4 ms·
this is an interesting way to look at the problem but in my reasonably informed opinion, flawed. it seems like this is working backwards from the assumption th
by lmg643 12y ago
this is an interesting way to look at the problem but in my reasonably informed opinion, flawed.
it seems like this is working backwards from the assumption that quote stuffing must be benign activity, and then trying to rationalize it with signal/noise theories about finding the fair price level.
it is totally inaccurate to say that there is more load on the sender than the general public, and also misses the mark on what the DOS theory alleges.
the exchange bears considerably more load than the sender of orders. the exchange must (1) ack the order, or reject if any flags are populated out-of-spec, (2) add the order to the order book, (3) check for potential matches based on price of order, if so, cross and update feeds, (4) if non-marketable, publish out to (a) depth-of-book feed, (b) SIP feed, etc.
the DOS theory is that excessive activity in a single partition can slow down the publishing of data in that symbol range, which would mess up the quoted price for the exchange in a symbol, which would affect orders priced on the exchange, or anyone using the price in a derived manner (at a dark pool etc).
- yummyfajitas 12y agoI'm not making the assumption that it's benign. It's based on my own experience - I've quote stuffed hundreds of times in simulation, and I'm sure it happened in production as well. It's a hard bug to completely avoid. Interesting - the DOS attack is on the exchange rather than other market participants. But could you be more specific on how this helps you make money?
- kasey_junk 12y agoThere used to be games where you would attempt to get one order connection on one exchange gateway and then another connection on a different exchange gateway. You'd spam with one connection to slow down all the other participants on that gateway, and use your other connection for your real trades. Other games involved spamming open auctions, settlement trades etc. This gaming was a very brief phenomenon (because it is stupid, doesn't make as much money as traditional trading, and trivial to foil). The exchanges got rid of it almost immediately but it still gets passed around as folklore for one of the "predatory" activities that HFT does.
- hft_throwaway 12y agoMost exchanges are structured something like: a.) Each trader has one or more gateway processes that do the order checking/rejecting. b.) Each gateway maintains a queue of messages for the matching engine. c.) The matching engine/order book for a product pulls one message at a time from each gateway that has a message waiting on its queue and processes it before spinning back to the first gateway again. So a trader blasting the exchange with orders isn't going to impact other traders who also place orders around the same time. She'll only be slowing herself down.
- mmaldacker 12y agoDOSing the exchange will get you kicked out in no time.