5 ms·

There's an argument for spoofing from earlier this year [1] which I would tend to agree with if the proportion of spoofers and HFT front-runners actually balanc

by dm3 11y ago

There's an argument for spoofing from earlier this year [1] which I would tend to agree with if the proportion of spoofers and HFT front-runners actually balanced out. Not sure how it really is in reality though. [1] http://www.bloombergview.com/articles/2015-01-23/high-frequency-trading-spoofers-and-front-running http://www.bloombergview.com/articles/2015-01-23/high-freque...

kasey_junk 11y ago
From what I can tell, the argument for spoofing devolves pretty rapidly into an argument for private order books (that is prices are not published at all). This is available currently in the form of dark pools. They don't tend to work out as liquidity is much lower on them and bid/ask spreads are wider. That may not be true if ALL venues were required to be private, but that would be a pretty dramatic change (and exactly the opposite of what we have now, which is a requirement to publish and meet other published prices).
- msandford 11y ago
  > They don't tend to work out as liquidity is much lower on them and bid/ask spreads are wider. If you're a big institutional investor though, and you know that buying a bunch of shares will move the market for sure, well, it might be worth suffering a wider spread. As long as that spread looks small relative to how much you think you'll move the market, it's not a bad deal. And if you already have a subscription to the pool you might as well try it before you get the algorithms involved to buy on the open market.
  - kasey_junk 11y ago
    Absolutely if you are a large block trader your dream scenario is a very liquid market with very inefficient price discovery. Dark Pools were meant to provide that, but it turns out that in practice it didn't work (because no one wants to provide liquidity in that environment) and Dark Pools ended up resorting to either letting liquidity providers in, going out of business, or extremely scammy things to keep up the ruse.
    - msandford 11y ago
      So there are no institutional investors who ever need to sell? Or maybe it's that people aren't willing to wait at all when they want to sell, so putting it on the dark pool for a few hours or days isn't really an option. Where as if you want to buy you might be willing to wait a day or two.
      - kasey_junk 11y ago
        You are under the incorrect impression that providing liquidity means selling shares. Providing liquidity happens on either side of a trade. Market makers are full time liquidity providers offering to both buy and sell (usually at the same time). They make their money by bridging the temporal gaps in the supply/demand of an instrument. So if you are using a liquidity providers it is evidence that you do not want to wait. If you did want to wait, you yourself can just put the order out and provide the liquidity to others.

by dm3 11y ago

kasey_junk 11y ago

From what I can tell, the argument for spoofing devolves pretty rapidly into an argument for private order books (that is prices are not published at all). This is available currently in the form of dark pools. They don't tend to work out as liquidity is much lower on them and bid/ask spreads are wider. That may not be true if ALL venues were required to be private, but that would be a pretty dramatic change (and exactly the opposite of what we have now, which is a requirement to publish and meet other published prices).

msandford 11y ago
> They don't tend to work out as liquidity is much lower on them and bid/ask spreads are wider. If you're a big institutional investor though, and you know that buying a bunch of shares will move the market for sure, well, it might be worth suffering a wider spread. As long as that spread looks small relative to how much you think you'll move the market, it's not a bad deal. And if you already have a subscription to the pool you might as well try it before you get the algorithms involved to buy on the open market.
- kasey_junk 11y ago
  Absolutely if you are a large block trader your dream scenario is a very liquid market with very inefficient price discovery. Dark Pools were meant to provide that, but it turns out that in practice it didn't work (because no one wants to provide liquidity in that environment) and Dark Pools ended up resorting to either letting liquidity providers in, going out of business, or extremely scammy things to keep up the ruse.
  - msandford 11y ago
    So there are no institutional investors who ever need to sell? Or maybe it's that people aren't willing to wait at all when they want to sell, so putting it on the dark pool for a few hours or days isn't really an option. Where as if you want to buy you might be willing to wait a day or two.
    - kasey_junk 11y ago
      You are under the incorrect impression that providing liquidity means selling shares. Providing liquidity happens on either side of a trade. Market makers are full time liquidity providers offering to both buy and sell (usually at the same time). They make their money by bridging the temporal gaps in the supply/demand of an instrument. So if you are using a liquidity providers it is evidence that you do not want to wait. If you did want to wait, you yourself can just put the order out and provide the liquidity to others.