4 ms·

The best proposal I've heard: Instead of continuous trading, have an auction every 1-60 seconds. One trade per minute is plenty.

by fsk 13y ago

yxhuvud 13y ago
What problem would that solve?
kasey_junk 13y ago
A couple of issues with this: 1) most of the arguments for call auctions instead of continuous trading assume a centralized call auction that in and of itself adds no cost above our current decentralized exchanges. This seems like an extremely troublesome assumption given that we have seen the negative impact of centralized monopoly exchanges. 2) If it isn't a centralized auction there needs to be some price sync. mechanism. The most obvious one seems to be either latency arbitraging HFT (which for some reason people don't like) or a governmental central auction block the type of which is already causing legislative arbitration in the current markets. 3) Call auctions in and of them selves do not solve the major issue with our current prioritization system. If the auction algorithm has several prices that match the same amount of participants, or if the price it determines has an uneven number of buyers & sellers, who gets priority? 4) Price discovery is currently harder in call auction instruments. That could be because they are only done in illiquid markets and liquidity itself will fix that, but it is an issue with the current examples of this style of trading. 5) "Market" order mechanism. Many, many market participants are more worried about making sure they buy/sell than about high fidelity price fairness. If I say, "I want out of Goog no matter what", that complicates any auction methodology and introduces opportunities for gaming. At the end of the day, I can't figure out who will actually be protected in this style of market and to whose disadvantage. That is a lot of added complexity for a very vague benefit.

The best proposal I've heard: Instead of continuous trading, have an auction every 1-60 seconds. One trade per minute is plenty.

by fsk 13y ago

The best proposal I've heard: Instead of continuous trading, have an auction every 1-60 seconds. One trade per minute is plenty.

yxhuvud 13y ago

What problem would that solve?

kasey_junk 13y ago

A couple of issues with this: 1) most of the arguments for call auctions instead of continuous trading assume a centralized call auction that in and of itself adds no cost above our current decentralized exchanges. This seems like an extremely troublesome assumption given that we have seen the negative impact of centralized monopoly exchanges. 2) If it isn't a centralized auction there needs to be some price sync. mechanism. The most obvious one seems to be either latency arbitraging HFT (which for some reason people don't like) or a governmental central auction block the type of which is already causing legislative arbitration in the current markets. 3) Call auctions in and of them selves do not solve the major issue with our current prioritization system. If the auction algorithm has several prices that match the same amount of participants, or if the price it determines has an uneven number of buyers & sellers, who gets priority? 4) Price discovery is currently harder in call auction instruments. That could be because they are only done in illiquid markets and liquidity itself will fix that, but it is an issue with the current examples of this style of trading. 5) "Market" order mechanism. Many, many market participants are more worried about making sure they buy/sell than about high fidelity price fairness. If I say, "I want out of Goog no matter what", that complicates any auction methodology and introduces opportunities for gaming. At the end of the day, I can't figure out who will actually be protected in this style of market and to whose disadvantage. That is a lot of added complexity for a very vague benefit.