3 ms·
Pending transactions are never public. Everyone sees the execution on that exchange, but they don't know whether or not some additional portion is being routed
by evanpw 12y ago
Pending transactions are never public. Everyone sees the execution on that exchange, but they don't know whether or not some additional portion is being routed to another exchange.
One situation that people often _mistake_ for this type of prior knowledge is the following: You are a market-maker, and at the current price, you want to buy X shares (you're also willing to sell at some slightly higher price, and willing to buy more at some lower price, but at the current bid, your appetite is X). Since the US equity market is very fragmented, the best way to make that happen is to place an order for X shares on all of the dozens of different venues, and hope one of them gets executed. When your order on one venue gets executed, you want to cancel your orders on all of the other venues quickly so that you don't get overfilled and accidently buy more than X. If you're a person who's trying to sell 2 * X or 3 * X shares, and the price moves down after you sell the first X, it may look like someone knew about the rest of your order and sold ahead of you, but it's actually just the market-maker trying to control their inventory.
- Retric 12y ago"Pending transactions are never public." Pending transactions are should never be public. (Bad actor 1): Gee, but if they where I could get 1 billion dollars. (Bad actor 2): no, We could get 1 billion dollars. (Bad actor 1): I like 1 billion dollars. The point being it's often hard to steal 100's of Millions of dollars without someone noticing. But, front running like insider trading is one of the ways to do so.
- evanpw 12y agoI don't quite understand this argument. I certainly agree that front-running of the kind you describe would make someone a lot of money. This is one of the reasons that being a NYSE specialist was hugely profitable back in the pre-electronic era. I'm making the statement that this sort of thing is in fact no longer possible on on any U.S equities exchange.
- Retric 12y agoI think I was talking past people. The original post I responded to said: If your insider information is exclusive and rich, you don't even need HFT My comment was there is a range of vary short term insider information that you need HFT to benefit from. That does not mean that anyone does so, just that it's something that regulators should and probably are on the lookout for.