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Very nicely put. Yes it's a bit hilarious. The HFT folks seem to be saying "you don't have a right to add up all the total amount of asks at a certain price a

Very nicely put. Yes it's a bit hilarious. The HFT folks seem to be saying "you don't have a right to add up all the total amount of asks at a certain price across all the exchanges and expect to get execution at that price" and with a bit of thought I might agree with them. But it is very counter-intuitive. If you see 10,000 shares for sale across 10 exchanges at $54.00 your VERY next thought probably isn't "oh that's actually 1,000 shares, but advertised on all the exchanges so it only LOOKS like 10,000" Once you understand how things works, sure fine. The counter to that, though, is that the HFT folks don't have any right to have access to order flow. If market participants want to route their orders to a particular dark pool or exchange they have every right to. The "markets are always right" sword cuts both ways.

consz 13y ago
It isn't only 1000 shares, there is indeed 1000 unique shares on each of those ten exchanges. The problem is that, as soon as the first exchange that you trade on processes your trade of the 1000 shares on that exchange and publicly disseminates that information, that is public information -- and an HFT is totally within their right to pull their remaining 1000 shares on each of the nine remaining exchanges if they so choose. That's why Lewis explains that once they wrote a program to stagger the submission of their orders so they arrive simultaneously to all ten exchanges, they were able to pick off all 10000 shares instead of only the 1000 on the first exchange.
auntienomen 13y ago
They do have every right to route their orders where they will. It's telling that most of the buy side prefers to route their orders to public exchanges rather than dark pools like IEX.
- tpeng 13y ago
  The buy side doesn't route orders. Brokers route orders, and they aren't required to tell their clients where they route the orders. (Some good brokers do allow traders to direct routing, but I believe it's not common). Also, there is a network effect to overcome here. Try to give IEX more than a few months before writing their obituary. They haven't even fully launched yet (they are still a dark pool)

consz 13y ago

It isn't only 1000 shares, there is indeed 1000 unique shares on each of those ten exchanges. The problem is that, as soon as the first exchange that you trade on processes your trade of the 1000 shares on that exchange and publicly disseminates that information, that is public information -- and an HFT is totally within their right to pull their remaining 1000 shares on each of the nine remaining exchanges if they so choose. That's why Lewis explains that once they wrote a program to stagger the submission of their orders so they arrive simultaneously to all ten exchanges, they were able to pick off all 10000 shares instead of only the 1000 on the first exchange.

auntienomen 13y ago

They do have every right to route their orders where they will. It's telling that most of the buy side prefers to route their orders to public exchanges rather than dark pools like IEX.

tpeng 13y ago
The buy side doesn't route orders. Brokers route orders, and they aren't required to tell their clients where they route the orders. (Some good brokers do allow traders to direct routing, but I believe it's not common). Also, there is a network effect to overcome here. Try to give IEX more than a few months before writing their obituary. They haven't even fully launched yet (they are still a dark pool)