5 ms·

No, it is definitely fraud. The rule is that you may not enter an order (quote) that you have no intention of filling. You're perfectly entitled to change you

by gd1 12y ago

No, it is definitely fraud. The rule is that you may not enter an order (quote) that you have no intention of filling. You're perfectly entitled to change your mind afterwards (for whatever reason) and then cancel the order, but if you send an order with the initial objective of never having it execute, it is a fraudulent order and and a case of market manipulation. Always hard to prove though, since it goes to the intention of the market participant.

mapt 12y ago
Pardon my ignorance, but why is it possible to change your mind afterward and cancel the order? Why does the market not clear orders irrevocably (executing automatically) as soon as they are matched? Why this "sending" disengaged from actual market actions?
- Mvandenbergh 12y ago
  You can't cancel them after they're matched, these cancellations happen while they're sitting around waiting for someone to take them.
- gd1 12y ago
  These are limit orders under discussion, you seem to be confusing them with market orders.
- throwaway183839 12y ago
  The market clears any matching orders in effectively zero time (that is, it runs its matching algorithm to clear the book before it allows any new quotes to enter). After an order is matched, you can't cancel it except in exceptional circumstances (for example, you mistakenly entered an order very far from the bbo - in that case, with the cooperation of your broker and the counterparty to your trade, you may be able to unwind it). However before the order is matched you are free to cancel it if you decide you no longer want to trade at that price (for example, you see some change in the fundamentals of the stock that causes you to no longer want to buy, or simply that the price moves in such a way that a buy/sell at your original price no longer looks like good value).
  - mapt 12y ago
    So if I offer a trade, and then withdraw the trade because I decide I don't like the idea anymore (or 'any other reason')... that's legal. And routine to do on microsecond timescales. But offering a trade, and then withdrawing the trade manually a few seconds later because I never intended to execute the trade... that's not legal? What was the original rational for creating this class of thoughtcrime? Why does it criminalize intent, while the action is perfectly routine, and the outcomes are the same either way? There is, after all, the risk of someone actually calling your bluff and buying your sell order, or selling into your buy order, which is cleared instantly... so where's the fraud?. Doesn't HTF presuppose that we are hard-coding this behavior, this tactic, into the trading algorithms of automated traders?
    - gd1 12y ago
      >So if I offer a trade, and then withdraw the trade because I decide I don't like the idea anymore (or 'any other reason')... that's legal. And routine to do on microsecond timescales. Yes that's right. So quickly you may as well assume that they are updating the price they are willing to buy/sell continuously in realtime. Which is the idea. And because they are updating their prices continuously and accurately, they can keep the gap between those two prices as small as possible. For some bizarre reason, this is the only field in all of technology where HN contributors get freaked out by this. Name a control system that doesn't update its outputs frequently. >But offering a trade, and then withdrawing the trade manually a few seconds later because I never intended to execute the trade... that's not legal? Yes that's right. Markets work on trust, if you don't actually want to buy/sell what you're claiming you want to buy/sell then you are lying. More importantly, if you don't want to trade, what are you doing putting the order in? What does that leave as your motivation? Manipulation, that's what. Which is illegal. It's very hard to define market manipulation, but that's just about the easiest way I can think of - can you think of a simpler definition? They have to settle on some way of describing it, and it's not unusual for crimes to be defined by intent. >Doesn't HTF presuppose that we are hard-coding this behavior, this tactic, into the trading algorithms of automated traders? I don't follow
      - 12y ago

by gd1 12y ago

mapt 12y ago

Pardon my ignorance, but why is it possible to change your mind afterward and cancel the order? Why does the market not clear orders irrevocably (executing automatically) as soon as they are matched? Why this "sending" disengaged from actual market actions?

Mvandenbergh 12y ago
You can't cancel them after they're matched, these cancellations happen while they're sitting around waiting for someone to take them.
gd1 12y ago
These are limit orders under discussion, you seem to be confusing them with market orders.
throwaway183839 12y ago
The market clears any matching orders in effectively zero time (that is, it runs its matching algorithm to clear the book before it allows any new quotes to enter). After an order is matched, you can't cancel it except in exceptional circumstances (for example, you mistakenly entered an order very far from the bbo - in that case, with the cooperation of your broker and the counterparty to your trade, you may be able to unwind it). However before the order is matched you are free to cancel it if you decide you no longer want to trade at that price (for example, you see some change in the fundamentals of the stock that causes you to no longer want to buy, or simply that the price moves in such a way that a buy/sell at your original price no longer looks like good value).
- mapt 12y ago
  So if I offer a trade, and then withdraw the trade because I decide I don't like the idea anymore (or 'any other reason')... that's legal. And routine to do on microsecond timescales. But offering a trade, and then withdrawing the trade manually a few seconds later because I never intended to execute the trade... that's not legal? What was the original rational for creating this class of thoughtcrime? Why does it criminalize intent, while the action is perfectly routine, and the outcomes are the same either way? There is, after all, the risk of someone actually calling your bluff and buying your sell order, or selling into your buy order, which is cleared instantly... so where's the fraud?. Doesn't HTF presuppose that we are hard-coding this behavior, this tactic, into the trading algorithms of automated traders?
  - gd1 12y ago
    >So if I offer a trade, and then withdraw the trade because I decide I don't like the idea anymore (or 'any other reason')... that's legal. And routine to do on microsecond timescales. Yes that's right. So quickly you may as well assume that they are updating the price they are willing to buy/sell continuously in realtime. Which is the idea. And because they are updating their prices continuously and accurately, they can keep the gap between those two prices as small as possible. For some bizarre reason, this is the only field in all of technology where HN contributors get freaked out by this. Name a control system that doesn't update its outputs frequently. >But offering a trade, and then withdrawing the trade manually a few seconds later because I never intended to execute the trade... that's not legal? Yes that's right. Markets work on trust, if you don't actually want to buy/sell what you're claiming you want to buy/sell then you are lying. More importantly, if you don't want to trade, what are you doing putting the order in? What does that leave as your motivation? Manipulation, that's what. Which is illegal. It's very hard to define market manipulation, but that's just about the easiest way I can think of - can you think of a simpler definition? They have to settle on some way of describing it, and it's not unusual for crimes to be defined by intent. >Doesn't HTF presuppose that we are hard-coding this behavior, this tactic, into the trading algorithms of automated traders? I don't follow
    - 12y ago