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The overloading of exchanges with orders has actually become an intentional strategy in the real world. High frequency firms send large quantities of junk order
by this_user 13y ago
The overloading of exchanges with orders has actually become an intentional strategy in the real world. High frequency firms send large quantities of junk orders to create arbitrage possibilites or even as an offensive measure for the purpose of slowing down the competition by making them waste ressources processing useless orders.
- yummyfajitas 13y agoUm, no. This is a wild conspiracy "theory" [1] pushed by Nanex for publicity, but it's almost certainly false. If it were true, it would be trivially easy for any of the broker, exchange or SEC to trace and shut down. These parties already have countermeasures in place to prevent you from doing this accidentally - you need to make sure the rolling average of your fill rate is above 0.5% (approximate cutoff, it varies but it's in that neighborhood). Further, the risk of getting filled makes such a strategy insane. It's analogous to placing a bunch of bids on EBay in the hopes of slowing down their servers. Great plan, but it carries the risk that you win an auction and need to buy 1,500 copies of Dianetics @ $10.00 each. [1] I use the term "theory" loosely. Nanex's allegations more or less amount to the idea that HFT firms are DDOSing the markets by pushing an order volume that a 2008-era laptop could handle without hitting 100% cpu, and expect to profit via unexplained mechanisms.