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One thing that I wondered about with automated trading was whether it might make sense to have a rate-limited marketplace. Somewhere that caches trades received

One thing that I wondered about with automated trading was whether it might make sense to have a rate-limited marketplace. Somewhere that caches trades received over a given time period and then executes them 'simultaneously' (or at least without preference for the order they were received in)....

curiouscats 12y ago
That is similar to some of the sensible suggestions to reduce the front running gains high frequency traders extract from the market. I can't remember the details but even just pooling them by the second or something like that.
Yrlec 12y ago
I'd love to see a stock market with a call auction every 15th min 24/7. It just doesn't make sense to have no trading at all during weekends and then claim that sub-millisecond execution is necessary when the market is open. The risk for the market maker shouldn't be much higher but the resources required to provide liquidity are much lower (no need to hire lots of developers to optimize your code). I wouldn't be surprised if a market like that would have tighter spreads (since it's cheaper to act as a market maker) but better stability (since an algorithm screwing up can be stopped during the 15 min interval).
- kasey_junk 12y ago
  There are actually academic findings that would make you think that is true. Unfortunately, those findings didn't take into account venue arbitrage, carry risk, or fees.
  - Yrlec 12y ago
    Interesting! Do you have any link where I can read more about it?
    - kasey_junk 12y ago
      Sure: http://faculty.chicagobooth.edu/eric.budish/research/HFT-FrequentBatchAuctions.pdf http://faculty.chicagobooth.edu/eric.budish/research/HFT-Fre... Note that this doesn't deal with the distributed systems problems of multiple exchanges so would require a universal exchange monopoly (ie an impossible and unwanted condition).
kasey_junk 12y ago
There are exchanges with batch auctions or batch auction time periods. They don't prevent algorithmic shenanigans in practice, they are some of the most gamed exchanges there are. Batch auctions in and of themselves do not mitigate latency advantage because the people that propose them never remember 2 things: 1) venue arbitrage - not only does the exchange have to batch all the trades on its book, it has to coordinate that with all the other exchanges. 2) tiebreakers - if in a given auction you have more people on 1 side of a price than on the other (more people offering to buy at x than people willing to sell for instance) who gets to trade?

curiouscats 12y ago

That is similar to some of the sensible suggestions to reduce the front running gains high frequency traders extract from the market. I can't remember the details but even just pooling them by the second or something like that.

Yrlec 12y ago

I'd love to see a stock market with a call auction every 15th min 24/7. It just doesn't make sense to have no trading at all during weekends and then claim that sub-millisecond execution is necessary when the market is open. The risk for the market maker shouldn't be much higher but the resources required to provide liquidity are much lower (no need to hire lots of developers to optimize your code). I wouldn't be surprised if a market like that would have tighter spreads (since it's cheaper to act as a market maker) but better stability (since an algorithm screwing up can be stopped during the 15 min interval).

kasey_junk 12y ago
There are actually academic findings that would make you think that is true. Unfortunately, those findings didn't take into account venue arbitrage, carry risk, or fees.
- Yrlec 12y ago
  Interesting! Do you have any link where I can read more about it?
  - kasey_junk 12y ago
    Sure: http://faculty.chicagobooth.edu/eric.budish/research/HFT-FrequentBatchAuctions.pdf http://faculty.chicagobooth.edu/eric.budish/research/HFT-Fre... Note that this doesn't deal with the distributed systems problems of multiple exchanges so would require a universal exchange monopoly (ie an impossible and unwanted condition).

kasey_junk 12y ago

There are exchanges with batch auctions or batch auction time periods. They don't prevent algorithmic shenanigans in practice, they are some of the most gamed exchanges there are. Batch auctions in and of themselves do not mitigate latency advantage because the people that propose them never remember 2 things: 1) venue arbitrage - not only does the exchange have to batch all the trades on its book, it has to coordinate that with all the other exchanges. 2) tiebreakers - if in a given auction you have more people on 1 side of a price than on the other (more people offering to buy at x than people willing to sell for instance) who gets to trade?