3 ms·

In the simplest of cases, let's say a stock you are following is at 50.50. You want to buy it at anything under $50. It drops to $49.99, and someone cuts in f

In the simplest of cases, let's say a stock you are following is at 50.50. You want to buy it at anything under $50. It drops to $49.99, and someone cuts in front of you in line, and buys it. You miss the purchase, and the stock goes back up. Multiple this millions of times. This isn't to say they are all completely evil. They do provide liquidity as banks have walked away from equity. But there needs to be more transparency on what is going on. (For example - should it be legal to send false buy or sell signals which will be intentionally cancelled?)

ChuckMcM 13y ago
The false buy/sell signsls are a legitimate issue. Given that you can't easily make it illegal to cancel a limit order (after all people give up after a while) you could require that the order has to be valid for 60 seconds before it can be cancelled and that would put a huge crimp in the 'faking it' market.
- AndrewBissell 13y ago
  A rule like this would cause every market marker to set their bid/ask spread wide enough to cover the risk of the typical adverse price move which could occur over 60 seconds.
  - mathattack 13y ago
    You've hit on the challenge. Any hard and fast room either has unintended consequences, or can be worked around.
yummyfajitas 13y ago
There is no "cut in front of you" message in FIX or OUCH. Most exchanges use price/time priority - if someone "cuts in front of you" it means they offered $50.01. Or maybe "cuts in front of you" means you wanted to buy the stock at $50, but you didn't actually place the order until the last minute because you wanted to play a speed game (and lost).
- kasey_junk 13y ago
  How dare you use facts to back up your case in a HFT forum discussion?
  - dang 13y ago
    This comment is a substanceless one-liner. We don't want any of these on Hacker News. Such comments are especially bad when they're sarcastic. I'm not picking on one commenter here. Many HNers post substanceless one-liners. Please don't do that. Re-read what you've posted and, if it adds little of substance to the discussion, delete it. Fewer substanceless comments will mean a higher signal/noise ratio for all of us. Edit: someone pointed out to me that kasey_junk is one of the few people who actually knows what they're talking about in this thread, meaning that he/she has contributed much more signal than noise. That's probably true! I don't have time to read all the threads, even the interesting ones—especially the interesting ones. I'm sure kasey_junk couldn't care less, but I've restored the karma that his/her account lost to downvotes here. Keep in mind that HN is going through a period of experimentation while we figure out how to address some of the longstanding problems that PG never had time to take care of. We're going to get a lot of things wrong on our path to getting things right. We're also very interested in your feedback on these experiments, so don't think the feedback is one-way. The best channel for it is hn@ycombinator.com.
    - deleted 13y ago
      [deleted]
- crdoconnor 13y ago
  One way HFTs do this is to place thousands of tiny orders while trying to detect the presence of a large trade being put through (known as a 'whale'). They use pattern recognition software to detect a large, price-insensitive seller or buyer and bid up (or down) accordingly. Another is to flood the exchange with orders in a bid to create congestion and slow down other market participants who might intervene. This is why HFT in fact causes higher transaction costs on market participants. It provides the perfect way to leech.
AndrewBissell 13y ago
> It drops to $49.99, and someone cuts in front of you in line Um, how do they do that, exactly? The major equity exchanges are all FIFO on every tick price. If you put a limit order in for $49.99 before somebody else, and an offer crosses your bid, you'll get filled before they do, period.
- vpeters25 13y ago
  Let's say you want 100 shares paying no more than $49.99. Your screen shows the following sell orders: Exchange A: 25 @ 49.99 Exchange B: 20 @ 49.98 Exchange C: 60 @ 49.97 You expect your order to get filled with all shares from C and B and just 20 from A at the highest price, the problem is Exchange A is closest to you, B is 50 miles away, and C is 800 miles away in Chicago. The HFT bot sees your order arriving at Exchange A, since they have a fastest link to B and C, they buy the orders there and put them on sell to you at $49.99 just a few milliseconds before your order arrives.
  - AndrewBissell 13y ago
    This is just a problem with my broker lacking the technical sophistication to synchronize the transmission of my orders in such a way as to ensure the best execution. Whether it's worth it for me to switch to a broker with that capability probably depends on how much volume I trade. Either way, this problem can be solved much more simply by the application of some simple order timing algorithms than by regulations attempting, in effect, to repeal the speed of light.
    - iopq 13y ago
      Yes, but it's kind of stupid that they could get away with it in the first place since most people do not have collocation with the exchanges.
  - snowwrestler 13y ago
    If you put in an order for $49.99, that is the price you said you are willing to pay. It is not fleecing you if someone meets the demand you express. If you really wanted to pay $49.97 then you should have put in that order instead.

ChuckMcM 13y ago

The false buy/sell signsls are a legitimate issue. Given that you can't easily make it illegal to cancel a limit order (after all people give up after a while) you could require that the order has to be valid for 60 seconds before it can be cancelled and that would put a huge crimp in the 'faking it' market.

AndrewBissell 13y ago
A rule like this would cause every market marker to set their bid/ask spread wide enough to cover the risk of the typical adverse price move which could occur over 60 seconds.
- mathattack 13y ago
  You've hit on the challenge. Any hard and fast room either has unintended consequences, or can be worked around.

yummyfajitas 13y ago

There is no "cut in front of you" message in FIX or OUCH. Most exchanges use price/time priority - if someone "cuts in front of you" it means they offered $50.01. Or maybe "cuts in front of you" means you wanted to buy the stock at $50, but you didn't actually place the order until the last minute because you wanted to play a speed game (and lost).

kasey_junk 13y ago
How dare you use facts to back up your case in a HFT forum discussion?
- dang 13y ago
  This comment is a substanceless one-liner. We don't want any of these on Hacker News. Such comments are especially bad when they're sarcastic. I'm not picking on one commenter here. Many HNers post substanceless one-liners. Please don't do that. Re-read what you've posted and, if it adds little of substance to the discussion, delete it. Fewer substanceless comments will mean a higher signal/noise ratio for all of us. Edit: someone pointed out to me that kasey_junk is one of the few people who actually knows what they're talking about in this thread, meaning that he/she has contributed much more signal than noise. That's probably true! I don't have time to read all the threads, even the interesting ones—especially the interesting ones. I'm sure kasey_junk couldn't care less, but I've restored the karma that his/her account lost to downvotes here. Keep in mind that HN is going through a period of experimentation while we figure out how to address some of the longstanding problems that PG never had time to take care of. We're going to get a lot of things wrong on our path to getting things right. We're also very interested in your feedback on these experiments, so don't think the feedback is one-way. The best channel for it is hn@ycombinator.com.
  - deleted 13y ago
    [deleted]
crdoconnor 13y ago
One way HFTs do this is to place thousands of tiny orders while trying to detect the presence of a large trade being put through (known as a 'whale'). They use pattern recognition software to detect a large, price-insensitive seller or buyer and bid up (or down) accordingly. Another is to flood the exchange with orders in a bid to create congestion and slow down other market participants who might intervene. This is why HFT in fact causes higher transaction costs on market participants. It provides the perfect way to leech.

AndrewBissell 13y ago

> It drops to $49.99, and someone cuts in front of you in line Um, how do they do that, exactly? The major equity exchanges are all FIFO on every tick price. If you put a limit order in for $49.99 before somebody else, and an offer crosses your bid, you'll get filled before they do, period.

vpeters25 13y ago
Let's say you want 100 shares paying no more than $49.99. Your screen shows the following sell orders: Exchange A: 25 @ 49.99 Exchange B: 20 @ 49.98 Exchange C: 60 @ 49.97 You expect your order to get filled with all shares from C and B and just 20 from A at the highest price, the problem is Exchange A is closest to you, B is 50 miles away, and C is 800 miles away in Chicago. The HFT bot sees your order arriving at Exchange A, since they have a fastest link to B and C, they buy the orders there and put them on sell to you at $49.99 just a few milliseconds before your order arrives.
- AndrewBissell 13y ago
  This is just a problem with my broker lacking the technical sophistication to synchronize the transmission of my orders in such a way as to ensure the best execution. Whether it's worth it for me to switch to a broker with that capability probably depends on how much volume I trade. Either way, this problem can be solved much more simply by the application of some simple order timing algorithms than by regulations attempting, in effect, to repeal the speed of light.
  - iopq 13y ago
    Yes, but it's kind of stupid that they could get away with it in the first place since most people do not have collocation with the exchanges.
- snowwrestler 13y ago
  If you put in an order for $49.99, that is the price you said you are willing to pay. It is not fleecing you if someone meets the demand you express. If you really wanted to pay $49.97 then you should have put in that order instead.