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Some aspects of HFT seem highly analogous to insider trading to me, and insider trading is currently illegal. Abusing the ability to cancel orders fast in order

Some aspects of HFT seem highly analogous to insider trading to me, and insider trading is currently illegal. Abusing the ability to cancel orders fast in order to ping for non-public data about other orders sure seems like an insider advantage. As I understand it this "pinging" is central to HFT strategies. Am I missing something?

lrm242 13y ago
There is nothing about HFT that is analgous to insider trading. Unfortunately the people describing it in public like Cuban simply don't understand what's going on. There is no non-public information at work here.
- guelo 13y ago
  The information that the HFT traders pay millions of dollars to acquire before the rest of the market does is not public at the time that they acquire it by any definition of public that does not include having to pay millions of dollars to acquire the information.
  - lrm242 13y ago
    That's fundamentally wrong. Direct feeds are available to anyone who wishes to purchase them. Do you have a source for a piece of data purchasable by a firm that isn't on the public side of the information pipe?
    - erichocean 13y ago
      > Direct feeds are available to anyone who wishes to purchase them. Out of curiosity, how much does a direct feed cost, and is there a practical limit to the number of simultaneous buyers (for example, physical server space in a data center)?
      - lrm242 13y ago
        Price lists are all public. Look at nasdaqtrader.com or batstrading.com.
        deleted 13y ago
        [deleted]
drawkbox 13y ago
The whole pinging to cancel seems like it could really end up compounding into problems, it is abuse of a needed cancelation system. What happens when it spams so much that it triggers other market reactions? (Flash crashes - which seem like it would happen more as more HFT is increased as you don't have the balance of unpredictable individual investors. HFT vs HFT only in the market, who wins?) What effect does this have on exchange systems bandwidth / capacity / reliability? Pretty soon every trade one makes will have to fire off 10x the fake orders to stay camouflaged. What happens when HFT DDoS the whole market with fake orders? Right now HFT is trying to fly under the radar but it could get more intense if not checked early at least with some sort of limit. A good market is a fair market, noone wants to start the race a lap back. HFT skims now but what is in place when HFT decides to take.
snowwrestler 13y ago
If they get reactions to their "pings" then by definition the data is not privileged; they're just faster at seeing and reacting to it than other market participants Insider trading allows someone to plan a course of action prior to other market participants having the opportunity to react.

lrm242 13y ago

There is nothing about HFT that is analgous to insider trading. Unfortunately the people describing it in public like Cuban simply don't understand what's going on. There is no non-public information at work here.

guelo 13y ago
The information that the HFT traders pay millions of dollars to acquire before the rest of the market does is not public at the time that they acquire it by any definition of public that does not include having to pay millions of dollars to acquire the information.
- lrm242 13y ago
  That's fundamentally wrong. Direct feeds are available to anyone who wishes to purchase them. Do you have a source for a piece of data purchasable by a firm that isn't on the public side of the information pipe?
  - erichocean 13y ago
    > Direct feeds are available to anyone who wishes to purchase them. Out of curiosity, how much does a direct feed cost, and is there a practical limit to the number of simultaneous buyers (for example, physical server space in a data center)?
    - lrm242 13y ago
      Price lists are all public. Look at nasdaqtrader.com or batstrading.com.
      - deleted 13y ago
        [deleted]

drawkbox 13y ago

The whole pinging to cancel seems like it could really end up compounding into problems, it is abuse of a needed cancelation system. What happens when it spams so much that it triggers other market reactions? (Flash crashes - which seem like it would happen more as more HFT is increased as you don't have the balance of unpredictable individual investors. HFT vs HFT only in the market, who wins?) What effect does this have on exchange systems bandwidth / capacity / reliability? Pretty soon every trade one makes will have to fire off 10x the fake orders to stay camouflaged. What happens when HFT DDoS the whole market with fake orders? Right now HFT is trying to fly under the radar but it could get more intense if not checked early at least with some sort of limit. A good market is a fair market, noone wants to start the race a lap back. HFT skims now but what is in place when HFT decides to take.

snowwrestler 13y ago

If they get reactions to their "pings" then by definition the data is not privileged; they're just faster at seeing and reacting to it than other market participants Insider trading allows someone to plan a course of action prior to other market participants having the opportunity to react.