3 ms·

How many times does someone need to explain that enforcing fixed-interval ticks is a bad idea for people to stop bringing it up on HN? In the current environme

How many times does someone need to explain that enforcing fixed-interval ticks is a bad idea for people to stop bringing it up on HN? In the current environment, you own shares of MidCap Inc. They release a really bad earnings report, the company looks like it'll just keep sliding for the next few months and you want out. You see what the price as of 5 seconds ago is is (5 seconds since you're only human), put yours in at just below that and 10 milliseconds later you've sold your stock. You got a fair price and you aren't stuck holding a bad stock. In your proposed 1 hour ticks, you still own MidCap and they still release a bad earnings report. You still want out, but since trades execute once an hour you have no idea what the price is after this earnings report. You put in an ask at a slight loss (you don't care about the loss, you just want out), wait 45 minutes and... Fuck, everyone put their asks lower than yours. Half the book clears and everyone who didn't get their ask thinks "I really don't want to be holding onto this crap stock". You re-list at a 25% loss, because you really just want out and the average trade was a 15% loss anyway, and so does everyone else. You better hope the book gets completely cleared this time, or that stock is gonna hit the floor. That's all not mentioning the fact that 1 hour ticks wont eliminate HFT and the desire for low-latency (who get's priority when there are 2 $33.55 bids on the book? The first one placed?). And half of HN will be grumbling about how the exchanges take all this profit when the bid/ask spread is negative.

kansface 13y ago
Your scenario trades efficiency for fairness. I don't see a problem with this in general.
dchichkov 13y ago
Ah, 1 hour ticks. I like it. Imagine the spikes of traffic at the start of every hour. Just beautiful. That would result in the prompt upgrade from 40Gbps to something much faster. And finally all these pesky bugs in the routers and network cards will get sort out. Beautiful :)
firebones 13y ago
Aren't all of those problems solvable? 1) Use ticks less than an hour. Say, one second. Or even one minute--however long it takes to settle an auction. You will quickly get a sense of the price. 2) If there are multiple bids on the books, randomize priority at the bid level. The goal is to remove HFT, not create a new HFT with more granular resolution.
- 30thElement 13y ago
  Lowering the interval makes the effect less pronounced, but it's still there. When you have fixed intervals the order book will keep increasing in size until the trades execute on the 1 second interval or whatever it is, and the book will be larger than for our current instantaneous ticks. Larger book means wider spread, as basic game theory says when you have more participants you need a stronger hand to have the same odds, so if you want that trade to execute you put it way outside the last price. HFT firms narrow the spread and take the difference as profit, as they don't really care if 1 particular order executes so they play closer to the last price. Randomizing the execution order makes the spread even wider, because now you need to beat everyone instead of just tying if you want to guarantee execution. And again, the HFT firms don't care if any particular order executes. Although randomizing the order would probably reduce the incentive to co-locate, but I'm guessing the larger firms would still want quicker access to the last price, just in case. Also, in all of this I'm assuming no one outside of the exchange can view the actual book, just the last price. If you let people see the full book, as they can now, this is all a wash anyway as they'll just "trade" by placing and cancelling orders right up until the next tick.
- hft_throwaway 13y ago
  If my orders get random priority I will just spray a bunch of smaller orders onto each level. Look at the Eurodollar markets. You get execution priority based on size there and traders just send massively oversized orders. Why is the goal to remove HFT?

kansface 13y ago

Your scenario trades efficiency for fairness. I don't see a problem with this in general.

dchichkov 13y ago

Ah, 1 hour ticks. I like it. Imagine the spikes of traffic at the start of every hour. Just beautiful. That would result in the prompt upgrade from 40Gbps to something much faster. And finally all these pesky bugs in the routers and network cards will get sort out. Beautiful :)

firebones 13y ago

Aren't all of those problems solvable? 1) Use ticks less than an hour. Say, one second. Or even one minute--however long it takes to settle an auction. You will quickly get a sense of the price. 2) If there are multiple bids on the books, randomize priority at the bid level. The goal is to remove HFT, not create a new HFT with more granular resolution.

30thElement 13y ago
Lowering the interval makes the effect less pronounced, but it's still there. When you have fixed intervals the order book will keep increasing in size until the trades execute on the 1 second interval or whatever it is, and the book will be larger than for our current instantaneous ticks. Larger book means wider spread, as basic game theory says when you have more participants you need a stronger hand to have the same odds, so if you want that trade to execute you put it way outside the last price. HFT firms narrow the spread and take the difference as profit, as they don't really care if 1 particular order executes so they play closer to the last price. Randomizing the execution order makes the spread even wider, because now you need to beat everyone instead of just tying if you want to guarantee execution. And again, the HFT firms don't care if any particular order executes. Although randomizing the order would probably reduce the incentive to co-locate, but I'm guessing the larger firms would still want quicker access to the last price, just in case. Also, in all of this I'm assuming no one outside of the exchange can view the actual book, just the last price. If you let people see the full book, as they can now, this is all a wash anyway as they'll just "trade" by placing and cancelling orders right up until the next tick.
hft_throwaway 13y ago
If my orders get random priority I will just spray a bunch of smaller orders onto each level. Look at the Eurodollar markets. You get execution priority based on size there and traders just send massively oversized orders. Why is the goal to remove HFT?