And racing against the clock has marginal utility
    - JumpCrisscross 2y ago
      > racing against the clock has marginal utility It has the same utility as in the opening cross, the most algorithmically-trafficked moments of trading after the closing cross. The last order can incorporate more information than an earlier one. Given the book is assembled transparently, that means an order submitted close to the deadline can “see” other orders in a way they couldn’t “see” it.
      - sdwr 2y ago
        > blind one trade per-minute granularity "Blind" meaning that no orders can "see" each other.
- JedMartin 2y ago
  You would change the rules, but I think the result would largely remain the same. As a market participant with the fastest access to data from other markets, news, and similar sources, as well as low order entry latency, you would still be able to profit from information asymmetry. Imagine that a company announces the approval of its new vaccine a few milliseconds before the periodic trade occurs. As an HFT firm, you have the technology to enter, cancel, or modify your orders before the periodic auction takes place, while less sophisticated players remain oblivious to what just happened. The same applies to price movements on venues trading the same instrument, its derivatives, or even correlated assets in different parts of the world. On the other hand, you risk increasing price volatility (especially in cases where there is an imbalance between buyers and sellers during the periodic auction) and making markets less liquid.

superzamp 2y ago

Attempts at doing this are effectively already existing, the IEX [1] exchange being an example, albeit on a less ambitious scale than your idea: > It's a simple technology: 38 miles of coiled cable that incoming orders and messages must traverse before arriving at the exchange’s matching engine. This physical distance results in a 350-microsecond delay, giving the exchange time to take in market data from other venues—which is not delayed—and update prices before executing trades

JedMartin 2y ago
IntelligentCross Midpoint (a darkpool) is a better example, since it actually does matching periodically every couple of milliseconds [1]. IEX just introduces additional latency for everyone. [1] https://www.imperativex.com/products https://www.imperativex.com/products

tikkabhuna 2y ago

There are venues that support this. Its called continuous, or periodic, auctions. https://www.fca.org.uk/publications/research/periodic-auctions https://www.fca.org.uk/publications/research/periodic-auctio...

infecto 2y ago

There are exchanges that already do this and it goes back to the whole attack on HFT even though modern markets have the tightest spreads in history.