4 ms·

I know, HFT is insanely competitive in developed markets and there is no way an amateur can enter this segment but what about emerging markets like that of Indi

I know, HFT is insanely competitive in developed markets and there is no way an amateur can enter this segment but what about emerging markets like that of India. Is it possible to exploit HFT without expensive infrastructure, or million dollar code?

lmm 12y ago
If you're not competing with anyone then sure. The algorithms can be found in economics textbooks, the implementation isn't hard if you don't need insanely low latency. The trouble is that if you get your bids in slower than everyone else (with penny spreads there is no way to compete on price) then no-one's going to trade with you.
- yummyfajitas 12y ago
  In India the tick sizes tend to be 1-5 paise << 1 US penny. Over there it's actually a price competition game rather than a speed game. http://asiaetrading.com/resource/securities-tick-sizes/ http://asiaetrading.com/resource/securities-tick-sizes/ Incidentally, for anyone who wants to stop HFT, all you need to do is copy the Indian tick size. http://www.chrisstucchio.com/blog/2012/hft_whats_broken.html http://www.chrisstucchio.com/blog/2012/hft_whats_broken.html
  - minimax 12y ago
    I think you are oversimplifying. In the US you can compete on price at a subpenny level by posting at an exchange with inverted (taker/maker) pricing. Shares posted at BYX are really $0.004/share cheaper than BZX, and most smart order routers will take at the inverted exchanges first. Also, changing the tick size won't eliminate the race to 0 (or c) because there are other advantages to low latency execution beyond just getting good queue priority at the inside price. One obvious example is quickly canceling or modifying your orders when the price of a related instrument moves.
    - yummyfajitas 12y ago
      I am oversimplifying. You are right that speed still matters for cancels. It's true that you can post hidden midpoint orders. That's a far cry from posting a public bid at $42.2837 in order to jump the queue ahead of someone posting $42.2836.
  - kylebrown 12y ago
    Another option is to match orders with frequent batch auctions (instead of continuous double).[1] 1. http://faculty.chicagobooth.edu/eric.budish/research/HFT-FrequentBatchAuctions.pdf http://faculty.chicagobooth.edu/eric.budish/research/HFT-Fre...
    - kasey_junk 12y ago
      Batch auctions already exist already and still have HFT algo trading. Further, this paper also assumes a very particular assumption, that there is 1 and only 1 exchange. Even if we wanted that in 1 legal venue (history says we don't) we can't enforce it globally. So venue arbitrage will still happen and therefore there is still a speed advantage. Finally, this paper glosses over with 1 phrase "it may be necessary to ration one side of the market to enable market clearing" the whole crux of the problem. How do you remediate ties in price that can't be fully filled? IE, what is the matching algorithm? If it is still FIFO, then you still have a race.
  - lmm 12y ago
    Do you think the $.05 tick size experiment will demonstrate the disadvantages you claim for larger ticks?
- vecter 12y ago
  Do you work in HFT? Because as someone who used to work in HFT, I can say with 100% confidence that the algorithms are not found in economics textbooks.
  - lordnacho 12y ago
    I was about to say the same thing. I've studied economics, and worked in latency sensitive finance, though not for one of these firms, and I've never come across anything that was obvious. Perhaps you could enlighten us about was sort of thing is used, because time constraints seem to imply the algos must be quite short.
- deleted 12y ago
  [deleted]

lmm 12y ago

If you're not competing with anyone then sure. The algorithms can be found in economics textbooks, the implementation isn't hard if you don't need insanely low latency. The trouble is that if you get your bids in slower than everyone else (with penny spreads there is no way to compete on price) then no-one's going to trade with you.

yummyfajitas 12y ago
In India the tick sizes tend to be 1-5 paise << 1 US penny. Over there it's actually a price competition game rather than a speed game. http://asiaetrading.com/resource/securities-tick-sizes/ http://asiaetrading.com/resource/securities-tick-sizes/ Incidentally, for anyone who wants to stop HFT, all you need to do is copy the Indian tick size. http://www.chrisstucchio.com/blog/2012/hft_whats_broken.html http://www.chrisstucchio.com/blog/2012/hft_whats_broken.html
- minimax 12y ago
  I think you are oversimplifying. In the US you can compete on price at a subpenny level by posting at an exchange with inverted (taker/maker) pricing. Shares posted at BYX are really $0.004/share cheaper than BZX, and most smart order routers will take at the inverted exchanges first. Also, changing the tick size won't eliminate the race to 0 (or c) because there are other advantages to low latency execution beyond just getting good queue priority at the inside price. One obvious example is quickly canceling or modifying your orders when the price of a related instrument moves.
  - yummyfajitas 12y ago
    I am oversimplifying. You are right that speed still matters for cancels. It's true that you can post hidden midpoint orders. That's a far cry from posting a public bid at $42.2837 in order to jump the queue ahead of someone posting $42.2836.
- kylebrown 12y ago
  Another option is to match orders with frequent batch auctions (instead of continuous double).[1] 1. http://faculty.chicagobooth.edu/eric.budish/research/HFT-FrequentBatchAuctions.pdf http://faculty.chicagobooth.edu/eric.budish/research/HFT-Fre...
  - kasey_junk 12y ago
    Batch auctions already exist already and still have HFT algo trading. Further, this paper also assumes a very particular assumption, that there is 1 and only 1 exchange. Even if we wanted that in 1 legal venue (history says we don't) we can't enforce it globally. So venue arbitrage will still happen and therefore there is still a speed advantage. Finally, this paper glosses over with 1 phrase "it may be necessary to ration one side of the market to enable market clearing" the whole crux of the problem. How do you remediate ties in price that can't be fully filled? IE, what is the matching algorithm? If it is still FIFO, then you still have a race.
- lmm 12y ago
  Do you think the $.05 tick size experiment will demonstrate the disadvantages you claim for larger ticks?
vecter 12y ago
Do you work in HFT? Because as someone who used to work in HFT, I can say with 100% confidence that the algorithms are not found in economics textbooks.
- lordnacho 12y ago
  I was about to say the same thing. I've studied economics, and worked in latency sensitive finance, though not for one of these firms, and I've never come across anything that was obvious. Perhaps you could enlighten us about was sort of thing is used, because time constraints seem to imply the algos must be quite short.
deleted 12y ago
[deleted]