# Alan Kohler's Take on High Frequency Trading



## cogs (11 April 2012)

High-frequency trading is cuckoo

Alan Kohler

Published 6:40 AM, 11 Apr 2012 Last update 6:40 AM, 11 Apr 2012
inShare



    In the Australian Stock Exchange’s Sydney data room, which is about the size of a big lounge room, there are six “cuckoos”. These are the banks of servers installed by high frequency traders.

    They sit against the wall opposite the ASX servers and each is connected directly into the host by a fat fibre optic pipe. Each cable is precisely the same length by agreement with the ASX so that none gets an advantage; if one server is closer to the input, its cable is looped around to lengthen it.

    Think about that: one less metre of optic fibre carrying data at 299.8 million metres per second would give one share trader an unfair advantage over the rest. It suggests that something pretty quick is going on.

    The question is whether it’s fair to the rest of us; whether those six parasites with their suckers fastened directly into the heart of the ASX should be allowed to get away with it.

    The ASX is no longer a regulator, just a business, so it says that if the practice is legal and it pays a fee – not to mention a handy rent in the data room – then it can’t and won’t stop them.

Cont' in his article http://www.businessspectator.com.au/bs.nsf/filterSpectatorsc?openview&restricttocategory=Alan Kohler

Nothing new, but regulation of sorts needs traction for the sake and well being of general investors.


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## MrBurns (11 April 2012)

*Trade parasites feeding at the heart of the ASX*



> In the Australian Stock Exchange's Sydney data room, which is about the size of a big lounge room, there are six "cuckoos". These are the banks of servers installed by high-frequency traders.
> 
> They sit against the wall opposite the ASX servers and each is connected directly into the host by a fat fibre optic pipe. Each cable is precisely the same length by agreement with the ASX so that none gets an advantage; if one server is closer to the input, its cable is looped around to lengthen it.
> 
> ...




http://www.abc.net.au/news/2012-04-11/kohler-high-frequency-trade-parasites-at-heart-of-asx/3943052


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## Boggo (11 April 2012)

*Re: Trade parasites feeding at the heart of the ASX*

Play the video on the link below for an explanation of the reality of what is happening.
Very interesting !

http://www.mtpredictor.us/2099/correction-came-but-how-deep/


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## Trembling Hand (11 April 2012)

> What do the computers and their algorithms do? Well, as my relatively low-frequency brain can understand it, these machines constantly monitor order flow into the ASX servers, and the sophisticated programs can pick up patterns that indicate when a reasonably large order has been placed. What they then do, in effect, is "front-run" – that is, they buy ahead of the order and make a small spread selling into it.




What a complete idiot this guy is. He is simply guessing at what they do. And he is way off. 

Anyone that pays or listens to a fool is a bigger .........


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## So_Cynical (11 April 2012)

Alan Kohler]What do the computers and their algorithms do? Well said:


> What a complete idiot this guy is. He is simply guessing at what they do. And he is way off.
> 
> Anyone that pays or listens to a fool is a bigger .........




Not that i have a clue but...if the HFT's are only day trading then they would have to buy first and then sell to make money, sort of micro trend following i would think.

I like Alan Kohler


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## tech/a (11 April 2012)

So_Cynical said:


> Not that i have a clue but...if the HFT's are only day trading then they would have to buy first and then sell to make money, sort of micro trend following i would think.
> 
> I like Alan Kohler




Did you look at the video?
Try 1.2 million trades in 7 minutes.


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## Trembling Hand (11 April 2012)

So_Cynical said:


> I like Alan Kohler




Why? 

He is just making it up. They don't front run large orders like his stated to make out they are robbing your super fund. Just clueless BS his made up because he has no idea what they do.

How can a financial journalist get away with this rubbish?

Then of course you get the 100 comments like that article has attracted about how it should be banded and how its evil just like short selling etc etc.

All from an article with NO research and no facts as to what it actually does. If I was a HFT bot I would be suing for slander.

c:


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## CanOz (11 April 2012)

I was waiting all day for you to comment on that TH...Figured you have a better idea what the bots do than Alan Kohler!

Sounds like he's got his knickers in a twist....the bots got his super!

CanOz


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## So_Cynical (11 April 2012)

tech/a said:


> Did you look at the video?
> Try 1.2 million trades in 7 minutes.




Yep watched the video...and to make money they still have to sell XYZ for more than they paid for it.

And cant see anything wrong with a 1 minute minimum holding period.


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## doctorj (11 April 2012)

Is Kohler describing trading or sky net? It's hard to decipher much more than the fact we should be afraid, very afraid. He portrays these machines as god-like things able to guess what will happen in the near future and get ahead of it, robbing you of money. Great for getting Mum and Dad excited, but not so good for a financial journalist's credability.

There are so many things he could of criticised about HFT without sounding like a lunatic - for example a lack of regulation or understanding by any regulators or how the oft-used argument in support of HFT (more liquidity) only applies when markets are behaving nicely and quickly disappears when you need it the most. 

There's no doubt that HFT needs to be better understood than it is, but he's not helping!


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## Starcraftmazter (12 April 2012)

So_Cynical said:


> Yep watched the video...and to make money they still have to sell XYZ for more than they paid for it.
> 
> And cant see anything wrong with a 1 minute minimum holding period.




Seems reasonable - but then they'd do the same thing, and just hold for a minute. They would still identify the opportunities before everyone else does and be out before everyone else does.

The best solution is to regulate HFTers out of discounts and special deals with the ASX. If they had to pay $20 per trade, they'd be out of business. Problem solved.


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## doctorj (12 April 2012)

Starcraftmazter said:


> Seems reasonable - but then they'd do the same thing, and just hold for a minute. They would still identify the opportunities before everyone else does and be out before everyone else does.
> 
> The best solution is to regulate HFTers out of discounts and special deals with the ASX. If they had to pay $20 per trade, they'd be out of business. Problem solved.




I don't think its right to regulate them out of existence. They don't have an advantage that isn't open to anyone else with the money to pay the fees. I think what is important is to understand how they work (if I recall, the US authorities have asked to review the code behind some HFT bots) and how they're likely to behave under different market conditions. I don't see a problem in a bot hitting the bid or ask (isn't this just what a market maker does, but more efficient?), but you want to limit opportunities for market manipulation, you probably want to also manage how they behave during multi-deviation events and you want to establish standards to limit potential for the so called 'flash crashes'.

The EU is looking at compelling HFT bots to provide liquidity even as the market is crashing which is obviously crazy and will never happen, the US is looking at studying it better, but I can't see why you'd want to get rid of them completely.

As an interesting aside, check out - http://blog.themistrading.com/more-hft-and-insects-algobots-on-amazon/ for an interesting look at how bots get their tentacles into some places you might not expect.


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## Trembling Hand (12 April 2012)

Starcraftmazter said:


> If they had to pay $20 per trade, they'd be out of business. Problem solved.




What problem?

Its a market? If trading smarter than someone else is a problem then we are in serious trouble!!


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## Punta (12 April 2012)

I don't really know anything about institutional HF trading, but my latest trading bot that I'm trying to get going for the SPI has an average hold time of 40-secs.  I get 5-sec bars for my "live" data feed, and I place a new limit order every 5-secs.  Often my limit is hit, but I don't get filled, because my order is not close enough to the front of the queue, I guess.  

My guess is that the proper HF guys place a whole load of limit orders slightly away from the current bid/ask, and when the market moves, they are first in line, and so they are able to get filled first, and scalp the market; buy at the bid and sell at the ask.  Or market making, whatever you want to call it.

You need a proper fast data feed to track the market in real time, and submit your orders accordingly.  At the moment a punter like me with IB is limited to 5-sec real time bars, which is nowhere near fast enough to write a market making algo.

You could bemoan the fact that it comes down to an arms race, and the guys with fat fiber optics connected to the exchange have an advantage that is not available to us punters, but really, I think it's all just shades of grey - the guy at home in Sydney with a  fast computer and internet connection probably has an advantage over the guy in Timbuktu with a Spectrum 128 and a dial up connection.  It doesn't seem to make sense to legislate data feeds/trading behaviour to some arbitrary playing field based on what the average punter in Sydney/New York is comfortable with.


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## Trembling Hand (12 April 2012)

Yeah thats correct Punta. Its a bloody market!! The commies want every Mum & Pop to win. And every Mum & Pop want someone to blame for their loses.

I see no propblem making sure they don't destablise the market in adverse events similar to the restrictions they placed on Bot selling after the 87 crash. But to make up BS like Kohler has just done IS the problem not the HFT.

On a side note I'm surprised you can find a algo that can trigger that many times on the snail pace SPI. Have you had a look at some faster markets like HSI, K200 or STW?


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## Punta (12 April 2012)

Trembling Hand said:


> On a side note I'm surprised you can find a algo that can trigger that many times on the snail pace SPI.




Well with a market making algo (which mine isn't really), you're always going to want to buy a little lower than the market, or sell a little higher, so you will submit a limit order as often as you can get market data (5-secs in my case).   Mostly they don't get filled, because they are only active until you receive the next piece of market info.



Trembling Hand said:


> Have you had a look at some faster markets like HSI, K200 or STW?





I haven't mate - the SPI is my first foray into futures trading.  The "to do" list includes getting historical data for other contracts, and testing my algo on them.  Getting a year of 5-sec bars from IB takes a few days per contract though, so it's a bit of a drawn out process.  Thanks for the heads up though - will make sure I look at the contracts you suggest.


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## Starcraftmazter (12 April 2012)

doctorj said:


> I don't think its right to regulate them out of existence.






Trembling Hand said:


> What problem?
> 
> Its a market? If trading smarter than someone else is a problem then we are in serious trouble!!




It's not really trading smarter than someone else, so much as having a distinct advantage over everyone else.

In my view HFTers disrupt and impede the functioning of the stock markets - which is to efficiently allocate capital to the highest quality investments. In fact, they do not allocate any capital to anyone 

Normal traders at least aid in price discovery and are very much on even footing with everyone else in terms of what is available to them and what they can do. They do not manipulate the market and cause crashes. This is not the case with HFTers.


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## motorway (12 April 2012)

http://www.cmegroup.com/education/steidlmayer-volume-strips-video.html

Worthwhile listening to this.

A view of how market dynamics have changed over time and his current thinking on how to deal  with it.

well worth the effort to listen through ... it will take a little effort.


==>Steidlmayer Volume Strips: A New Method to Analyze the Markets
J. Peter Steidlmayer has been a Chicago Board of Trade member for over 40 years. He developed a mainstay of market analysis, Market Profile, and has been a thought leader in how markets behave. Steidlmayer presents his recent research discussing the importance of understanding how price and volume databases as tools for market analysis have changed with the advent of electronic trading, and how these changes effect trading methodology. He discusses:

Why the Market Profile legacy analysis of price and time has changed
How electronic market order flow contrasts to open-outcry order flow
Analyzing volume and price
How the influence of supply (volume) effecting price is the new paradigm


Motorway


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## Trembling Hand (12 April 2012)

Starcraftmazter said:


> It's not really trading smarter than someone else, so much as having a distinct advantage over everyone else.
> 
> *In my view HFTers disrupt and impede the functioning of the stock markets* - which is to efficiently allocate capital to the highest quality investments. In fact, they do not allocate any capital to anyone
> 
> Normal traders at least aid in price discovery and are very much on even footing with everyone else in terms of what is available to them and what they can do. They do not manipulate the market and cause crashes. This is not the case with HFTers.



You say they " disrupt and impede the functioning" but can you back up this statement with any proof other than market myth?


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## sinner (12 April 2012)

Trembling Hand said:


> You say they " disrupt and impede the functioning" but can you back up this statement with any proof other than market myth?




Seriously?

Check here! http://www.nanex.net/FlashCrash/OngoingResearch.html

http://www.nanex.net/aqck/2816.HTML
http://www.nanex.net/Research/QuoteStuffingBanned/QuoteStuffingBanned.html
http://www.nanex.net/20100506/FlashCrashAnalysis_Part4-1.html
http://www.nanex.net/aqck/2970.html
http://www.nanex.net/StrangeDays/06082011.html
http://www.thetrader.se/2012/02/14/crude-hft/

Quote stuffing, subpennying, order spoofing, flash trades, exchange flooding with spoofed orders then flooding with cancels, stub quotes, etc.

My own training in systems theory sets off all sorts of alarm bells when I hear about the things HFT has been in trouble with CME and other exchanges for (NYMEX crude algo anyone?), are working systemic instability into the market microstructure.


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## pixel (12 April 2012)

motorway said:


> Why the Market Profile legacy analysis of price and time has changed
> How electronic market order flow contrasts to open-outcry order flow
> Analyzing volume and price
> How the influence of supply (volume) effecting price is the new paradigm



 ... right on cue, just as VSA gained traction. What's the next fad the algos can exploit?


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## Punta (12 April 2012)

sinner said:


> ... working systemic instability into the market microstructure.




I would have thought that any momentum following trading introduces instabilities.  The price goes up, everyone gets on board, and the price goes up some more until it is far from it's rational/fundamental value.  This happens with trading of all asset classes (houses, food, financial derivatives etc), and probably reflects something fundamental in human nature.  It doesn't seem to be qualitatively different if I make a machine do the trading, and make decisions at a slightly faster pace than my poor little brain can manage.


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## sinner (12 April 2012)

Punta said:


> I would have thought that any momentum following trading introduces instabilities.  The price goes up, everyone gets on board, and the price goes up some more until it is far from it's rational/fundamental value.  This happens with trading of all asset classes (houses, food, financial derivatives etc), and probably reflects something fundamental in human nature.  It doesn't seem to be qualitatively different if I make a machine do the trading, and make decisions at a slightly faster pace than my poor little brain can manage.




Punta, when you simplify it like that the issues are lost. It's not simply a matter of 'making a machine to do the trading', what if the machine fails? What if the machine is only tested for a few hours before being dumped into the live market, like the NYMEX crude bot that f'd stuff up? What if the firm doing the HFT accounts for more than 50% of all the market? What if the machine fails, and then the failsafes fail? This has *already happened* in repeated instances across many exchanges. Turns out, the 'laws of computer science' apply to HFT code as well, who would have thought!  

Research indicates repeatedly that many HFT strategies are not even viable in lieu of transaction costs despite their high level of predictive capability. HFT by and large gets *exchange rebates* to perform their churn, without these rebates there would be no viability. A concept so retarded that the London Stock Exchange has already abolished it after being one of the first to utilise it. Of course a whole bunch of HFTs jumped ships to BATS Europe (which holds <10% of share compared to LSEs 65%) straight away, since they wouldn't be able to churn viably without.


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## Punta (12 April 2012)

sinner said:


> Punta, when you simplify it like that the issues are lost.




Yeah fair enough, there's obviously problems with how individual algos are implemented, but I can't see anything fundamentally wrong with HFT.  

There is currently legislation in place to prevent asset bubbles, or large price fluctuations, on time scales that the human brain is familiar with (i.e. months/years).  I guess with the advent of HFT there could be legislation in place to stop HFTs causing big price fluctuations at "their timescale", of a few mins.


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## sinner (12 April 2012)

Punta said:


> Yeah fair enough, there's obviously problems with how individual algos are implemented, but I can't see anything fundamentally wrong with HFT.




It' all about market structure and its integrity, rather than the individual algos.

Right now the only barrier to entry for 'driving on the HFT highway' is money. Got money? You can drive on our highway, even if you don't know how.

But it turns out the highway is pretty important to the real world, so letting on a jalopy with a rocket strapped to just to score the toll seems more than a little stupid.


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## wayneL (12 April 2012)

How does any of this affect Joe and Martha Sixpack with their occasional share purchase to put in the bottom drawer?

Much ado over nothing methinks.


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## Punta (12 April 2012)

sinner said:


> ...What if the firm doing the HFT accounts for more than 50% of all the market?




Wouldn't this mean that it would have to be trading with itself??  That doesn't seem to make too much sense.

You could say that, if an algo is not trading with itself, then there must be another party willing to take the other side of the trade, and so the algo isn't pushing prices around unfairly.


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## sinner (12 April 2012)

Punta said:


> Wouldn't this mean that it would have to be trading with itself??  That doesn't seem to make too much sense.
> 
> You could say that, if an algo is not trading with itself, then there must be another party willing to take the other side of the trade, and so the algo isn't pushing prices around unfairly.




Lots of algo activity is not matched trades but rather huge quote stuffing. Also there is the well known 'pass the parcel' technique, algo A has a block of 100 shares and sells it to algo B for one tick more than it paid, then algo B sells the block back to algo A for one tick higher again, etc etc. No reason the algos have to be owned by different firms.


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## Starcraftmazter (12 April 2012)

wayneL said:


> How does any of this affect Joe and Martha Sixpack with their occasional share purchase to put in the bottom drawer?
> 
> Much ado over nothing methinks.




For every dollar the HFTers make, someone has to lose it.


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## Punta (12 April 2012)

sinner said:


> Also there is the well known 'pass the parcel' technique, algo A has a block of 100 shares and sells it to algo B for one tick more than it paid, then algo B sells the block back to algo A for one tick higher again, etc etc.




That sounds like flat out market manipulation.  It makes sense though - if there is a fundamental instability due to the fact that people/algos follow momentum, it might be in your interest to generate a bit of momentum, so that you can ride the wave you've created further down the track.  I'm not saying it's right, but if I could make waves and surf them, I'd be pretty happy...


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## Trembling Hand (12 April 2012)

The thing is that Mr & Misses average think these things are wildly profitable at the cost of their own "investment" loses. They aren't, mostly the BOTs are hardly profitable.

I've seen the evolution of HFT bots on ASX since 2007-8 up to now and 99.9 percent of the time they have greatly reduced volatility. To the point that many a local has had to move on because they cannot get intraday moves big enough to cover cost. Yet idiot journalist state that they wildly swing the market at will to profit from everyone else. Or they somehow front run other execution bots? Ridiculous! 

From time to time they have a bad hair day and muck things up but I've seen many human traders do the same. No problems in regulating them to "do no harm" but firstly it would be nice if Kohler and his Muppets knew what the hell they spoke of.


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## Trembling Hand (12 April 2012)

Starcraftmazter said:


> For every dollar the HFTers make, someone has to lose it.




LOL So? You want to regulate who makes money?


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## tech/a (12 April 2012)

sinner said:


> Lots of algo activity is not matched trades but rather huge quote stuffing. Also there is the well known 'pass the parcel' technique, algo A has a block of *100 *shares and sells it to algo B for one tick more than it paid, then algo B sells the block back to algo A for one tick higher again, etc etc. No reason the algos have to be owned by different firms.




Then Punter comes along and sees a higher price so puts in a bid for *10000s* at market and Bot sells into it with an average price way less than bought.
OR

If they get really lucky there is an announcement related or un related which has punters lined up at open for buy OR sell.
Bot picks the eyes out of it quicker than traders can react!

Bot buys when everyone is selling and sells when everyone is buying.
You just cant see clear cut evidence.




> I've seen the evolution of HFT bots on ASX since 2007-8 up to now and 99.9 percent of the time they have greatly reduced volatility.




Absolutely.
My feeling is that long term trends will be rare.
Once bots get on them they will control volatility.


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## notting (12 April 2012)

tech/a said:


> Absolutely.
> My feeling is that long term trends will be rare.
> Once bots get on them they will control volatility.




I agree, they provide liquidity both ways so the effect is minimal.
However they do provide a drain on markets that was not there once, so there is less money for the humans without HFTs machines close to the action. So less overall opportunity in the market, longer term that is meaningful.

On the other side of the argument, it does not seem to make much sense that volatility tends to pick up during holiday periods, where, presumerably, the machines are not lying on the beaches or hitting the slopes.  So if the machines are moderaters of volatility then shouldn't the holidays be a little more boring?
Or does everyone go home and day trade on their holidays?
Maybe everyone has a HFT app on their Iphone - younger generation just can't keep up with em.


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## sinner (12 April 2012)

tech/a said:


> Then Punter comes along and sees a higher price so puts in a bid for *10000s* at market and Bot sells into it with an average price way less than bought.




Except, in the 1 human second it took to bid, liquidity has already dropped and the price has moved.

http://www.economist.com/node/21547988


> A bigger problem, says Paul Squires, the head of trading for AXA Investment Managers, is that *increased liquidity can be illusory*. “You can press the button to buy Vodafone, say, and have it executed in a second but in that period 75% of the liquidity has disappeared and the price has moved.”







> You just cant see clear cut evidence.




Errr, says you? Actually analysing market microstructure is pretty much the bread and butter for outfits like NANEX. Worth checking out before making claims like that.



> My feeling is that long term trends will be rare.
> Once bots get on them they will control volatility.




So how has AAPL, or NG futs, or Soybeans, or Swiss Francs, or JPY, or anything that is up to its eyeballs in HFT for the last 2 years been trending so long term? I am wondering how you explain all the volatility and 100% correlation of unrelated markets, of May 6 2010 then? Oh wait, turns out HFT are just as 'fearful and greedy' as everyone else and at the first whiff of trouble they will just *turn off* and let the market fall/rise to the human price level.


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## Starcraftmazter (12 April 2012)

Trembling Hand said:


> LOL So? You want to regulate who makes money?




I want to regulate so that everyone has an equal opportunity to make money.


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## Trembling Hand (12 April 2012)

Starcraftmazter said:


> I want to regulate so that everyone has an equal opportunity to make money.




Err 

They have.


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## Starcraftmazter (12 April 2012)

Trembling Hand said:


> Err
> 
> They have.




No they have not. The vast majority of market participants cannot afford to buy and collocate servers at the ASX.


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## sinner (12 April 2012)

Starcraftmazter said:


> No they have not. The vast majority of market participants cannot afford to buy and collocate servers at the ASX.




Well no ****, if you allocate an investor with $1000 the same 'participation' rate as Goldman Sachs Sydney office then of course it seems skewed.

But your statement is not true, the vast majority of market participants *ranked by actual participation in the market* can in fact afford to buy and colocate servers at the ASX (or similarly connected datacenters).


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## wayneL (12 April 2012)

Starcraftmazter said:


> For every dollar the HFTers make, someone has to lose it.




1/ Quite so in derivative markets, Bu Joe Sixpack isn't likely to buy his nest egg there. Not quite so clear in equity markets. Suppose Joe bought CBA for $5ish at, or shortly after the IPO... who lost?

2/ When Joe Sixpack goes into the market to buy some shares, HFTs may have pushed it down or pushed it up. JS is just as likely to benefit by a few ticks.

3/ Ergo, HFTs do not compete in any way with buy and holders, they compete with short term traders. As a private short term trader you always have been a guppy amongst sharks. I couldn't give a fat rat's @ss about the HFTs... bring it on, I'll trade against them (and do).



Starcraftmazter said:


> I want to regulate everything




Corrected for accuracy. LOL 

I am incredulous that you claim to be an Austrian.


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## Starcraftmazter (12 April 2012)

sinner said:


> But your statement is not true, the vast majority of market participants *ranked by actual participation in the market* can in fact afford to buy and colocate servers at the ASX (or similarly connected datacenters).




First of all, I fail to see how ranking them in any way is relevant.

Second, no I doubt they can afford it - it is extremely expensive.

Third, let us say they could afford it at the current rate - there would not be enough physical space nor connectivity for every market participant - not nearly enough.

And having them in a different data centre is clearly inferior.


Thereby, it is inherently unfair and should not be allowed.



wayneL said:


> Not quite so clear in equity markets. Suppose Joe bought CBA for $5ish at, or shortly after the IPO... who lost?




But more importantly - what does that have to do with HFTs?

Every $1 they make would be someone else's otherwise. Let's say Joe Sixpack buys $100,000 CBA one day for $49, and it trades at $50 a fortnight later. Mr. Sixpax proclaims "yipee" and hits the sell button - but in that period of time, in between when he hit sell and the order is executed by the ASX, a HFT parasite has taken market actions which result in CBA trading at $49.50 - and good 'ol Joe with six kids to feed, and a wife that just won't shut up about a brand new BMW got 50% less profit.

Sure you could say he should have put in a conditional order to sell at $50, but let's say the price would never reach $50 again and he was too slow to put in that order. The point is, HFTers make money by depriving people of their well earned profits. For every $1 they make, someone will lose a $1 which they would have otherwise made.



wayneL said:


> 2/ When Joe Sixpack goes into the market to buy some shares, HFTs may have pushed it down or pushed it up. JS is just as likely to benefit by a few ticks.




Private companies do not have the right to randomly pick winners and losers in the market.



wayneL said:


> 3/ Ergo, HFTs do not compete in any way with buy and holders, they compete with short term traders. As a private short term trader you always have been a guppy amongst sharks. I couldn't give a fat rat's @ss about the HFTs... bring it on, I'll trade against them (and do).




It doesn't particularly matter who they compete with, the point is they cause other market participants to make less profit or even lose money.



wayneL said:


> I am incredulous that you claim to be an Austrian.




Without regulation, we cannot have stable, free and fair markets. If we do not have fair markets where everyone has equal opportunity - then it is *not* capitalism.


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## skyQuake (12 April 2012)

Starcraftmazter said:


> Every $1 they make would be someone else's otherwise. Let's say Joe Sixpack buys $100,000 CBA one day for $49, and it trades at $50 a fortnight later. Mr. Sixpax proclaims "yipee" and hits the sell button - but in that period of time, in between when he hit sell and the order is executed by the ASX, a HFT parasite has taken market actions which result in CBA trading at $49.50 - and good 'ol Joe with six kids to feed, and a wife that just won't shut up about a brand new BMW got 50% less profit.




No way can the HFT algo know a mkt order is coming in. They can react to price and volume but they cannot anticipate Joe's order. Unless Joe sits on the ask at $50, the algo sees his order come in, and *can* frontrun that. But so can the entire market.

The problem is HFTs cant push CBA any more than a few cents without getting smashed by other market participants. And neither can it frontrun the thousands of orders that come in every minute.

In a real life scenario Joe hits the sell mtk button, gets done at $50, or $49.98, or even $50.03, Commsec is the real winner here. 



> Sure you could say he should have put in a conditional order to sell at $50, but let's say the price would never reach $50 again and he was too slow to put in that order. The point is, HFTers make money by depriving people of their well earned profits. For every $1 they make, someone will lose a $1 which they would have otherwise made.




Its not 0 sum in stocks. And in most cases, HFT would be helping the Joes by providing liquidity. The real whales that move the market ie fundies etc are the ones that are preyed upon.



> Private companies do not have the right to randomly pick winners and losers in the market.
> 
> It doesn't particularly matter who they compete with, the point is they cause other market participants to make less profit or even lose money.




Yes, I too would like to trade in a market where my competitors are not allowed to make me lose money.



Most of the HFTs are index arb or oppies arb or some sort of arb bot. Because arb opportunities disappear so very very quickly, that is why they have a need to jump the competitor and snap up cheap stock etc. %wise of Aus mkt vol, very little is actual predatory algos that seek out large buy/sell orders and try to frontrun that.


----------



## Trembling Hand (12 April 2012)

Starcraftmazter said:


> Every $1 they make would be someone else's otherwise. Let's say Joe Sixpack buys $100,000 CBA one day for $49, and it trades at $50 a fortnight later. Mr. Sixpax proclaims "yipee" and hits the sell button - but in that period of time, in between when he hit sell and the order is executed by the ASX, a HFT parasite has taken market actions which result in CBA trading at $49.50 - and good 'ol Joe with six kids to feed, and a wife that just won't shut up about a brand new BMW got 50% less profit.
> 
> Sure you could say he should have put in a conditional order to sell at $50, but let's say the price would never reach $50 again and he was too slow to put in that order. The point is, HFTers make money by depriving people of their well earned profits. For every $1 they make, someone will lose a $1 which they would have otherwise made.
> 
> ...




OMG. That is the biggest collection of un educated nonsense I have seen in a long time. Its a BOT reacting on PAST data. Not a God knowing when someone will hit a button.

This is just the kind of utter rubbish that Kohler aims at.

Mate go off and learn how a market works. really you will be doing yourself a favor.


----------



## moXJO (12 April 2012)

Anyone see the article on Big Blue trading the market?


----------



## Starcraftmazter (12 April 2012)

skyQuake said:


> Its not 0 sum in stocks. And in most cases, HFT would be helping the Joes by providing liquidity. The real whales that move the market ie fundies etc are the ones that are preyed upon.




I don't really buy this liquidity BS, I'm sure everyone would have more than enough liquidity without HFTs. As for the fundies - do they not manage the money for even more Joe Sixpackian people than Joe Sixpack himself? How is that a good thing?



skyQuake said:


> Most of the HFTs are index arb or oppies arb or some sort of arb bot. Because arb opportunities disappear so very very quickly, that is why they have a need to jump the competitor and snap up cheap stock etc. %wise of Aus mkt vol, very little is actual predatory algos that seek out large buy/sell orders and try to frontrun that.




Just because our exchange is not the worst when it comes to HFTers, does not mean we should be complacent about it.




Trembling Hand said:


> OMG. That is the biggest collection of un educated nonsense I have seen in a long time. Its a BOT reacting on PAST data. Not a God knowing when someone will hit a button.




I don't know if you're trying to be thick or it comes naturally, but you certainly make an art of it. At no time did I suggest they can tell the future. What I said was that their *actions* deprive individuals like Joe Sixpack out of profit. Simply put - if they did not exist, the rest of us would make great profits.

Savy?


----------



## wayneL (12 April 2012)

Starcraftmazter said:


> I don't know if you're trying to be thick or it comes naturally, but you certainly make an art of it. At no time did I suggest they can tell the future. What I said was that their *actions* deprive individuals like Joe Sixpack out of profit. Simply put - if they did not exist, the rest of us would make great profits.
> 
> Savy?




Mate, the ASF code of conduct makes it impossible for me to tell you the truth about you.

Un-freakin'-believable.


----------



## Starcraftmazter (12 April 2012)

wayneL said:


> Mate, the ASF code of conduct makes it impossible for me to tell you the truth about you.
> 
> Un-freakin'-believable.




Maybe it's because you should stick to the debate? Wouldn't it be nice if we all just stuck  to the debate and nobody ever got personal? 

But I guess at some point people run out of argument and have to resort to other measures


----------



## wayneL (12 April 2012)

Starcraftmazter said:


> Maybe it's because you should stick to the debate? Wouldn't it be nice if we all just stuck  to the debate and nobody ever got personal?
> 
> But I guess at some point people run out of argument and have to resort to other measures




It's too difficult debating with fools.


----------



## skc (12 April 2012)

Starcraftmazter said:


> Every $1 they make would be someone else's otherwise. Let's say Joe Sixpack buys $100,000 CBA one day for $49, and it trades at $50 a fortnight later. Mr. Sixpax proclaims "yipee" and hits the sell button - but in that period of time, in between when he hit sell and the order is executed by the ASX, a HFT parasite has taken market actions which result in CBA trading at $49.50 - and good 'ol Joe with six kids to feed, and a wife that just won't shut up about a brand new BMW got 50% less profit.
> 
> Sure you could say he should have put in a conditional order to sell at $50, but let's say the price would never reach $50 again and he was too slow to put in that order. The point is, HFTers make money by depriving people of their well earned profits. For every $1 they make, someone will lose a $1 which they would have otherwise made.




You need to be clear on your arguments?

- Should HFT be banned because they are making profits? Surely not.
- Should HFT be banned because they are making profits at the expense of others? But that's what every trader does. If I make profit, someone else is making a loss or less of a profit. Should they simply ban all trader?
- Should HFT be banned because they use the latest technology? 
- Should HFT be banned because they are backed by institutions with more money and resources than the average Joe? Then shouldn't we ban all institutions that isn't the average Joe?
- Should HFT be banned because they serve no real purpose apart from provide liquidity? Again, most traders don't serve any real purpose. So ban them all?


The only reason to control HFT is if they cause instability and dis-orderly market, or if they have any real unfair advantage (not advantage they have because they have $$). And there are certainly aspects of HFT that needs to be controlled.

I've read somewhere before that some exchange "flashes" incoming orders to HFTs so they can be front runned. That is clearly an unfair advantage and should be banned. If there's order stuffing which prohibits other normal orders from reaching the exchange, then that should also be banned.

But HFT should not be banned for any of the reasons you've provided.


----------



## Starcraftmazter (12 April 2012)

skc, not quite the reasons you said but because they have an unfair advantage over the ordinary joe, and with that they steal money from other market participants. I use the term "steal" because I deem their actions to be unfair and outside of what the vast majority of market participants have an opportunity to do.

I can rent a single unit of rackspace from a DC in USA for $15 (cheaper if I get more). Now can I get the same from the ASX? No, of course not. The cost for me would be unreasonable.

Would I like to be able to do that at reasonable cost? Hell yeh I would! But I can't - and nor can 99.99% of the people who make trades on the ASX. And that to me seems unfair.


I just want a free, open market which is fair and equal to all. Is that really so much to ask for? Why would some companies be able to do things I can't, and make profits in ways I can't just because they have more money than me? What gives them the right to have preferential market treatment?


----------



## nulla nulla (12 April 2012)

Trembling Hand said:


> OMG. That is the biggest collection of un educated nonsense I have seen in a long time. *Its a BOT reacting on PAST data. Not a God knowing when someone will hit a button*.
> 
> This is just the kind of utter rubbish that Kohler aims at.
> 
> Mate go off and learn how a market works. really you will be doing yourself a favor.




My Bold. Permutations and probabilities. Forecasting, although based on past activites, very accurate and definitely a market mover.


----------



## skc (12 April 2012)

Starcraftmazter said:


> skc, not quite the reasons you said but because they have an unfair advantage over the ordinary joe, and with that they steal money from other market participants. I use the term "steal" because I deem their actions to be unfair and outside of what the vast majority of market participants have an opportunity to do.
> 
> I can rent a single unit of rackspace from a DC in USA for $15 (cheaper if I get more). Now can I get the same from the ASX? No, of course not. The cost for me would be unreasonable.
> 
> ...




Can the average Joe employ an economic professor or a team of quants at reasonable costs? So should any institution that employs economists and quants be banned?

What about just a below average finance graduate - can the average Joe employ one at reasonable cost? So all institution with finance graduates have an unfair advantage?

What about Bloomberg terminal? Or even standalone Iress? Hell many can't even afford Spark... Should all traders with access to these be banned?

Where do you draw the line? People who spends more than $X to facilitate their trading has unfair advantage? What should X be?


----------



## Starcraftmazter (12 April 2012)

skc said:


> Can the average Joe employ an economic professor or a team of quants at reasonable costs? So should any institution that employs economists and quants be banned?




Whether they can or cannot is irrelevant, and I forgot to mention that I do not feel that other institution with more resources and money than me such as managed funds have some sort of an unfair advantage over me or anyone else; we can all see they fail at delivering consistent, good returns.

It is HFTers in particular who have an unfair advantage over all others because of their special and highly costly relationships with the ASX.



skc said:


> What about just a below average finance graduate - can the average Joe employ one at reasonable cost? So all institution with finance graduates have an unfair advantage?
> 
> What about Bloomberg terminal? Or even standalone Iress? Hell many can't even afford Spark... Should all traders with access to these be banned?
> 
> Where do you draw the line? People who spends more than $X to facilitate their trading has unfair advantage? What should X be?




While I see your point, I'm betting that colocation at the ASX costs significantly more expensive than the things you list. Successful traders should be able to afford them without issues - they need not even be employed by a company. But the bar for having your servers colocated at ASX is clearly much much higher. Also, a service that conveniently and quickly delivers lots of information to you does not to me seem unfair. Anyone could build such a system if they really wanted to, or get the specific pieces of information quickly.

And it is not just that HFTers spend a lot of money - it is the fact that no matter how much the service costs, it is impossible for there to be a server for everyone or even a smaller proportion of people, in the ASX building, getting the fastest access to the exchange. This is another argument, because it is so inherently impossible - it ought to not be allowed.


----------



## Trembling Hand (12 April 2012)

Starcraftmazter said:


> I don't know if you're trying to be thick or it comes naturally, but you certainly make an art of it. At no time did I suggest they can tell the future. What I said was that their *actions* deprive individuals like Joe Sixpack out of profit.



Your example about the punter selling his CBA shares and being robbed by a bot is utter nonsense.

This is exactly why this artical from Alan Kohler is so dumb. Fools actually believe that they are being robbed by some all winning, all manipulating, front running, unbeatable BOT. 

LOL no wonder BOTs make money. They are trading against punters that cannot understand market basics.


Starcraftmazter said:


> Simply put - if they did not exist, the rest of us would make great profits.



hahaha. So now you're not making a profit and looking for someone to blame?


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## Starcraftmazter (12 April 2012)

Trembling Hand said:


> Your example about the punter selling his CBA shares and being robbed by a bot is utter nonsense.




That's not a counter-argument.



Trembling Hand said:


> hahaha. So now you're not making a profit and looking for someone to blame?




2+2=3? Move on buddy.


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## Trembling Hand (12 April 2012)

Starcraftmazter said:


> That's not a counter-argument.




Well mate cus I'm so thick and do not understand markets like you just run it through again for me how do HFT rob you of your due profits again?


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## Starcraftmazter (12 April 2012)

Trembling Hand said:


> Well mate cus I'm so thick and do not understand markets like you just run it through again for me how do HFT rob you of your due profits again?




I never said anyone robs *me* out of *my* profit. Perhaps you ought to learn not to take people's comments so personally, and then promptly re-read this thread so that you would have a better understanding of the issue at hand before continuing.


----------



## skc (12 April 2012)

Starcraftmazter said:


> It is HFTers in particular who have an unfair advantage over all others because of their special and highly costly relationships with the ASX.
> 
> While I see your point, I'm betting that colocation at the ASX costs significantly more expensive than the things you list. Successful traders should be able to afford them without issues - they need not even be employed by a company. But the bar for having your servers colocated at ASX is clearly much much higher. Also, a service that conveniently and quickly delivers lots of information to you does not to me seem unfair. Anyone could build such a system if they really wanted to, or get the specific pieces of information quickly.
> 
> And it is not just that HFTers spend a lot of money - it is the fact that no matter how much the service costs, it is impossible for there to be a server for everyone or even a smaller proportion of people, in the ASX building, getting the fastest access to the exchange. This is another argument, because it is so inherently impossible - it ought to not be allowed.




Allow me to paraphrase your arguments
1. HFTs employ resources that are costly.
2. HFTs employ resources that are finite.
3. HFTs have special relationship with ASX.

1. We've already established that cost (or their capacity to spend to support their trading) isn't an issue. You've made the example yourself that just because some institutions spend a lot of money doesn't mean they have unfair advantage or make consistent return (BTW you have no information on what return is being achieved by the HFTs).

2. All resources are finite. The "finite-ness" of a resource doesn't make it unfair. Space at ASX is finite. Good finance graduates and economists are finite. So the institution who employs the top finance graduates and economists has an unfair advantage? 

3. Do they have a special relationship? Or is it just a commercial relationship based on cost? Has ASX denied anyone, who's willing and capable of paying, server space at their premise? What has the ASX made available to the HFTs, and not to you and me (assuming we have the ability to pay)?


----------



## Trembling Hand (12 April 2012)

Starcraftmazter said:


> I never said anyone robs *me* out of *my* profit. Perhaps you ought to learn not to take people's comments so personally, and then promptly re-read this thread so that you would have a better understanding of the issue at hand before continuing.




Come on just give us that example of Joe Sixpack losing out on his CBA profit due to HFT.

Come on I need another laugh.


----------



## Starcraftmazter (12 April 2012)

skc said:


> Allow me to paraphrase your arguments
> 1. HFTs employ resources that are costly.
> 2. HFTs employ resources that are finite.
> 3. HFTs have special relationship with ASX.




You can break them up and make seemingly legitimate arguments that it is okey - and I don't necessarily disagree with you. However put them all together, to me, it is beyond the threshold that I would consider reasonable.

I do not consider some big company having a lot of good economists at any advantage to myself. Most economists are idiots, and the best ones most certainly do not work for financial institutions - case and point Steve Keen. Other good economists own their own companies and funds (let's say Chanos for instance), and make money through their own skill - not because some finite number of uni grads told them to do this or that.

They can buy all the resources they like, but really I do not feel myself or anyone else at a disadvantage to these banks, institutions, mutual funds, etc - at least for the reasons that you cited (lobbying and corruption would be one advantage, but that's outside the realms of this thread).


But HFTers definitely have a distinct advantage over everyone else. Furthermore, this advantage is constant and quantifiable. Having a bloomberg terminal doesn't mean you will make good decisions. Having the most economists doesn't mean they will form a hivemind to see the future. But having the fastest access to the ASX by a wide margin does mean that you can use mathematics and historical patterns to accurately predict what is about to happen, and profit from it - at the expense of other market participants.


----------



## cynic (13 April 2012)

Mommy, mommy it's so unfair!

Those dastardly HF traders are using their resources to gain a profitable edge in the market. 

Somebody, anybody, please stop them! Stop them now! 

Coz I wanna trade the markets but I can't seem to make a profit coz those nasty bots keep sucking all the opportunity out of the market!

It's so unfair. I can't seem to profit - so the traders making the money must have an unfair advantage over me, therefore we need more regulations and we need them now!

Mommy please make it all better!


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## tech/a (13 April 2012)

cynic said:


> Mommy, mommy it's so unfair!
> 
> Those dastardly HF traders are using their resources to gain a profitable edge in the market.
> 
> ...




Interesting contribution.


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## wayneL (13 April 2012)

tech/a said:


> Interesting contribution.




Yes

Probably pretty close to the mark too.


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## skc (13 April 2012)

Starcraftmazter said:


> But HFTers definitely have a distinct advantage over everyone else. Furthermore, this advantage is constant and quantifiable. Having a bloomberg terminal doesn't mean you will make good decisions. Having the most economists doesn't mean they will form a hivemind to see the future. But having the fastest access to the ASX by a wide margin does mean that *you can use mathematics and historical patterns to accurately predict what is about to happen, and profit from it* - at the expense of other market participants.




Allow me to paraphrase your arguments again.

- Big institutions employing alot of expensive and finite resources but can't make them work has no unfair advantage.

- HFTs employing alot of expensive and finite resources that makes them profitable has an unfair advantage.

Is that right?

By the way, how do you know the bold bit? Especially the "accurately" part.


----------



## skyQuake (13 April 2012)

Their only competitive advantage over a retail trader is superior execution speed. Which is next to useless in that context. If you're going to fight them in their <1sec timeframes you will lose. 

Different timeframes different trades.

The only benefit ultra low latency provides is over other *algos using a similar strategy*.


----------



## Trembling Hand (13 April 2012)

skc said:


> > But having the fastest access to the ASX by a wide margin does mean that* you can use mathematics and historical patterns to accurately predict what is about to happen, and profit from it*
> 
> 
> 
> By the way, how do you know the bold bit? Especially the "accurately" part.



 Because,


Starcraftmazter said:


> Let's say Joe Sixpack buys $100,000 CBA one day for $49, and it trades at $50 a fortnight later. *Mr. Sixpax proclaims "yipee" and hits the sell button - but in that period of time, in between when he hit sell and the order is executed by the ASX, a HFT parasite has taken market actions which result in CBA trading at $49.50* - and good 'ol Joe with six kids to feed, and a wife that just won't shut up about a brand new BMW got 50% less profit.



:bunny:
Just cracks me up. :nuts:




skyQuake said:


> The only benefit ultra low latency provides is over other *algos using a similar strategy*.



Xactly. Nothing here except a very poor journo's beat up.


----------



## Starcraftmazter (13 April 2012)

skc said:


> - Big institutions employing alot of expensive and finite resources but can't make them work has no unfair advantage.
> 
> - HFTs employing alot of expensive and finite resources that makes them profitable has an unfair advantage.
> 
> Is that right?




Yes. Is there a logical flaw? I don't see one.



skc said:


> By the way, how do you know the bold bit? Especially the "accurately" part.




Because they make money off of it? How many companies make money off predicting the lottery? None. That's because it's impossible. Clearly the existence of HFTers proves it is possible to do so with the stock market.




skyQuake said:


> Their only competitive advantage over a retail trader is superior execution speed. Which is next to useless in that context. If you're going to fight them in their <1sec timeframes you will lose.




Challenge Accepted! Or at least it would be if I had equal access to the low latency execution speed, regardless of my financial wealth.


----------



## Trembling Hand (13 April 2012)

Starcraftmazter said:


> Challenge Accepted! Or at least it would be if I had equal access to the low latency execution speed, regardless of my financial wealth.




I'd be happy with just you running through your CBA example of poor old Mr Sixpax getting robbed by the HSTers.

Or is the lack of comment acceptance that your example is BS?


----------



## skc (13 April 2012)

Starcraftmazter said:


> Yes. Is there a logical flaw? I don't see one.




Your logic is...
- Companies employing a lot of expensive and finite resources has no unfair advantage if they don't make profit.
- Companies employing a lot of expensive and finite resources has unfair advantage if they do make profit.

Unfairness depends on whether one is profitable or not.

So the moment that a company makes money from their highly paid economist they change from having no unfair advantage to having an unfair advantage. At the same time, if HFTs stop being profitable it is no longer unfair.

Can you see the logical flaw yet?



Starcraftmazter said:


> Because they make money off of it? How many companies make money off predicting the lottery? None. That's because it's impossible. Clearly the existence of HFTers proves it is possible to do so with the stock market.




When does existence imply profitability? So all existing enterprise must, by your logic, be profitable? 

Look - I am neither a supporter or detractor of HFTs. I see their existence as having both pros and cons. I am happy to change my mind if there's new information suggesting to me that they have unfair advantage. But so far none of your argument hold up logically (let alone factually).


----------



## Trembling Hand (13 April 2012)

One of the other things that makes Alan Kohler such Muppet is that there is no evidence that those servers are actually being used for HFT.

They are more than likely for hire execution bots doing the work of the same super funds that Kohler is claiming to be robbed.

Then of course they are also even more likely to be Arb bots that have locked the market up intraday since 2008. I'd like to know how Joe Sixpax has anything to be concerned about a bot selling futs and buying equal amount of stocks and holding till expiry.

Then of course beyond that they are even more likely to be Oppy MM bots. And they have every right to be there with the best execution available.

Utter crap article.

Care to comment on those points SCM?


----------



## Starcraftmazter (13 April 2012)

skc said:


> So the moment that a company makes money from their highly paid economist they change from having no unfair advantage to having an unfair advantage. At the same time, if HFTs stop being profitable it is no longer unfair.




I doubt any company is going to have an advantage by employing any economist. I really highly doubt that - at least so far as the stock market is concerned.

I, you, or anyone else can learn everything that exists in economics, and we can then use our knowledge to analyse and make predictions on the future - in the same way any economist employed by any company can. There is absolutely no inherent advantage which they have over anyone.

On the other hand I cannot fathom what apart from HFTing can possibly give one such a great advantage. No matter how smart you are, you can not do what they do because you do not have such low latency access to the ASX.

And just like you might argue that the top economists hired by the top companies may have more experience and skill than me or you or others, you can say that the top HFTing companies may have smarter algorithms than you or I or others may develop - but that is irrelevant to the point of being able to have the same opportunity to try and make a profit in the same way.



skc said:


> When does existence imply profitability?




When that which exists makes profit and thereby continues existing and perhaps even  expanding. HFTing companies would not pay the highest salaries and employ ever more people if they were not extremely profitable.



skc said:


> Look - I am neither a supporter or detractor of HFTs. I see their existence as having both pros and cons. I am happy to change my mind if there's new information suggesting to me that they have unfair advantage. But so far none of your argument hold up logically (let alone factually).




Maybe that's just because you're not looking at it from the broader perspective. Imagine that you could create HFTing algorithms just like them, which could make money - and yet, you could not deploy them because of a lack of capital. Now you see all these companies making money doing exactly the same as what you can do - but you do not have this opportunity, simply because you don't have enough money. Would you still think that's fair?

Is our economic system not meant to be based on the concept of equal opportunity? Just like it's unfair (and illegal) to trade based on knowing insider information before others, isn't it unfair to trade based on knowing the market action before others?


----------



## notting (13 April 2012)

tech/a said:


> Interesting contribution.




Cracking me up.



Trembling Hand said:


> Nothing here except a very poor journo's beat up.




Certainly not a rag I'd be subscribing to!


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## Trembling Hand (13 April 2012)

Starcraftmazter said:


> Imagine that you could create HFTing algorithms just like them, which could make money - and yet, you could not deploy them because of a lack of capital. Now you see all these companies making money doing exactly the same as what you can do - but you do not have this opportunity, simply because you don't have enough money. Would you still think that's fair?




LOL spoken like a true small thinker. Who do you think these dudes are? Hedge funds with an idea who then go out and raise capital from investors. Anyone can do.


----------



## Starcraftmazter (13 April 2012)

Trembling Hand said:


> LOL spoken like a true small thinker.




As opposed to you; a person clearly unconcerned with right and wrong - fair and unfair. Why even bother wasting my time with your immorality?


----------



## skc (13 April 2012)

Starcraftmazter said:


> I doubt any company is going to have an advantage by employing any economist. I really highly doubt that - at least so far as the stock market is concerned.
> 
> I, you, or anyone else can learn everything that exists in economics, and we can then use our knowledge to analyse and make predictions on the future - in the same way any economist employed by any company can. There is absolutely no inherent advantage which they have over anyone.




Economist is merely offered as a logical analogy, not for actual discussion. I am not saying anything about the usefulness of economist or otherwise. Substitute the word economist with "Some Resource" and try to understand the logic.



Starcraftmazter said:


> When that which exists makes profit and thereby continues existing and perhaps even  expanding. HFTing companies would not pay the highest salaries and employ ever more people if they were not extremely profitable.




Any reference to your assertions?



Starcraftmazter said:


> Maybe that's just because you're not looking at it from the broader perspective. Imagine that you could create HFTing algorithms just like them, which could make money - and yet, you could not deploy them because of a lack of capital. Now you see all these companies making money doing exactly the same as what you can do - but *you do not have this opportunity, simply because you don't have enough money*. Would you still think that's fair?




Very compelling argument. I see what you mean now. It is unfair because they have more money and resource than the average person. I support the notion that no institution with above average money and resource should be allowed to trade. Afterall, we must have a open and fair market based on everyone having the same money and resource.



wayneL said:


> It's too difficult debating with fools.




You are so right. How do I not see that. *sigh


----------



## Trembling Hand (13 April 2012)

Starcraftmazter said:


> As opposed to you; a person clearly unconcerned with right and wrong - fair and unfair. Why even bother wasting my time with your immorality?




You haven't addressed the point about you silly CBA example.

You haven't shown how they rob anyone,

You haven't shown that they are HFT bots,

You havn't commented about them more likely to be oppy bots, 

or execution bots, 

or arb bots,

Now you haven't addressed the point that anyone can actually do this if they are smart enough. Its not unfair access. You come up with the profitable algo I'll show you how to have the same access. I'll show you how you can fund it with very little money from yourself. This is your whole point isn't it? That its only available to some?. But you are wrong. You don't know what the hell ya talking about


----------



## Starcraftmazter (13 April 2012)

skc said:


> Economist is merely offered as a logical analogy, not for actual discussion. I am not saying anything about the usefulness of economist or otherwise. Substitute the word economist with "Some Resource" and try to understand the logic.




I understand your logic perfectly fine - what I contest is the possibility that any resource will be as significant as having by far the lowest latency access to the ASX. In particular, that a property qualified and experienced individual - or group of individuals cannot replicate such a resource if they wanted to let's say start their own trading/investment company.



skc said:


> Any reference to your assertions?




Well you can have a look at job offers on Seek and such. I know because while I was at uni, I was looking at a HFTing company as a possibility of employment. I applied, and down the track I was given a tour of their building. They were saying that they are moving to a new building and employing over 100 new engineers as they are expanding their operation. They also operate in multiple countries. And they did not make the salary secret, the highest for my profession for someone straight out of uni - 75k in 2009, plus 20% super and private health cover. Their offices were pretty good too, they had arcade games, pool and everything.



skc said:


> Afterall, we must have a open and fair market based on everyone having the same money and resource.




We must have a free market whereby people are not deprived of opportunities to make money in such ways as others do merely because those have more capital.



Trembling Hand said:


> You haven't addressed the point about you silly CBA example.




What point?



Trembling Hand said:


> You haven't shown how they rob anyone,




Some people are blind. I'm beginning to see that the majority of the patrons of this forum simply cannot see right from wrong, or they do not care.



Trembling Hand said:


> You haven't shown that they are HFT bots,




Who?



Trembling Hand said:


> You havn't commented about them more likely to be oppy bots,
> 
> or execution bots,
> 
> or arb bots,




It's irrelevant what other companies rent server space from the ASX for what other reasons, because that is outside of the current topic.



Trembling Hand said:


> Now you haven't addressed the point that anyone can actually do this if they are smart enough. Its not unfair access. You come up with the profitable algo I'll show you how to have the same access. I'll show you how you can fund it with very little money from yourself. This is your whole point isn't it? That its only available to some?. But you are wrong. You don't know what the hell ya talking about




I can't possibly make such an algorithm without thorough testing - which implies I require the access before I have the algorithm. Would you be interested in purchasing the colocation at the ASX building for me for a few years while I develop my algorithm? I'll split profits with you 50/50 :dunno:


----------



## Trembling Hand (13 April 2012)

Starcraftmazter said:


> I can't possibly make such an algorithm without thorough testing - which implies I require the access before I have the algorithm. Would you be interested in purchasing the colocation at the ASX building for me for a few years while I develop my algorithm? I'll split profits with you 50/50 :dunno:




Utter nonsense. You again have shown you do not know what you are talking about. Anyone can test with data that cost about $40 month.

And again you dodge all questions. :bunny:

The more you talk the more I KNOW you cannot trade to save yourself. That you haven't a friggin clue about markets.


----------



## Starcraftmazter (13 April 2012)

Trembling Hand said:


> Utter nonsense. You again have shown you do not know what you are talking about. Anyone can test with data that cost about $40 month.




Are you serious? How is data for $40 a month going to replicate the conditions of thousands of buy and sell orders - many of which do not even get executed, coming in microsecond timings? Do you even think before you type? Do you know what HFTing does?



Trembling Hand said:


> And again you dodge all questions. :bunny:




More like you dodge my answers.



Trembling Hand said:


> The more you talk the more I KNOW you cannot trade to save yourself. That you haven't a friggin clue about markets.




Of course, when all else fails and you are proven wrong, then resort to personal insults. Losers don't know any better


----------



## Trembling Hand (13 April 2012)

Starcraftmazter said:


> Are you serious? How is data for $40 a month going to replicate the conditions of thousands of buy and sell orders - many of which do not even get executed, coming in microsecond timings?




LOL deadly serious. 



> Do I know what HFTing does?



Just OMFG. I pretty sure I'm as close as it gets to a human HFTer. And I'm also pretty sure you are clueless. thats not a baseless insult. I'm will to prove I can trade and I'm willing to pay to see what we all suspect. You cannot trade.

I know more about HFT by about 100000 times more than you without a doubt. But back to you. I can set you up with unlimited funds and the data to test.

You willing to take up the challenge or you just all talk?


----------



## Starcraftmazter (13 April 2012)

Trembling Hand said:


> I pretty sure I'm as close as it gets to a human HFTer.




HFTing refers to algorithms which make trading decisions quicker than you can read and register in your head the price of a stock order that appears on your screen.

There is no such thing as a "human HFTer".



Trembling Hand said:


> I know more about HFT by about 100000 times more than you without a doubt.




Mhmmm.



Trembling Hand said:


> But back to you. I can set you up with unlimited funds and the data to test.
> 
> You willing to take up the challenge or you just all talk?




What are we talking about here? More detail.


----------



## Trembling Hand (13 April 2012)

Starcraftmazter said:


> HFTing refers to algorithms which make trading decisions quicker than you can read and register in your head the price of a stock order that appears on your screen.
> 
> There is no such thing as a "human HFTer".
> 
> ...



Your point is that its unfair because its not available to anyone. Thats wrong.

I can give you the ASX data and funds to set one up. Therefore disproving your whole stupid point thats its unfair.

Now 

1. Do you want the data to make a HFT bot?

2. Then if you can make a profitable one I can get you the funds? Will you get this far?


----------



## So_Cynical (13 April 2012)

Trembling Hand said:


> One of the other things that makes *Alan Kohler such Muppet is that there is no evidence that those servers are actually being used for HFT*.
> 
> They are more than likely for hire execution bots doing the work of the same super funds that Kohler is claiming to be robbed.
> 
> ...




Ill have a go.

From the above it seems you have no idea what those servers are actually doing...the fact that the servers are there and that someone's paying big dollars for them to be there seems to be the only things not in dispute.

What i can surmise from personal experience is that those servers are in all probability worth many 100's of thousands of dollars (hardware) and that any one paying for those main frame servers to be there has committed millions of dollars to that purpose.

Thus would not have them tied up doing low end processes.


----------



## Trembling Hand (13 April 2012)

So_Cynical said:


> Ill have a go.
> 
> From the above it seems you have no idea what those servers are actually doing...the fact that the servers are there and that someone's paying big dollars for them to be there seems to be the only things not in dispute.
> 
> ...




F'in excatly 

which would make them more than likely oppy MM bots not HFT ASX bots where there is so little opportunity.


----------



## Starcraftmazter (13 April 2012)

Trembling Hand said:


> Your point is that its unfair because its not available to anyone. Thats wrong.
> 
> I can give you the ASX data and funds to set one up. Therefore disproving your whole stupid point thats its unfair.




You would only disprove my point if you make a public and equal offer to everyone in the world.

I will say again, there is not enough physical space in the ASX building to house enough server resources for all, or even a small portion of market participants.



Trembling Hand said:


> Now
> 
> 1. Do you want the data to make a HFT bot?
> 
> 2. Then if you can make a profitable one I can get you the funds? Will you get this far?




It is not merely the data but the precise intervals between every action on the ASX which are important. The only way to emulate this is to have a server along side every single other HFT company in the ASX datacentre. Although I can see no reason why this cannot be simulated, I highly doubt you would have any equipment nor software to do this. You would also need 100% historically accurate records of price action for such a simulator. Do you?

And what data are we talking about exactly? Is it the publicly available data, or the full data precisely as the HFTers see it?


----------



## Trembling Hand (13 April 2012)

Starcraftmazter said:


> And what data are we talking about exactly? Is it the publicly available data, or the full data precisely as the HFTers see it?




Lets stop wasting everyone's time. You clearly have no idea about system design. No idea about what historical data is available. No idea about what is possible. yet your whole point is that its unfair. yet you simply have no idea whats available let alone who can access it.

Simply you have very little idea about the market,

Summed up perfectly by this utter BS,



Starcraftmazter said:


> Every $1 they make would be someone else's otherwise. Let's say Joe Sixpack buys $100,000 CBA one day for $49, and it trades at $50 a fortnight later. Mr. Sixpax proclaims "yipee" and hits the sell button - but in that period of time, in between when he hit sell and the order is executed by the ASX, a HFT parasite has taken market actions which result in CBA trading at $49.50 - and good 'ol Joe with six kids to feed, and a wife that just won't shut up about a brand new BMW got 50% less profit.


----------



## Ves (13 April 2012)

It's only unfair because he still has to pay tax, real estate is too over-priced, someone else is making a profit and he isn't, the list is endless...

Sorry if that is a "personal attack" but it is starting to become a very repetitive pattern IMO.


----------



## Starcraftmazter (13 April 2012)

Trembling Hand said:


> Lets stop wasting everyone's time.




No, *you* stop wasting everyone's time and answer the question. Unless of course you don't know the answer because you do not have access to the resources you claim. This would certainly make a lot more sense and would fit in line with your lack of understanding of this topic as you have already demonstrated.


----------



## Trembling Hand (13 April 2012)

Starcraftmazter said:


> No, *you* stop wasting everyone's time and answer the question. Unless of course you don't know the answer because you do not have access to the resources you claim. This would certainly make a lot more sense and would fit in line with your lack of understanding of this topic as you have already demonstrated.




OMG you are clueless.

Yes historical Time stamped data of all quotes and trades to 5 levels for asx top 50-100 whatever you need + futs.

By the way I know 1000000000 times more than you lets prove it. You put up 100 trades via statements sent to a mod and I'll do the same. I bet that if you even done 100, which I doubt, you're under water.


----------



## Beej (14 April 2012)

Trembling Hand said:


> F'in excatly
> 
> which would make them more than likely oppy MM bots not HFT ASX bots where there is so little opportunity.




Ah hah! Someone who actually thinks and starts to have some idea about what is actually going on


----------



## Julia (14 April 2012)

Trembling Hand said:


> By the way I know 1000000000 times more than you lets prove it. You put up 100 trades via statements sent to a mod and I'll do the same. I bet that if you even done 100, which I doubt, you're under water.



I don't think we'll be holding our collective breath waiting for SCM's 100 trades.


----------



## nulla nulla (14 April 2012)

From following this thread since it started it seems Sinner has a good grasp on the topic and has refrained from getting emotional or personal with anyone expressing an opposing view. Algorithmic trading has been arround for several years. The following is a link to an article in the Australian from October 2009:

http://www.theaustralian.com.au/bus...orithmic-trading/story-e6frgac6-1225785175331

And another one in the Financial Review:

http://afr.com/p/business/financial...share_trading_troubles_UZU6ZauYMQ00X86vxdgowK

The following link is to the ASX which give a fairly reasonable but basic overview of Algrithmic trading:

http://www.asx.com.au/products/algorithmic_trading.htm

And it looks like you can buy a software package to develop your own "bot":

http://www.mathworks.com.au/discovery/algorithmic-trading.html

If you google "Algorithmic Trading Companies Australia" the above items come up as well as a host of Employment Agencies looking to recruit experienced staff. It is a big money industry. 

There was an article, last year I think, about a legal stoush between two algorithmic trading companies where-in one company alleged that employees left the company, took proprietory software and intelectual property, then set up their own company and went on the make multimillion dollar profits. if I can find the article I will post it.

The reality is that Algorithmic trading is here and if you are trading without it you will just have to live with it and adapt your trading styles. It's a bit like the horse and cart being replaced by the horseless carriage.


----------



## Trembling Hand (14 April 2012)

nulla nulla said:


> From following this thread since it started it seems Sinner has a good grasp on the topic and has refrained from getting emotional or personal with anyone expressing an opposing view. Algorithmic trading has been arround for several years. The following is a link to an article in the Australian from October 2009:
> 
> http://www.theaustralian.com.au/bus...orithmic-trading/story-e6frgac6-1225785175331
> 
> ...




Nulla all those algos that you are talking about including the legal stoush are *oppy MM.* And therefore have every right to have co-located servers.

Most of those jobs are for *Arb bots and execution bots.*

NOT HFT bots. Which is my point. I doubt that they are HFT bot. There is no evedince that HFT bots are doing any significant ASX vol. Alan Kohler's piece is just utter rubish.

In fact from your first link,



> The ASX says that while the practice is mostly used for* traditional trading strategies*, there is a* small portion of trading algorithms in use internationally* that raise questions about their impact on the market and on non-algorithmic market users.


----------



## nulla nulla (14 April 2012)

Trembling Hand said:


> Nulla all those algos that you are talking about including the legal stoush are *oppy MM.* And therefore have every right to have co-located servers.
> 
> Most of those jobs are for *Arb bots and execution bots.*
> 
> ...




I found the article. Well worth reading even if only to appreciate the levels of profits they generate:

http://idm.net.au/article/trading-titans’-clash-swords-discovery-clash

Please note, I consider Algorithmic Trading (HFT) as a "fact of life" and the clever buggers that worked it out deserve all the success they get. I work arround it.


----------



## Trembling Hand (14 April 2012)

nulla nulla said:


> I found the article. Well worth reading even if only to appreciate the levels of profits they generate:
> 
> http://idm.net.au/article/trading-titans’-clash-swords-discovery-clash




Bloody hell. Nulla these are not HFT firms.  Optiver and Tibra and TimberHill are option market makers. They are obliged to make a market in their alloted option chains. You want them to be co-located at the ASX. They use algos but so too does CBA and you avg super fund. There is nothing in this thats unfair.

They are not HFT    



> Optiver has been in the “algo trading” business since 1997. Optiver uses its software for *arbitrage trading.*






> Things moved quickly for Tibra. By July, 2006 it was registered with the stock exchange as a* ‘market maker’* enabling it to compete with Optiver. By the end of 2006, the newly formed company was beating Optiver at its own game – by being faster to the punch on the crucial arbitrage trades. According to expert evidence tendered at one hearing, the rate of success over Optiver continued to climb in 2007




If you trade options you want them co-located. How would it be if they are located in a office in perth? Some dude cuts their phone line while gardening and they have to say "oh sorry you will not be able to close your trade untill tomorrow when Telstra comes and fixes our ADSL line maybe the day after!"



nulla nulla said:


> Please note, I consider Algorithmic Trading (HFT) as a "fact of life" and the clever buggers that worked it out deserve all the success they get. I work arround it.




Algorithmic Trading and HFT is not the same thing. Everyone beyond Mum & Pop uses  Algorithmic Trading and there is no evidence that HFT bots are running any vol on ASX stocks. Arb bots absolutely but thats a different story to this beat up. Kohler takes the stupid jump from servers co-located at the ASX means that they are HFT. Thats the least likely use of them.


----------



## nulla nulla (14 April 2012)

Wikipedia definiton of Algorithmic trading:

http://en.wikipedia.org/wiki/Algorithmic_trading

Wikipedia definition of High Frequency Trading:

http://en.wikipedia.org/wiki/High-frequency_trading

And an article pointing out the differences between Algorithmic trading and High Frequency Trading (HFT):

http://talkfast.org/2011/09/13/algorithmic-trading-is-not-high-frequency-trading

It appears that HFT is still based on algorithyms but the human input is removed, "Bots". At the end of the day they don't hold a position.

TH, please note I am not taking any sides in respect of "fairness", "moralty" or anything else. Nothing personal.


----------



## Starcraftmazter (14 April 2012)

Julia said:


> I don't think we'll be holding our collective breath waiting for SCM's 100 trades.




I'm still waiting on my asx colocation? I'm not holding my breath either, seems you lot just have hot air and can't deliver.



Trembling Hand said:


> Bloody hell. Nulla these are not HFT firms.




Ahahaha this is what you actually believe 

Oh my god, you...

http://optiver.com/corporate/our-views/hft-position-paper
http://www.efinancialnews.com/story/2011-07-18/optiver-rebound-reflects-volatility


> Dutch high-frequency trading firm Optiver




The aforementioned deserters
http://www.efinancialnews.com/story/2011-10-31/traders-launch-boutique

You just got TOLD.


----------



## CanOz (14 April 2012)

nulla nulla said:


> Wikipedia definiton of Algorithmic trading:
> 
> http://en.wikipedia.org/wiki/Algorithmic_trading
> 
> ...




Thanks for the links nulla! I like that last article in particular


----------



## nulla nulla (14 April 2012)

Here is a direct link to the article refered to in the last link in my post above. Further clarification on the difference between "Algorithmic Trading" and  "High Frequency Trading":

http://seekingalpha.com/article/158...-algorithmic-trading-not-as-big-as-many-think


I want one, lol.


----------



## Trembling Hand (14 April 2012)

Starcraftmazter said:


> I'm still waiting on my asx colocation? I'm not holding my breath either, seems you lot just have hot air and can't deliver.



I've issued a challenge to you. I can get you the data. And I can get you into the firm that will back you.

If you can produce the profitable algo on ASX market.

But of course you cannot even show that you have placed a few trades. You will wiggle and worm because your point was that its unfair because its not available to anyone. It is. If you are smart enough which you are not.

Thats the bottom line.



Starcraftmazter said:


> Ahahaha this is what you actually believe
> 
> Oh my god, you...
> 
> ...



Hardly. I know what they do. They use Servers co-located at exchanges to arb and market make options clearly thats their job and can you tell me whats unfair about them doing that like you claimed?

That is not what Alan Kohler's article was about. It was about HFT robbing super funds and retail out of their profit. With the flash orders and dodgy quotes And you swallowed it. Hook line and sinker!!



Starcraftmazter said:


> Every $1 they make would be someone else's otherwise. Let's say Joe Sixpack buys $100,000 CBA one day for $49, and it trades at $50 a fortnight later. Mr. Sixpax proclaims "yipee" and hits the sell button - but in that period of time, in between when he hit sell and the order is executed by the ASX, a HFT parasite has taken market actions which result in CBA trading at $49.50 - and good 'ol Joe with six kids to feed, and a wife that just won't shut up about a brand new BMW got 50% less profit.




Now I've asked about 8 times can you stand by this above statement? If so can you give me more detail because the market simply doesn't function like that. if we cannot clear up the above BS then I'm wasting my time talk to some who doesn't trade.


----------



## Starcraftmazter (14 April 2012)

Trembling Hand said:


> I've issued a challenge to you. I can get you the data. And I can get you into the firm that will back you.
> 
> If you can produce the profitable algo on ASX market.




I have issued a challenge to you. Your challenge is to walk in a straight line for one minute. Also you are locked in a 1x1 metre cube. Good luck.



Trembling Hand said:


> But of course you cannot even show that you have placed a few trades.




What few trades? What the **** are you even talking about? Do you have multiple personality disorder? Can I remind you that we are talking about what one can do if one has a server colocated at the ASX building and is has 300 microsecond access to the ASX. Are you going to give me said colocation?

Simple yes or no will be fine.



Trembling Hand said:


> Hardly. I know what they do.




Given I have provided a multitude of links which disprove what you said, I would beg to differ.



Trembling Hand said:


> That is not what Alan Kohler's article was about. It was about HFT robbing super funds and retail out of their profit. With the flash orders and dodgy quotes And you swallowed it. Hook line and sinker!!




I did not even read the article, as it's contents is irrelevant to me - as I am already well enough familiar with HFTing. How stupid do you look now?



Trembling Hand said:


> Now I've asked about 8 times can you stand by this above statement? If so can you give me more detail because the market simply doesn't function like that. if we cannot clear up the above BS then I'm wasting my time talk to some who doesn't trade.




What detail do you need? HFTers move the sp, if someone makes an order before they do, the result they will get after they do it will be different to the one they expected, and can cause them to lose money (which does not imply their trade is not profitable, merely less profitable than otherwise) as a result of HFTing actions. This is pretty easy to understand.


----------



## Trembling Hand (14 April 2012)

> Can I remind you that we are talking about what one can do if one has a server colocated at the ASX building and is has 300 microsecond access to the ASX. Are you going to give me said colocation?




Yes. If your smart enough to be able to use it. I've already said that. YES ,

CO-Location.
Now do you want the data to develop your HFT Bot or not?


----------



## Trembling Hand (14 April 2012)

Starcraftmazter said:


> What detail do you need? HFTers move the sp, if someone makes an order before they do, the result they will get after they do it will be different to the one they expected, and can cause them to lose money (which does not imply their trade is not profitable, merely less profitable than otherwise) as a result of HFTing actions. This is pretty easy to understand.




and that will always be negative will it 

They will also be able to move CBA $0.50 at will in the instant Joe six pax hits sell.



> Originally Posted by Starcraftmazter
> Every $1 they make would be someone else's otherwise. Let's say Joe Sixpack buys $100,000 CBA one day for $49, and it trades at $50 a fortnight later. Mr. Sixpax proclaims "yipee" and hits the sell button - but in that period of time, in between when he hit sell and the order is executed by the ASX, a HFT parasite has taken market actions which result in CBA trading at $49.50 - and good 'ol Joe with six kids to feed, and a wife that just won't shut up about a brand new BMW got 50% less profit.


----------



## Starcraftmazter (14 April 2012)

Trembling Hand said:


> Yes. If your smart enough to be able to use it. I've already said that. YES ,
> 
> CO-Location.
> Now do you want the data to develop your HFT Bot or not?




I doubt that the data you give me will be sufficient for me to develop a HFT bot because the data alone does not simulate the same environment - which is in fact what HFT companies pay for. If you believe otherwise, you are welcome to send me a sample.



Trembling Hand said:


> and that will always be negative will it
> 
> They will also be able to move CBA $0.50 at will in the instant Joe six pax hits sell.




I didn't say it will ALWAYS be negative, I said it CAN be negative.

I'm not not suggesting they are stalking sixpax's trades, merely that it will be coincidental. Effectively everyone who paces a trade when there is any HFT action that goes against them will lose out.


----------



## Trembling Hand (14 April 2012)

Starcraftmazter said:


> I doubt that the data you give me will be sufficient for me to develop a HFT bot because the data alone does not simulate the same environment - which is in fact what HFT companies pay for. If you believe otherwise, you are welcome to send me a sample.



Oh here we go!! the start of the back pedalling. First you claim that its unfair -colocation is not available to you. But it is.

Now timestapped data for every quote and trade isn't good enough. which is all the HFT have to develop their bots.

Your are ripper.



Starcraftmazter said:


> I didn't say it will ALWAYS be negative, I said it CAN be negative.
> 
> I'm not not suggesting they are stalking sixpax's trades, merely that it will be coincidental. Effectively everyone who paces a trade when there is any HFT action that goes against them will lose out.



 so they always win SCM?  I think I'll rest my case on that point.

Now you want an intro to the company and the data? Luckily they are in your home town. Shouldn't take long for you to get your foot in the door. After all,


Starcraftmazter said:


> I actually have a similar but an even better idea. I am planning to write trading software over the course of the next year or so, and what I will do is make the signals from it public with a small delay so that I can get in/out before anyone who decides to pay attention to it. And some period of time after that, I will of course start charging for it's use






Starcraftmazter said:


> It's pretty much impossible to not make money in trading, I fail to see why everyone doesn't do it. It's not even hard. The real challenge is getting something like 1000% pa returns. Fortunately there is leverage


----------



## Starcraftmazter (14 April 2012)

Trembling Hand said:


> Oh here we go!! the start of the back pedalling. First you claim that its unfair -colocation is not available to you. But it is.




No it is not, and there is no back-pedalling. You have already said you do not want to give me colocation until I have something workable - but it is not possible to make anything of that sort without colocation in the first place.

How about less talk and more action from you. You have been offering to give me the data for many posts now, yet my PM box has no new messages. How about you stop bull****ting and make good.



Trembling Hand said:


> Now timestapped data for every quote and trade isn't good enough. which is all the HFT have to develop their bots.




To what degree precision are the timestamps? Second? Millisecond? Microsecond? Remember, ASX guarantees 300 microsecond timing if you co-locate with them.

But like I have said - feel free to send me the data so I can assess it. You have not done this despite your claim that you will. Thus the onus right now lies squarely with you to stop wasting my time and actually do what you claimed you will.



Trembling Hand said:


> so they always win SCM?  I think I'll rest my case on that point.




They generate huge profits, this implies they are extremely successful.


----------



## Trembling Hand (14 April 2012)

Starcraftmazter said:


> They generate huge profits, this implies they are extremely successful.



You don't know that because the only firms you "think" are involved with HFT on the ASX are the ones I told you about and they are option market makers and Arbers as per your articles. They trade fast, they trade with Co-location but they are not trading against joe six pak.

So how do you know they are profitable when you don't even know if they exist on the ASX ?

Have request email for data via PM.


----------



## Starcraftmazter (14 April 2012)

Trembling Hand said:


> So how do you know they are profitable when you don't even know if they exist on the ASX ?




What do you mean if they exist on the ASX? Why else would they employ 100s of traders and software engineers in Sydney and colocate their servers in the ASX building?


----------



## Trembling Hand (14 April 2012)

Starcraftmazter said:


> What do you mean if they exist on the ASX? Why else would they employ 100s of traders and software engineers in Sydney and colocate their servers in the ASX building?



LOL. Do you know what a option market maker does?


----------



## Starcraftmazter (14 April 2012)

Trembling Hand said:


> LOL. Do you know what a option market maker does?




I know that they exist on the ASX.

I will again remind you of the links I posted earlier which show that Optiver is a HFTing company. Whether they do other things is irrelevant to the discussion.


----------



## Trembling Hand (14 April 2012)

Starcraftmazter said:


> I know that they exist on the ASX.
> 
> I will again remind you of the links I posted earlier which show that Optiver is a HFTing company. Whether they do other things is irrelevant to the discussion.




  

Your article states that they are Market Makers in the option exchange using Co-located Servers to HFT the OPTIONS market as per their ASX market maker agreement!!!!

They Arb the futs and options. not directional bets.  You really do not understand what they do. its clear.

FFS


----------



## Trembling Hand (14 April 2012)

Nice post I'v lifted from the Human potential thread. I've changed just one word in red


Sdajii said:


> Markets are very complex, which makes them difficult for us to understand well. People often start speculating in a 'religious' sort of way when there are big unknowns (like with religion itself in response to where the world came from and why the sun does its thing and all that).



Pretty much sums up the BS hysteria about bots. No knowledge leads to crazy theories.


----------



## Starcraftmazter (14 April 2012)

Trembling Hand said:


> Your article states that they are Market Makers in the option exchange using Co-located Servers to HFT the OPTIONS market as per their ASX market maker agreement!!!!
> 
> They Arb the futs and options. not directional bets.  You really do not understand what they do. its clear.
> 
> FFS




I'm not saying they don't trade options for the 10th time. Although clearly their practices in that department are also unfair;
http://www.stocktrendsystem.com/trading/options.html

Are you actually denying that there are HFTers trading stocks on the ASX?


----------



## skyQuake (14 April 2012)

Starcraftmazter said:


> I didn't say it will ALWAYS be negative, I said it CAN be negative.
> 
> I'm not not suggesting they are stalking sixpax's trades, merely that it will be coincidental. Effectively everyone who paces a trade when there is any HFT action that goes against them will lose out.




So effectively everyone who places a trade when there is a HFT action in their direction will win out. Whats the problem then?
And no, they can't "see" a trade before it comes through to the market. They can be fast but not go back in time.


----------



## wayneL (14 April 2012)

Starcraftmazter said:


> Although clearly their practices in that department are also unfair;
> *http://www.stocktrendsystem.com/trading/options.html*




Oh Gawd!!! 

The boy believes himself an intellectual yet is citing muppets. 

The blind leading the blind.


----------



## Trembling Hand (14 April 2012)

Starcraftmazter said:


> Are you actually denying that there are HFTers trading stocks on the ASX?



I'm saying its very very unlikely given the tiny market and minuscule volume. The cost to possible rewards are just not there. They have so little to play with. so few transaction compared to US & Euro markets.


I DO KNOW that there are lots of Arb bots on the ASX market playing games between the futs, oppy and stocks. But they are not what we are discussing here. And have very little to do with robbing Mr & Misses retail. (and the main players here are Merrill lynch, Tibra, Timber Hill, Optiver etc)

In fact they so dominate the derivative market that the ASX have on the arbers request gone to monthly futs contracts in spite of there being ZERO interest in them. Amazing!


----------



## Starcraftmazter (14 April 2012)

skyQuake said:


> So effectively everyone who places a trade when there is a HFT action in their direction will win out. Whats the problem then?
> And no, they can't "see" a trade before it comes through to the market. They can be fast but not go back in time.




Hmmm.

I will take all of your money, property and assets - but I will give it to someone else.

What's the problem then?



Trembling Hand said:


> I'm saying its very very unlikely given the tiny market and minuscule volume. The cost to possible rewards are just not there. They have so little to play with. so few transaction compared to US & Euro markets.




ASX is one of the biggest and most liquid markets in the world. Where there is money to be made, it will be made.


----------



## skyQuake (14 April 2012)

Starcraftmazter said:


> Hmmm.
> 
> I will take all of your money, property and assets - but I will give it to someone else.
> 
> What's the problem then?





I have no idea what you're talking about lol.
Enlighten me please


----------



## Starcraftmazter (14 April 2012)

skyQuake said:


> I have no idea what you're talking about lol.
> Enlighten me please




I said everyone trading against the direction of the HFT algorithm loses.
You said everyone who will trade in their direction wins, and asked what is the problem.

You are therefore implying that it is okey to take money from someone so long as you give it to someone else. So I suggested that I take all your money and give it to someone else.


----------



## Trembling Hand (14 April 2012)

Starcraftmazter said:


> ASX is one of the biggest and most liquid markets in the world.




LOL! More rubbish from the inexperienced.

The Korean stock market does more volume/value in 1/2 hour than the ASX does all day. The Taiwan futs trades more in their 1/4 day than the SFE does in its 24 hours! And they are considered small fry.

Again the inexperienced drivel that you server up is is golden.

Do you ever admit you don't know what the fark you are talking about?

 (your confusing mrk cap with liquidity but why wouldn't you. You have never dipped your toe in the market!!)


----------



## Starcraftmazter (14 April 2012)

Trembling Hand said:


> LOL! More rubbish from the inexperienced.




http://en.wikipedia.org/wiki/List_of_stock_exchanges

12th by trade value and 9th by market cap. In a list called "*Major* Stock Exchanges". Yep, not big or liquid at all!



Trembling Hand said:


> Do you ever admit you don't know what the fark you are talking about?




I don't know, do you?



Trembling Hand said:


> The Korean stock market does more volume/value in 1/2 hour than the ASX does all day.




Friday ASX turnover: $4,029,137,368 AUD
Friday KOSPI turnover: $4,620,542,929 AUD

Tell me, do you ever get tired of being wrong?


----------



## skyQuake (14 April 2012)

Starcraftmazter said:


> I said everyone trading against the direction of the HFT algorithm loses.
> You said everyone who will trade in their direction wins, and asked what is the problem.



ok so far so good


> You are therefore implying that it is okey to take money from someone so long as you give it to someone else. So I suggested that I take all your money and give it to someone else.



Uhh I implied no such thing. How you reached that jump of logic is beyond me.
You have stated that HFTs take money by trading against a punter. Then you said ok maybe they're not always on the opposite side of the punter.


> Effectively everyone who places a trade when there is any HFT action that goes against them will lose out.



So 50% of the time, an HFT action will help you, and 50% it wont, as they have *no way* to determine what your next action will be unless you are trying to buy/sell a whole lot of stock over the day.


----------



## Starcraftmazter (14 April 2012)

skyQuake said:


> So 50% of the time, an HFT action will help you, and 50% it wont, as they have *no way* to determine what your next action will be unless you are trying to buy/sell a whole lot of stock over the day.




Please prove mathematically that it will be 50%.


----------



## skyQuake (14 April 2012)

Starcraftmazter said:


> Please prove mathematically that it will be 50%.




Because they won't know whether I'm buying or selling until the order has hit the market. ASX time price priority.
Thus 50/50
Do you concede they won't know what my action is until my order has hit market and gotten filled? Or sitting there if its a limit order.

Btw KOSPI futs do HEAPS more val/vol than SPI. Same contract value too.


----------



## Trembling Hand (14 April 2012)

Starcraftmazter said:


> http://en.wikipedia.org/wiki/List_of_stock_exchanges
> 
> 12th by trade value and 9th by market cap. In a list called "*Major* Stock Exchanges". Yep, not big or liquid at all!
> 
> ...



yep clueless. Add in the derivatives u joker. Bots need to arb. The Aussie market is a ghost town compared to other markets.

I don't need Wikipedia to tell me data. I see what vol we do compared to the markets I trade everyday. Maybe one day u will get to place a trade and see for yourself


----------



## skyQuake (14 April 2012)

*SPI Contract Val	*
107,500 AUD

*KOSPI Contract Val* 
132,750,000 KRW
*KRWAUD	*
0.000851	
 112,970 AUD Equiv

Same contract size approx	

KOSPI does 250k a day avg while SPI does 30k.	

No-one arbs stocks. U need futs

pic related


----------



## Starcraftmazter (14 April 2012)

skyQuake said:


> Because they won't know whether I'm buying or selling until the order has hit the market. ASX time price priority.
> Thus 50/50
> Do you concede they won't know what my action is until my order has hit market and gotten filled? Or sitting there if its a limit order.




Yes, but what does this have to do with anything? I asked you to prove that it's 50/50.



skyQuake said:


> Btw KOSPI futs do HEAPS more val/vol than SPI. Same contract value too.




We're not talking about futures are we? Super funds don't trade futures, do they?



Trembling Hand said:


> I don't need Wikipedia to tell me data. I see what vol we do compared to the markets I trade everyday. Maybe one day u will get to place a trade and see for yourself




Those figures are not from wikipedia, they are from the KRX and ASX.


----------



## Trembling Hand (14 April 2012)

Starcraftmazter said:


> We're not talking about futures are we? Super funds don't trade futures, do they?
> 
> 
> 
> Those figures are not from wikipedia, they are from the KRX and ASX.




Oh oh oh my god. To funny.

You haven't a clue what Bots do do u.


----------



## skyQuake (14 April 2012)

Starcraftmazter said:


> Yes, but what does this have to do with anything? I asked you to prove that it's 50/50.




Well if they don't know whether I'm going to BUY (50%) or SELL (50%) they can't really make any other assumption can they? Assuming its a predatory algo that wants to frontrun your orders. Which is what you're talking about isnt it?





> We're not talking about futures are we? Super funds don't trade futures, do they?



HFTs need oppies or futs to arb against don't they?


----------



## Starcraftmazter (14 April 2012)

skyQuake said:


> Well if they don't know whether I'm going to BUY (50%) or SELL (50%) they can't really make any other assumption can they? Assuming its a predatory algo that wants to frontrun your orders. Which is what you're talking about isnt it?




What do buy/sell 50/50 have anything to do with them?

Let's say you make 10 trades in a day. Let's say for every position you took and closed, it just so happens that the HFTing algos took a different position. That's not 50%, that's 0%.


----------



## skyQuake (14 April 2012)

Starcraftmazter said:


> What do buy/sell 50/50 have anything to do with them?
> 
> Let's say you make 10 trades in a day. Let's say for every position you took and closed, it just so happens that the HFTing algos took a different position. That's not 50%, that's 0%.




My point is how can they frontrun u if they don't know what direction you're going to trade. Let's say you make 10 trades a day on the same side of a HFT etc.
Long term avg will be 50%


----------



## Starcraftmazter (14 April 2012)

skyQuake said:


> My point is how can they frontrun u if they don't know what direction you're going to trade. Let's say you make 10 trades a day on the same side of a HFT etc.
> Long term avg will be 50%




There is no way to prove this. It will be random at best and less than 50% at worst.


----------



## skyQuake (14 April 2012)

Starcraftmazter said:


> There is no way to prove this. It will be random at best and less than 50% at worst.




Prove what? That they can't see ur order coming to mkt?
It's a coin flip unless they know your order so they can frontrun it


----------



## Starcraftmazter (14 April 2012)

skyQuake said:


> Prove what? That they can't see ur order coming to mkt?
> It's a coin flip unless they know your order so they can frontrun it




Why are you still talking about them seeing my order coming to market? It has absolutely nothing to do with it


----------



## skyQuake (14 April 2012)

Starcraftmazter said:


> Why are you still talking about them seeing my order coming to market? It has absolutely nothing to do with it




Because if they can't frontrun you how can they make your trade entry/exit worse?


----------



## BradK (14 April 2012)

Trembling Hand said:


> Your are ripper.




This is a great thread. I am nearly up to the last page, and already I feel like a cigarette.. .and I don't even smoke! 

Oh, and it is 'You're' a ripper. Sorry about the correction TH... don't punish me - be kind!  

Brad


----------



## BradK (14 April 2012)

Trembling Hand said:


> Oh oh oh my god. To funny.
> 
> You haven't a clue what Bots do do u.




*cough cough* ... Too funny. 

Hey, don't shoot the messenger!


----------



## BradK (14 April 2012)

Finished. That was bloody awesome! 

It is still like an episode of House - something mysterious is going on - but, I am not sure which one is House - TH, SCM, or Hugh Laurie? 

Thanks for an entertaining thread.


----------



## Starcraftmazter (14 April 2012)

skyQuake said:


> Because if they can't frontrun you how can they make your trade entry/exit worse?




By moving the sp between when you place your order and your order executes...

1. A certain pattern emerges 
2. HFT bot recognises pattern
3. Unknowingly of the above (1,2), some amount of traders/investors including you put in order to go in X direction
4. HFT bot puts in a large order to go into Y direction because of (2) and irrespective of (3)
5. The orders of the investors/traders make it through to the ASX, but by this time the above already happened (4)
6. SP moves otherwise to how it would if (4) did not happen
7. Traders/Investors lose out.


----------



## skyQuake (14 April 2012)

Starcraftmazter said:


> By moving the sp between when you place your order and your order executes...




Impossible if its a market order. Because no-one knows you're putting in a market order but you, and after you place it the broker routes it in, and then it hits market. Then and only then can the HFT react. 



> 1. A certain pattern emerges
> 2. HFT bot recognises pattern
> 3. Unknowingly of the above (1,2), some amount of traders/investors including you put in order to go in X direction
> 4. HFT bot puts in a large order to go into Y direction because of (2) and irrespective of (3)
> ...




Really? HFTs trading breakouts on penny stocks too? On a intra timeframe? And how would pattern work with something that is supposed to take a few million trades a day? I don't think there are that many setups on any pattern.
Unless you mean something else by pattern.


----------



## Starcraftmazter (14 April 2012)

skyQuake said:


> Impossible if its a market order. Because no-one knows you're putting in a market order but you, and after you place it the broker routes it in, and then it hits market. Then and only then can the HFT react.




Understand these three very specific events which occur in the following order:

1. You hit the button on your computer to send the order.
2. HFT bot executes it's trading and changes sp.
3. Your order is received by the ASX and executed.

Because this seems hard to understand let me emphasise that point (2) would occur regardless of whether you wanted to execute your order or not - you are unluckily and through no particular fault of your own involved in HFT manipulation of the market.

I am not saying every single order every single person makes will be affected, but a lot will. That is the point.



skyQuake said:


> Really? HFTs trading breakouts on penny stocks too?




I'm pretty sure penny stocks are not the only stocks on the ASX which have over $0 turnover.



skyQuake said:


> On a intra timeframe? And how would pattern work with something that is supposed to take a few million trades a day? I don't think there are that many setups on any pattern.
> Unless you mean something else by pattern.




Not sure what exactly you mean, but by pattern I mean any sort of behaviour which is occurring in any stock which is picked up by the hft algo as indicating something which is well known to happen immediately following that pattern. They then trade on it.


----------



## skyQuake (14 April 2012)

Starcraftmazter said:


> Understand these three very specific events which occur in the following order:
> 
> 1. You hit the button on your computer to send the order.
> 2. HFT bot executes it's trading and changes sp.
> ...



Well that my point. 50% of the time the the price manipulation is in your favor, and 50% its not. Because its completely random its going to average 50% in the end.



> I am not saying every single order every single person makes will be affected, but a lot will. That is the point.
> 
> I'm pretty sure penny stocks are not the only stocks on the ASX which have over $0 turnover.
> 
> Not sure what exactly you mean, but by pattern I mean any sort of behaviour which is occurring in any stock which is picked up by the hft algo as indicating something which is well known to happen immediately following that pattern. They then trade on it.




What i meant is pattern trading isnt high frequency. Its low frequency if anything. There simply isnt that many setups.

Price action pattern on a 5min chart acts out over the nxt 20min. Patterns over the daily act out over the next few days or week. Do you really need 300micro second latency to act on that?
Or a volume participation algo? Issue would be volume not speed.


----------



## Starcraftmazter (14 April 2012)

skyQuake said:


> Well that my point. 50% of the time the the price manipulation is in your favor, and 50% its not. Because its completely random its going to average 50% in the end.




I dispute this because it is baseless.

Let's say you're a trader and HFTers make money by exploiting your behaviour. They know how you will react to things so they react to them quicker and take advantage of you.

Then it would not be 50%.




skyQuake said:


> What i meant is pattern trading isnt high frequency. Its low frequency if anything. There simply isnt that many setups.




There are many patterns which occur over different time scales.


----------



## skyQuake (14 April 2012)

Starcraftmazter said:


> I dispute this because it is baseless.
> 
> Let's say you're a trader and HFTers make money by exploiting your behaviour. They know how you will react to things so they react to them quicker and take advantage of you.
> 
> Then it would not be 50%.



Ok, so you're saying the HFT uses pattern recognition to take trades before other market participants do.

HFTs do not act this way. It defeats the purpose of having the fastest trigger finger. 

An example of what they DO is index arb. And that requires speed. Tiny arb opportunities pop up all the time, and are relatively unexpected compared to say a breakout on BHP which people have been anticipating for weeks. Will the arb disappear 1sec later? Yes. Will another one pop up in 1sec? Probably. 
Can you buy a BHP breakout 30sec after the pop? Yes. 5mins? Yes. Will another one occur in 24hrs? Very unlikely.

The problem with stocks is volume. Perhaps if you've traded size you'll know that time is not important, or even price (to an extent). Volume is all that matters. Being first might get u best price, but for no real volume.


----------



## Starcraftmazter (14 April 2012)

skyQuake said:


> Ok, so you're saying the HFT uses pattern recognition to take trades before other market participants do.
> 
> HFTs do not act this way. It defeats the purpose of having the fastest trigger finger.
> 
> ...




So is your claim that the only thing HFTers do is arbitrage? 

I understand your point about volume, but if the HFTers can detect a certain price action which is about to occur in a stock like BHP which is pretty damn liquid - and it need not at all be a significant action like a breakout, they could simply smash into the orders already on market because they know the sp is about to fly further in that direction anyway.


----------



## skyQuake (15 April 2012)

Starcraftmazter said:


> So is your claim that the only thing HFTers do is arbitrage?



 Thats pretty much it. They're very delta neutral.



> I understand your point about volume, but if the HFTers can detect a certain price action which is about to occur in a stock like BHP which is pretty damn liquid - and it need not at all be a significant action like a breakout, they could simply smash into the orders already on market because they know the sp is about to fly further in that direction anyway.




Order in the market depth are seldom fulfilling. Real volume doesnt sit at market, so hfts would have touble getting filled at good prices.
How often do u see spikes in stocks that don't fade? (excluding news, big levels etc)
You're far far more likely to see modest but continuous green/red candles continue than spikes with no follow thru.


----------



## Trembling Hand (15 April 2012)

skyQuake said:


> Thats pretty much it. They're very delta neutral.




skyQuake ever get the feeling you're talking to someone who learnt everything from wiki and from articles like Kohlers and is yet to actually put together anything that looks like a  system? He has no idea what they do. Thats why he thinks they are some all winning all robbing super algo. And has no idea why they need a deep active derivative market.

*or even more likely never traded a thing profitably in his life??*


----------



## skyQuake (15 April 2012)

Too often. Still, I'd like to believe there's hope.

Even wiki had a line about how HFTs compete with each other not investors. Better show that to Kohler.


----------



## cynic (15 April 2012)

skyQuake said:


> Too often. Still, I'd like to believe there's hope.
> 
> Even wiki had a line about how HFTs compete with each other not investors. Better show that to Kohler.




Congratulations SQ and TH! I never thought I'd live to see it! Miracles do happen!

You've achieved the impossible and conquered the unconquerable by somehow managing to have the last word!

So tell me - which of you was it who hatched that clever scheme to insert the entry into wiki?


----------



## moXJO (16 April 2012)

Trembling Hand said:


> *or even more likely never traded a thing profitably in his life??*




SCM have you ever traded shares(ops,futs) or bought property?
You seem to be an expert in both


----------



## tech/a (16 April 2012)

moXJO said:


> SCM have you ever traded shares(ops,futs) or bought property?
> You seem to be an expert in both




Why bother?


----------



## sinner (16 April 2012)

BradK said:


> I am not sure which one is House - TH, SCM, or Hugh Laurie?




Check SCMs contributions to other threads for a clue. For the last 30 odd days he has been trawling threads and arguing with anyone and everyone about everything. 

You should've seen the three pages of 'discussion' where we were all 'educated' as to how Apple paying a dividend would apparently distort the whole market. To the point where he was reprimanded by a mod.


----------



## Trembling Hand (16 April 2012)

SCM I just tried to send through to you the historical tick data but its bounced.

"The email account that you tried to reach does not exist."

I hope you have a go at it. Would love to see your system design skills at work


----------



## CanOz (16 April 2012)

sinner said:


> Check SCMs contributions to other threads for a clue. For the last 30 odd days he has been trawling threads and arguing with anyone and everyone about everything.
> 
> You should've seen the three pages of 'discussion' where we were all 'educated' as to how Apple paying a dividend would apparently distort the whole market. To the point where he was reprimanded by a mod.




LOL, I noticed the same thing and was almost tempted to weigh in on an argument....thankfully my forum experience has left me with some decent lessons...

Its almost as if SCM is trying to prove his worth or intelligence to someone...I sense a deeper Physiological issue at heart.

Cheers,


CanOz


----------



## CanOz (16 April 2012)

tech/a said:


> Why bother?
> 
> 
> View attachment 46743




LOL @ Tech/A

Ahh the wonders of technology.

CanOz


----------



## Starcraftmazter (16 April 2012)

Trembling Hand said:


> SCM I just tried to send through to you the historical tick data but its bounced.
> 
> "The email account that you tried to reach does not exist."
> 
> I hope you have a go at it. Would love to see your system design skills at work




I've received nothing so far. My email is the same as my forum username @gmail.com, check again.



CanOz said:


> Its almost as if SCM is trying to prove his worth or intelligence to someone...I sense a deeper Physiological issue at heart.




No, I just can't stand the stupidity that I see other people exhibit on this forum. It is almost as though they are from a parallel universe.


----------



## Trembling Hand (16 April 2012)

Starcraftmazter said:


> I've received nothing so far. My email is the same as my forum username @gmail.com, check again.




The email you gave was wrong






Starcraftmazter said:


> No, I just can't stand the stupidity that I see other people exhibit on this forum. It is almost as though they are from a parallel universe.



You mean like stupidity of pretending you know what trading is about when you don't trade yourself?

Or the stupidity of commenting on bots robbing retail when you don't know that they even use derivatives etc


----------



## skc (16 April 2012)

Trembling Hand said:


> The email you gave was wrong
> 
> View attachment 46746
> 
> ...




Missing the t in maz*t*er

But TH... 

You can't convince someone who define "unfairness" as any venture that requires above-average capital and makes a profit. And you know you won't get your many wasted hours back...as well as the bandwidth you wasted in sending him the data.

Personally I have a 15-post stop loss on forum debate (I only use this term very losely) with fools (I also use this term very losely).


----------



## Starcraftmazter (16 April 2012)

Trembling Hand said:


> Or the stupidity of commenting on bots robbing retail when you don't know that they even use derivatives etc





How is it stupid, it's common sense. They close their positions at the end of a day. That means they do not make money from value created overtime by companies. That implies that for every $1 they make - someone really true has to lose $1. 

Prove me wrong.


----------



## Trembling Hand (16 April 2012)

Skc

Yep got the email off eventually but that was the original one he gave.

But I really am waiting with great anticipation for the results of the next bot to rob retail of their hard earned.

And yep I've well and truly blown my stop!!


----------



## Trembling Hand (16 April 2012)

Starcraftmazter said:


> How is it stupid, it's common sense. They close their positions at the end of a day.



Hahahahahahahhah

Like I said clueless. You assume they do. I see very little evidence that they exist like you think they do. What I *know *is that they are arb bots if anything and they do not close out at the end of the day. They hold until expiry where they can unroll the arb.



Starcraftmazter said:


> That means they do not make money from value created overtime by companies. That implies that for every $1 they make - someone really true has to lose $1.
> 
> Prove me wrong.




There is no diff from you buying a share and closing it in 3 months as an "investor" or me buying it and selling it in 3 minutes. We are all just playing pass the parcel. (unless you only involve yourself in Cap raising & IPO's)

Maybe when you start trading you will be able to understand.


----------



## Starcraftmazter (16 April 2012)

Trembling Hand said:


> Skc
> 
> Yep got the email off eventually but that was the original one he gave.
> 
> ...




It's less than 24h of data, can't I get at least a month? I doubt anyone has ever learned anything from a single day's data.....



Trembling Hand said:


> Hahahahahahahhah
> 
> Like I said clueless. You assume they do.




Says so on wikipedia buddy. Don't argue with wikipedia.



Trembling Hand said:


> There is no diff from you buying a share and closing it in 3 months as an "investor" or me buying it and selling it in 3 minutes.




Except that they can do it in 300 microseconds.


----------



## Trembling Hand (16 April 2012)

Starcraftmazter said:


> It's less than 24h of data, can't I get at least a month? I doubt anyone has ever learned anything from a single day's data.....




Of course you can but you asked for a "sample"

so what will be the excuse after I give you 3 months of tick data?



> Says so on wikipedia buddy. Don't argue with wikipedia.



Well I guess when you don't trade like yourself you are left with whatever is on wiki.



> Except that they can do it in 300 microseconds.



 So can you if you're smart enough.


----------



## Starcraftmazter (16 April 2012)

Trembling Hand said:


> Of course you can but you asked for a "sample"
> 
> so what will be the excuse after I give you 3 months of tick data?




I contend that the sample is not a fully realistic snapshot of what the HFTers have available, since they know orders coming in with more time precision than what you have given me.

I was also hoping for a data of a stock's trading, like an ASX8 stock.

Nevertheless, there *may* well be ways to profit from patterns embedded within.

My idea would be to write an algorithm which tries to find patterns associated with coming market direction. The more data I have the better.

Also don't expect anything soon, I'm a busy man (posting here all day takes a lot of time you know).



Trembling Hand said:


> Well I guess when you don't trade like yourself you are left with whatever is on wiki.




I don't see how me buying or selling some shares in some stocks tells me whether HFTers have their positions closed by the end of the day or not.

Wikipedia is instant access to reliable data.


----------



## sinner (16 April 2012)

Just because the algos are 'flat' by EOD, doesn't mean they have closed positions. It just means they are running a flat book! Nothing else!

Also, in line with what TH said about pass the parcel, all global markets are a continuous auction serviced by a limit order book. Timeframe has sweet-f-all to do with it. It's about two participants meeting at a particular price and volume!

I hate this argument you are forcing, because I feel I have legitimate beef (quote stuffing, flash orders, propagation of systematic issues, etc) with HFT and you have continuously derailed the discussion or reduced it to levels where logical contributions are moot as everyone spends their time explaining reality to you, *again*.


----------



## Trembling Hand (16 April 2012)

sinner said:


> I hate this argument you are forcing, because I feel I have legitimate beef (quote stuffing, flash orders, propagation of systematic issues, etc) with HFT and you have continuously derailed the discussion or reduced it to levels where logical contributions are moot as everyone spends their time explaining reality to you, *again*.




Sinner I agree with you there is some things that HFT do that are a genuine worry. But I don't see any of that stuff on the ASX out side the few bot blowups/"fatfingers" I've seen. 

Stupidly Alan Kohler has taken the existence of co-located servers to be bots "quote stuffing, flash orders etc". That's just a plain beat up and the Muppets swallow it whole.


----------



## Starcraftmazter (16 April 2012)

Trembling Hand said:


> Sinner I agree with you there is some things that HFT do that are a genuine worry. But I don't see any of that stuff on the ASX out side the few bot blowups/"fatfingers" I've seen.




Well then why are we even arguing


----------



## Trembling Hand (16 April 2012)

Starcraftmazter said:


> Well then why are we even arguing




Because you stupidly have been arguing that the existence of Co-located servers is robbing joe average without a friggin clue what they do.


----------



## Starcraftmazter (16 April 2012)

Trembling Hand said:


> Because you stupidly have been arguing that the existence of Co-located servers is robbing joe average without a friggin clue what they do.




Of course I know what they do, they make money


----------



## sinner (16 April 2012)

Starcraftmazter said:


> Well then why are we even arguing




Because you have a penchant for trolling against a psychological mind-set which just can't stand trolling?


----------



## Starcraftmazter (16 April 2012)

sinner said:


> Because you have a penchant for trolling against a psychological mind-set which just can't stand trolling?




How am I trolling? I just want a far game where everyone has equal access.


----------



## wayneL (16 April 2012)

Starcraftmazter said:


> How am I trolling? I just want a far game where everyone has equal access.




Fair?

Stars I also have a strong sense of fair play. Whenever I got into a dust up, I always fought fair... Marquis of Queensbury rules and all that. The first time I had sand thrown in my face and kicked in the nuts I realized life is not fair.

My dad died on my birthday... that wasn't bloody fair either.

In my current business, my competition is not playing fair, but along the way I've learned a few dirty tricks as well, so if thems the rules then I'll play by those rules or quit the game. I play the game to hold my own and not destroy, that is my ethics, but I still have to practice the dark arts in order to hold my own.

Likewise in trading. If someone is playing dirty, I want to learn the rules of war so I can counterpunch successfully... and I want to pick battles I can win. HFT is so far removed from *my* battlefield that I couldn't give a fat rat's @ss about them. That is a battle I can't win so I just don't compete there.

Do they take from my profits? Nup! Because I don't compete with them.

Ma & Pa Investor even less so.

In fact for the average retail trader, HFT is such a non-issue it's laughable.


----------



## CanOz (16 April 2012)

wayneL said:


> Fair?
> 
> Stars I also have a strong sense of fair play. Whenever I got into a dust up, I always fought fair... Marquis of Queensbury rules and all that. The first time I had sand thrown in my face and kicked in the nuts I realized life is not fair.
> 
> ...




Great post Wayne, makes me curious as to what SCM's opinion on short selling is? If HFTing is unfair....is short selling unfair?

CanOz


----------



## Starcraftmazter (16 April 2012)

CanOz said:


> Great post Wayne, makes me curious as to what SCM's opinion on short selling is? If HFTing is unfair....is short selling unfair?




I don't see why? Everyone can short-sell just the same.


----------



## nulla nulla (16 April 2012)

CanOz said:


> Great post Wayne, makes me curious as to what SCM's opinion on short selling is? If HFTing is unfair....is short selling unfair?
> 
> CanOz




"Short Selling" is a very sweeping description. Do you mean:
1. Large scale Hedge Fund "Naked Short Selling";
2. Pitiful scale Mum & Pop "Naked Short Selling";
3. Hedge Funds borrowing large parcels of shares for a fee from the super funds then driving the market down simply because they can make a profit from the drop and any recovery before handing the borrowed shares back; 
4. Mum and Pop shorting the market through CFD's; or
5. Something else?

Personally 2 & 4 don't bother me. 1 and 3 give me the shirts because it is just manipulation of the market to profiteer in my opinion. However, each to their own.
Any rate please don't respond to this here as I think we are getting off topic from Kohlers article. 

As has been demonstrated over the last 9 pages, Mr Kohler appears to have gone to press with what can only be described as a factualy bereft generalisation, sensational more for what he appears to have mixed up, got wrong or is simply guessing about. A pity really when a google search found plenty of other fairly well balanced articles that better explained Algorithmic trading and HFT's.


----------



## notting (16 April 2012)

wayneL said:


> My dad died on my birthday... that wasn't bloody fair either.
> .




That's so mean. Poor thing! You must have been quite young.


----------



## DB008 (16 April 2012)

http://vimeo.com/6056298

[video=vimeo;6056298]http://vimeo.com/6056298[/video]


----------



## Starcraftmazter (16 April 2012)

DB008 said:


> http://vimeo.com/6056298
> 
> [video=vimeo;6056298]http://vimeo.com/6056298[/video]




Holy crap, that's precisely what I'm saying.

Don't know why I even bother arguing when I'm obviously right. Wasting my time trying to make people understand and all.


----------



## skyQuake (16 April 2012)

Starcraftmazter said:


> Holy crap, that's precisely what I'm saying.
> 
> Don't know why I even bother arguing when I'm obviously right. Wasting my time trying to make people understand and all.




Excellent, so we can get down to the problems with what you're saying then:

*1. Co-location.
*
Yup. Ok.

*2. Algos*

GE Example: First of all its an insto big swinging dick that is prepared to push a DOW component 2%.
Not Joe. The insto BSD is trying to reduce market impact. A predator algo finds it. Thats nature.
A retail trader is not going to do his share in blocks. He will do 20 shares and get instantly done. Algos will ping up and see nothing come back.
You also have to keep in mind the US mkt has many separate exchanges which is why the algo can exploit it against opposing orders and/or dark pools.

*3. Flash Orders*

No-one uses it anymore.

*4. Rebates.*

Aus does not have it.


----------



## wayneL (17 April 2012)

skyQuake said:


> Excellent, so we can get down to the problems with what you're saying then:
> 
> *1. Co-location.
> *
> ...




Yep Sky. 

As I said before.



wayneL said:


> Do they take from my profits? Nup! Because I don't compete with them.
> 
> Ma & Pa Investor even less so.
> 
> In fact for the average retail trader, HFT is such a non-issue it's laughable.




:sleeping:


----------



## Trembling Hand (17 April 2012)

Starcraftmazter said:


> Don't know why I even bother arguing when I'm obviously right. Wasting my time trying to make people understand and all.




Oh, we are sooooooo lucky to have such an experienced and knowledgeable member to grace us and set us fools straight.

Imagine how lucky we will be when you *start *trading. Hope its in the futs.


----------



## DB008 (17 April 2012)

TH, LOL. Made me spill my coffee. 

SCM did say when he first joined ASF that he worked for an engineering firm in Sydney City somewhere. He posted this information in the NBN forum. Not sure if he was full time, part time, casual or doing a school work experience week 

I posted that vimeo clip for a basic overall concept of HFT.

There was a great article a number of years ago in regards to this and how technology is changing the markets.
Some firms with their algorithms are/were making a few k at the open when the bid/ask orders were getting processed. I'll had a dig for it, but it's highly unlikely l'll ever find it. Fascinating stuff and faster is better in this instance.


----------



## tech/a (17 April 2012)

Who cares

Lots of experts looking pretty ordinary.
You guys must be bored s$&tless.


----------



## Trembling Hand (17 April 2012)

tech/a said:


> Who cares
> 
> Lots of experts looking pretty ordinary.
> You guys must be bored s$&tless.




Thats the problem when you're a bot. You can steal millions from the market in milliseconds then what is one to do?


:vader:


----------



## sinner (17 April 2012)

tech/a said:


> You guys must be bored s$&tless.




Or, you know, some of us were kind of hoping to have a legit discussion about a trading strategy that constitutes half (or more) of global all-market volume and an even higher proportion of equity bourse volume? You know, considering it's coming to Aus in a big way very soon?

Not bored ****less enough to spew derailing stuff about HFT into a personal thread about value investing like you did, however.


----------



## tech/a (17 April 2012)

> Not bored ****less enough to spew derailing stuff about HFT into a personal thread about value investing like you did, however.




I'm gutted!
Argument pointing to a changing coal face is seen as derailing!
I thought---Thought provoking.
Dinosaurs-----


----------



## Trembling Hand (17 April 2012)

sinner said:


> some of us were kind of hoping to have a legit discussion about a trading strategy that constitutes half (or more) of global all-market volume and an even higher proportion of equity bourse volume?




But whats the problem with it. The flash orders stuff is a beat up. In the futs when it happens its ignored if not its hit into to by another bot or big dick. It just doesn't work. especially with the ASX where the markets spends most of the time asleep anyway.

Order stuffing is the same. The instrument get to where its going anyway. Can be frustrating fighting for a fill but its just an evolution of the markets. And I'm talking about fills when you are an active trader where a tick or two per trade means big money. Not Joe retail who can get all the volume he needs with a hit on the Comsec market button.


sinner said:


> You know, considering it's coming to Aus in a big way very soon?




The biggest effect I see is ironically the slowing down of markets yet the Muppets think its their enemy. The ASX top 20 and futs have greatly reduced volatility from pre bots days. To the point that most Prop now doesn't touch it. Its arbed to within an inch of it life. Its already here.


----------



## sinner (17 April 2012)

> I'm gutted!
> Argument pointing to a changing coal face is seen as derailing!
> I thought---Thought provoking.
> Dinosaurs-----




No issues with the "argument", just where you decided to dump it and your attitude towards people in the "argument".



Trembling Hand said:


> But whats the problem with it. The flash orders stuff is a beat up. In the futs when it happens its ignored if not its hit into to by another bot or big dick. It just doesn't work.




Right no problem, I wonder why *real* sugar traders complaining sugar contracts not representative since ICE killed their "Implied Engine" in an effort to attract HFT?



> Order stuffing is the same. The instrument get to where its going anyway.




lol, yeah instrument gets to where it's going, like the BATS IPO which went to 0? 

No issues with order stuffing except all the NYSE "we will cancel trades below/above 30% flash crash/smash"? Like NASDAQ, Direct Edge, Deutsche Borse, Borse Italiana all moving to penalise quote stuffing? Like the SEC *finally* moving to regulate HFT code which can bring down a bourse?

http://www.ft.com/cms/s/0/8d3aead4-689b-11e1-b803-00144feabdc0.html


> Though rapid quote cancelling is seen as a way for marketmakers to minimise the risks of offering prices to other traders, keeping trading costs low, there is growing concern that a portion of such traffic is inefficient and raises costs to other investors who must invest in greater data bandwidth.
> Nasdaq’s measures will penalise traders that send over 1m messages per day – which will include quotes, cancellations and replacements – but generate fewer than 1 trade per 100 messages.
> The penalties will initially range from 0.01 cents to 1 cent per trade, with higher charges for messages further from the market price. This is called the weighted order-to-trade ratio. The charges could change, however, if they prove not be effective at curbing messaging.
> “We don’t expect there to be a large number of customers affected, but it should cause people to focus on efficient quoting behaviour,” said Eric Noll, executive vice president at Nasdaq OMX. “In an ideal world, no one would pay anything.”






> Can be frustrating fighting for a fill but its just an evolution of the markets. And I'm talking about fills when you are an active trader where a tick or two per trade means big money. Not Joe retail who can get all the volume he needs with a hit on the Comsec market button.




I am wondering if you were trading the ES or USDJPY on May 6 2010 like I was during the NY session. If not, I am not sure you really understand until it happens to you. I didn't lose money that night, but it opened my eyes.



> The biggest effect I see is ironically the slowing down of markets yet the Muppets think its their enemy. The ASX top 20 and futs have greatly reduced volatility from pre bots days. To the point that most Prop now doesn't touch it. Its arbed to within an inch of it life. Its already here.




I am talking specifically about comparative trading volumes, 10% for the ASX versus 60-70% for NYSE, Euronext, LSE, etc. When I say 'coming' I mean the increase of this participation which moves in line with other major developed world markets.


----------



## Trembling Hand (17 April 2012)

sinner said:


> Right no problem, I wonder why *real* sugar traders complaining sugar contracts not representative since ICE implemented their "Implied Engine"? As FT pointed out at the time
> 
> http://www.ft.com/cms/s/0/05ba0b60-33d8-11e0-b1ed-00144feabdc0.html



 And, as you know the world is stuffed full of funny money looking for a place to put it. Just because it is moving more does that mean its solely the fault of bots?



sinner said:


> No issues with order stuffing except all the NYSE "we will cancel trades below/above 30% flash crash/smash"? Like NASDAQ, Direct Edge, Deutsche Borse, Borse Italiana all moving to penalise quote stuffing? Like the SEC *finally* moving to regulate HFT code which can bring down a bourse?
> 
> http://www.ft.com/cms/s/0/8d3aead4-689b-11e1-b803-00144feabdc0.html



And just like all other regulatory moves associated with the market they fix the "problem" long after the "market" has moved on from it. No problems with regulating dangerous code that F's up a market but thats exactly the same problem they had to deal with when electronic access started 20-30 years ago.



sinner said:


> I am wondering if you were trading the ES or USDJPY on May 6 2010 like I was. Thankfully I was short USDJPY but trying to get out of the trade was fkn hell.



 Just another fun day.  Come over to a thin and fast market like Honkers if you wanna know hell!!



sinner said:


> I am talking specifically about comparative trading volumes, 10% for the ASX versus 60-70% for NYSE, Euronext, LSE, etc. When I say 'coming' I mean the increase of this participation which moves in line with other major developed world markets.




But thats the thing. Yes undoubtedly there has been stuff ups with "fatfinger" bots. But it use to be every problem was blamed on the evil short sellers. Now its the evil HFT. But they have a legit reason to exist. Its a market. We are in a Bear market of sorts and that leads to short and sharp moves. I cannot see anyway around regulating markets not to move when they are thin?

As for this original reason for the topic its all a beat up. Kohler is a muppet who took the existence of Co-location servers as the existence of evil flash order, front running, manipulating Bots. BS. They are Oppy arb bots, Insto arb Futs bots and Insto execution bots.


----------



## notting (17 April 2012)

Trembling Hand said:


> They are Oppy arb bots, Insto arb Futs bots and Insto execution bots.




Can we just put that sentence in the Newbie thread just for fun?


----------



## Knobby22 (17 April 2012)

notting said:


> Can we just put that sentence in the Newbie thread just for fun?




LOL


----------



## sinner (17 April 2012)

Trembling Hand said:


> And, as you know the world is stuffed full of funny money looking for a place to put it. Just because it is moving more does that mean its solely the fault of bots?




All I was pointing out is that there are futs out there where what you said happens isn't happening, big dicks didn't ignore it or hit it, they stopped participating in the contract! They live in the *real world*, their access to production capital from the bank for the next year depends on a properly functioning futures market, if the contract series doesn't reflect reality then it is no good to them. If it's no good to the producers, the economic function it serves is more akin to casino than futs market. 

So there are clearly issues with capital formation and efficient allocation of capital here. 

I personally think the move by many long-only instos like pension funds to execute in dark pools indicates a similar issue.



> And just like all other regulatory moves associated with the market they fix the "problem" long after the "market" has moved on from it. No problems with regulating dangerous code that F's up a market but thats exactly the same problem they had to deal with when electronic access started 20-30 years ago.




Respectfully disagree that this problem is anything like the one faced by regulators in 1982. 

If you have no problem with the idea that there is potential for code to completely balls an exchange and that needs to be dealt with, then we agree in principle that an issue exists. I think the BATS IPO is a pretty good example. 



> Just another fun day.  Come over to a thin and fast market like Honkers if you wanna know hell!!




That comparison with HK is sort of the point isn't it. The normal size sitting 10 pips on either side of the book in USDJPY is something like a couple of billion. Normally, those are real bids and offers sitting in EBS or Reuters3000 from *very* strong hands. Experiencing a HK type move in USDJPY shows serious systematic issues.



> I cannot see anyway around regulating markets not to move when they are thin?




I would propose a very simple rule which is my understanding used to apply to the previous iteration of market-makers called "specialists". That is only this: if you get special exchange privilege (re latency, informational advantage, order types, etc) then you have to fulfil your role as a MM even in conditions aren't totally favourable to MM strategies. You don't wanna be a MM some days? Too bad! Take the trade or get the f off the floor.

May 6 2010 and plenty of other cases have shown that right now HFT supposedly fulfils the role of 'liquidity provider' when things are ok and gets paid good for it, but as soon as there is a sniff of trouble they suddenly become huge consumers of liquidity trying to flatten their book out as fast as possible, causing the most bizarre price action on the way.

That bizarre price action exhibits the characteristics of what we would call 'systematic instability' in compsci land. That the system being measured is exhibiting signs that indicate shifting underlying parameters beyond and point of equilibrium such that the system will either collapse catastrophically or become a new system.

What does the sound of liquidity getting sucked out of the market sound like?


You can hear near the end the 'human price' is reached and JPM steps in a big way to try and hit any offers it can find, shame NYSE and CME cancelled all those trades the next day 'cos that would've been their whole month right there.



> As for this original reason for the topic its all a beat up. Kohler is a muppet who took the existence of Co-location servers as the existence of evil flash order, front running, manipulating Bots. BS. They are Oppy arb bots, Insto arb Futs bots and Insto execution bots.




I don't disagree, but happy to use the opportunity to put a different view forward.


----------



## Trembling Hand (18 April 2012)

sinner said:


> All I was pointing out is that there are futs out there where what you said happens isn't happening, big dicks didn't ignore it or hit it, they stopped participating in the contract! They live in the *real world*, their access to production capital from the bank for the next year depends on a properly functioning futures market, if the contract series doesn't reflect reality then it is no good to them. If it's no good to the producers, the economic function it serves is more akin to casino than futs market.
> 
> So there are clearly issues with capital formation and efficient allocation of capital here.




Just on that point about futs not "working" I have read many articles about how the markets are being pushed and pulled at the expenses of poor ole Mum & Pop yet I have seen the opposite since bots came in. Over my many many years of my futs trading . Just seriously deep deep order books. As a result when looking at intraday moves they have locked up. With our very own SPI arbbed into almost non existence. After the first 30 min you start getting 5 min bars with a 3 tick range! FFS!!!! Thats what you call locked. And the fav of  Mum & Pop, the "blue chips", have followed the same pattern. At the expense of the daytraders.

Even the almighty ES just chews along now days with very little range. Nothing at all like the nice sweeping 1-5 min moves of 10 years ago. I would be more than happy to have all those friggin bots booted out and we all go back to ripping off the dumb traders at insto desks. But after 2008 I said good bye to those good old days and now just trying to *again *adapt. 

On the Sugar contract to take the range in ticks when it was at $8-9 bucks then take the tick range when its moved up to $36 dollars is a little silly. And the hedges and the produces making those nice sugary diabetic inducing products may be p!ssed off that they have to trade a contract now above 30 but the farmers who are in the real world are more than happy to have it there I bet.

Again the "efficient allocation of capital" or inefficient allocation of capital more like it is not the fault of bots IMO rather a much much bigger problem.


----------



## Iro (22 April 2012)

skyQuake said:


> So effectively everyone who places a trade when there is a HFT action in their direction will win out. Whats the problem then?
> And no, they can't "see" a trade before it comes through to the market. They can be fast but not go back in time.




No you're wrong about that. They in fact can see the order before everyone else, hence "see the future". That's why people are up in arms about flash trading don't you get it?

For example on the asx they have a matchtrading system with bids and offers on multiple order books, signals are flashed between the systems to a fill matched to the best price.

eg 1.
Best bid 	Best offer
TradeMatch	4.05	4.10
Chi-X	        4.02	4.06
PureMatch	4.02	4.07

But when the new order comes and you have a fast enough system, its possible to get a fill at a lower price and sell into the higher price. Its all a matter of latency. So when Joe 6 pack or even institutional investors who don't have access to HFT bots want to buy at the lower price, they would find they can't get a fill and have to move into a higher price. Hence you get slippage. (this is all happening in milliseconds btw)

The situation is even worse in volatile conditions like in a buying or selling frenzy where you can get bids above the offer prices or offers below the bidding prices. HFT bots can make tremendous amounts of money just from the spreads.

And this is just one way of doing it. I've seen other ways HFT have the advantage over the public, like using midpoint crossing trades with darkpools sell into rallies without public buyers knowing. This isn't like the dumb limit sell like we have either. They typically have standard deviations built into the system so it even MOVES with the rally, ensuring they get a good price. How come we can't do that? And if the direction goes against them, they will throw up a fake bid wall to manipulate the market into believing there's buying pressure. But when it actually get to them in the queue, they'll pull the order and put it one step back, letting fools who fill in after them take on more of their sells.


----------



## Iro (22 April 2012)

I've been reading alot about this topic recently. Its fascinating stuff. I suggest you guys read up on it too on since some of you actually think it only accounts for less than 10% of asx volume.

Some links:

Chasing the Same Signals:How Black-Box Trading Influences Stock Markets from Wall Street to Shanghai

The changed nature of the market and price manipulation on the ASX

A High Frequency Trader's Apology


----------



## Trembling Hand (22 April 2012)

Iro said:


> No you're wrong about that. They in fact can see the order before everyone else, hence "see the future". That's why people are up in arms about flash trading don't you get it?




Gee Iro you have been busy. Shame you didn't manage to understand this post,

https://www.aussiestockforums.com/forums/showthread.php?t=14370&p=695163&viewfull=1#post695163

Before you posted this,



> I see TH is been his usual smart **** self again huh.


----------



## skyQuake (22 April 2012)

Iro said:


> No you're wrong about that. They in fact can see the order before everyone else, hence "see the future". That's why people are up in arms about flash trading don't you get it?




No flash orders on the ASX. Never was. Happy to be proven wrong though so I can be up in arms over it.




> For example on the asx they have a matchtrading system with bids and offers on multiple order books, signals are flashed between the systems to a fill matched to the best price.
> 
> eg 1.
> Best bid 	Best offer
> ...




Orders are not 'flashed' between them. It will be a consolidated market depth so it'll show 4.05 bid, 4.06 ask. All aussie brokers sent out a best execution policy a while ago dealing wit this specific issue. Non crossing volume is still 99%+ TM though.


> But when the new order comes and you have a fast enough system, its possible to get a fill at a lower price and sell into the higher price. Its all a matter of latency. So when Joe 6 pack or even institutional investors who don't have access to HFT bots want to buy at the lower price, they would find they can't get a fill and have to move into a higher price. Hence you get slippage. (this is all happening in milliseconds btw)
> 
> The situation is even worse in volatile conditions like in a buying or selling frenzy where you can get bids above the offer prices or offers below the bidding prices. HFT bots can make tremendous amounts of money just from the spreads.
> 
> And this is just one way of doing it. I've seen other ways HFT have the advantage over the public, like using midpoint crossing trades with darkpools sell into rallies without public buyers knowing. This isn't like the dumb limit sell like we have either. They typically have standard deviations built into the system so it even MOVES with the rally, ensuring they get a good price. How come we can't do that? And if the direction goes against them, they will throw up a fake bid wall to manipulate the market into believing there's buying pressure. But when it actually get to them in the queue, they'll pull the order and put it one step back, letting fools who fill in after them take on more of their sells.




Agree with most of this, and you raise a point with a example of a sell order that sells into rallies and spoofs bids.
That would be more of a regular algo than a HFT.


----------



## Iro (23 April 2012)

Trembling Hand said:


> Gee Iro you have been busy. Shame you didn't manage to understand this post,




Gee I wonder why. You never answered my very specific questions, didn't provided any helpful information, and were very condescending so I moved onto other sources thanks.

And how did you see what I posted before I edited it? Are you actually a mod in disguise?


----------



## Iro (23 April 2012)

skyQuake said:


> No flash orders on the ASX. Never was. Happy to be proven wrong though so I can be up in arms over it.




Heh they may not call it that but I understand you can still pay asx a hefty fee to have access to order book level information, hence be able to see orders develop before everyone else and "see the future". It doesn't have to be like the Nasdaq style flash orders where for 30 milliseconds the prices are frozen while they try to find a seller/buyer on the other side following a quote. On the press releases asx say they run some sort of "preorder filter" through their order books to prevent "market manipulation and front-running" but this seems more like a PR exercise to booster retail investor's confidence in the integrity of the market rather than any real effort because similar claims have been made by other exchanges with very little difference and if they really want to put a stop to this sort of behavior they could simply impose a minimum size threshold to screw up their algorithms and that would make this sort of behavior uneconomical. As long as there's differences in and between the orderbooks, HFT firms will find a way to profit from it, and I doubt asx will do much about it since there's a conflict of interest in that HFT firms are such a gold mine in revenue. 

I guess the real proof is in the pudding, in that HFT firms around the world are still in very much in profit even after all the negative publicity after the flash crash and all that rhetoric about putting bans on flash trading. It just means the firms aren't using strategies that take advantage of the 30 millisecond window and have moved onto something else. Another thing to consider is that even though the flash crash happened in 2009, on asx statistics since then the average order size have been going down while the actual number of trades have been shooting up (just like before), suggesting even more players have been hopping on this bandwagon and that the volume is big enough to noticeably influence the asx statistics on ALL trades. 



skyQuake said:


> Orders are not 'flashed' between them. It will be a consolidated market depth so it'll show 4.05 bid, 4.06 ask. All aussie brokers sent out a best execution policy a while ago dealing wit this specific issue. Non crossing volume is still 99%+ TM though.




By consolidated market depth 4.05 bid, 4.06 ask, I assume you mean the NBBO? That's just the aggregate. Orderbook level pricing occurs before this phase and in fact alot of HFC strategies involve manipulating the orderbook bid/ask price to influence the NBBO. 



skyQuake said:


> Agree with most of this, and you raise a point with a example of a sell order that sells into rallies and spoofs bids.
> That would be more of a regular algo than a HFT.




I would say what you define as regular algo bots and HFT bots are basically the same thing. Since they both manipulate the prices before humans can react, HFT bots have algorithms too, algo bots benefit lower latency setups and they're not mutually exclusive imho.


----------



## Trembling Hand (23 April 2012)

Iro said:


> Gee I wonder why. You never answered my very specific questions, didn't provided any helpful information, and were very condescending so I moved onto other sources thanks.
> 
> And how did you see what I posted before I edited it? Are you actually a mod in disguise?




I wasn't condescending. I did answer it with great detail. Then realised you had no clue and were miles away from having to worry about it anyway because you didn't even understand position sizing. So I then tried to correct your huge hole in the most basic of trading understanding.

But clearly I have wasted my time.


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## Trembling Hand (23 April 2012)

Iro said:


> And how did you see what I posted before I edited it? Are you actually a mod in disguise?




I'm a bot and _can _see the future.


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## skyQuake (23 April 2012)

Iro said:


> Heh they may not call it that but I understand you can still pay asx a hefty fee




proof? Link would be very nice.



> to have access to order book level information, hence be able to see orders develop before everyone else and "see the future". It doesn't have to be like the Nasdaq style flash orders where for 30 milliseconds the prices are frozen while they try to find a seller/buyer on the other side following a quote. On the press releases asx say they run some sort of "preorder filter" through their order books to prevent "market manipulation and front-running" but this seems more like a PR exercise to booster retail investor's confidence in the integrity of the market rather than any real effort



"pre-order filters" as you call it are broker side controls. No-one sees them, your broker's algo may see them to determine whether its looks ok or you've missed decimal dots. Its more to stop fat fingers going through and a complicated mess to sort through afterwards.
Link to specific press release? ASX website hopeless



> because similar claims have been made by other exchanges with very little difference and if they really want to put a stop to this sort of behavior they could simply impose a minimum size threshold to screw up their algorithms and that would make this sort of behavior uneconomical.



Min size threshold? How would that hurt algos?



> As long as there's differences in and between the orderbooks, HFT firms will find a way to profit from it, and I doubt asx will do much about it since there's a conflict of interest in that HFT firms are such a gold mine in revenue.




I don't see a problem here, if someone wishes to put an order on a less liquid exchange its up to them (Chi-X etc). Algos are simply arbing.



> I guess the real proof is in the pudding, in that HFT firms around the world are still in very much in profit even after all the negative publicity after the flash crash and all that rhetoric about putting bans on flash trading. It just means the firms aren't using strategies that take advantage of the 30 millisecond window and have moved onto something else.



Or maybe there weren't that many players on the flash trade bandwagon anyway. 



> Another thing to consider is that even though the flash crash happened in 2009, on asx statistics since then the average order size have been going down while the actual number of trades have been shooting up (just like before), suggesting even more players have been hopping on this bandwagon and that the volume is big enough to noticeably influence the asx statistics on ALL trades.



Agree there, lots of big orders are now being done with some algo behind it instead of a simple iceberg or a chunky limit order.




> By consolidated market depth 4.05 bid, 4.06 ask, I assume you mean the NBBO? That's just the aggregate. Orderbook level pricing occurs before this phase and in fact alot of HFC strategies involve manipulating the orderbook bid/ask price to influence the NBBO.
> 
> I would say what you define as regular algo bots and HFT bots are basically the same thing. Since they both manipulate the prices before humans can react, HFT bots have algorithms too, algo bots benefit lower latency setups and they're not mutually exclusive imho.



Have to disagree with you here. HFT is a subset of algos trading. As I said before, Most Algos bots work through the day or whatever time period to get volume done, volume is priority, followed by price, followed lastly by speed. 
HFTs bots are completely opposite. Price is the overwhelming consideration. Filling a stray 50lot on the SPI and selling stock to delta hedge. 

*The main objective of algo trading is not necessarily to maximize profits but rather to control execution costs and market risk.*

http://www.math.nyu.edu/faculty/avellane/QuantCongressUSA2011AlgoTradingLAST.pdf


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## Androopy (4 May 2012)

Very entertaining thread.

This might be relevant: http://www.youtube.com/watch?v=NzfmT4vGXZY&feature=related


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## Joules MM1 (4 May 2012)

Androopy said:


> Very entertaining thread.
> 
> This might be relevant: http://www.youtube.com/watch?v=NzfmT4vGXZY&feature=related




lulz, nice advert !


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## Joules MM1 (4 May 2012)

for mine, hft add to liquidity they dont drain, let's say you take out the function you take out liquidity, just like short selling brings both sell liquidity and (re)buy liquidity through, all executing on the same field......this is like how we could bang on that derivatives don't add to society and they dont, still, they are a apart of market function, they facilitate trade, they allow liquidity to flow......that's all

 i think the front running man-in-a-dark-raincoat idea is complete bubcus

markets evolve constantly and all you're seeing is that evolution  just the same way that pit traders hated screen traders and now your average ill-informed screen junkie hates, well, they just need to hate something......and so it goes....ignorance is a funny thing

still, my only concern is the flattening of volatility via none-human speed but it's  long way away till we get to a Kurzweil singularity thing 

btw, journalists are journalists and not traders...... for a very good reason


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## JonnoB (4 May 2012)

skyQuake said:


> http://www.math.nyu.edu/faculty/avellane/QuantCongressUSA2011AlgoTradingLAST.pdf




Thanks for the link. Marco Avellaneda has some interesting papers.

Here are a couple of blog entries on HFT. A higher level discussion.

A High Frequency Trader's Apology, Pt 1

A High Frequency Trader's Apology, Pt 2


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## CanOz (5 May 2012)

Another opinion on HFT from another forum....not bad.



> Colocation of servers, not just in Chicago, but actually within the exchange buildings, is standard procedure amongst the HFTs. This has nothing to do with any kind of exchange corruption, per se, or 'high level people at the CME', but simply the priorities and resources of the HFT firms.
> 
> A few encouraging things to bear in mind, however, are the following:
> 
> ...




CanOz


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## Iro (11 May 2012)

Trembling Hand said:


> I wasn't condescending. I did answer it with great detail. Then realised you had no clue and were miles away from having to worry about it anyway because you didn't even understand position sizing. So I then tried to correct your huge hole in the most basic of trading understanding.
> 
> But clearly I have wasted my time.




Yes I can see from this reply you are not condescending at all. *sarcasm* 

The fact is I gave you specific questions, and you not only have not answered them you and tech actually started insulting me when all I did was pose questions. You say I didn't understand position sizing, but did you bother to explain? 

I've actually bothered read through your whole "something for nothing" thread and even your absurd hypothetical hedge fund thread. It turned out to be a huge waste time. In your posts you provided no useful information, no system for entry or exit, no examples why you took the trades, no explanations other than "you had a gut feeling". Gee I wonder how many traders just go with their gut and expect to win. And your sage "advice"? "Go learn more dom." (So helpful, wow) It seems more like an ego masturbation thread than any genuine attempt to help others.

Compare that tradesims's scalping thread. He clearly defines his system for scalping. Price and volume scan the day before to find set ups. Thin sell lines, thick buy lines. 3 points take profit. Get out when momentum stalls. Set up orders to execute before hand. Clear strategy and execution.

Or CanOz's genetic programming thread here and on trader's lab. Linking that propriety software to tradestation, input different indicators and conditions, define appropriate generations and backtest the hell out of it with appropriate data until you have a profitably bot. Clear starting point and strategy.

Or the other numerous system threads on forexfactory or babypips. Heck even that youtube School of Trade guy's bracket break out system is better than that nonsense you're touting.


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## Iro (11 May 2012)

skyQuake said:


> proof? Link would be very nice.




Its not that hard to find. The fees schedule is on the asx website. Google "ASX Market Connectivity Schedule of Fees". You're looking for the ASX ITCH config and liquidity cross rates, added that to mandatory 5km collocation fees for that setup and you're looking at around 20k per month for basic Pure and Tradematch orderbook access. Plus additional fees charged on top for volume. Pretty good money for just connecting a few cables. 

There's similar fees if you want access to Chi-X and the other various pools.



skyQuake said:


> "pre-order filters" as you call it are broker side controls. No-one sees them, your broker's algo may see them to determine whether its looks ok or you've missed decimal dots. Its more to stop fat fingers going through and a complicated mess to sort through afterwards. Link to specific press release? ASX website hopeless.




My opinion about the order filters is from reading one of HFT books or articles, forgot which one, but I remember author didn't think much of ASX claims given that they get so much money from the guys they're suppose to protecting us from. Also I'm fairly sure the pre-order filters, if they do much at all, would NOT be on the broker side. They would be on setup on the ASX computers or one of the intermediaries along the way. If they were on broker side, it would defeat the point, since the entire purpose of them is supposedly to prevent brokers from manipulating prices. Or perhaps you're thinking of something else.



skyQuake said:


> Min size threshold? How would that hurt algos?



Say for example a typical large institution wanted to buy from dark pool, with orderbook access you can see the order coming but not the limit price. So one way to get around this would be to issue tiny share lots with ‘immediate or cancel’ orders' (IOCs) say @ $20.10, if that order is ‘eaten’ the computer then issues an order at $20.25, then $20.30, then $20.35, then $20.40. When it tries $20.45 it gets no bite and the order is immediately canceled and you've just found out the highest price the institutional buyer is willing to pay. That's one example. There's also many algo bots that use small order to "scout" out the market to see if they meet conditions for various buy or sell entries. And others bots that try detect or obfusticate such activity, leading to the dueling bots thing that the articles before were talking about. Other activities like trying to flutter the spread or trying to quote stuff the system also requires large amounts of small parcels. I'm sure there's tons of other methods out there I don't know about. 

Anyway if the asx really wanted to stop this sort of activity, it could enforce a minimum size threshold, making the above activity uneconomical. As the bots would have to actually have to buy or sell marketable parcels like the rest of us, instead of been able to dip their toe in without getting wet.

The other points about difference between whats considered HFC and normal "algo" bots isn't that important to me, its just like tomaito or tomarto imo. They're not mutually exclusive, there's no law that says you can't code a HFC to focus on volume or algo on price or whatever.  Difference of timeframes is all.


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## Iro (11 May 2012)

Joules MM1 said:


> for mine, hft add to liquidity they dont drain, let's say you take out the function you take out liquidity, just like short selling brings both sell liquidity and (re)buy liquidity through, all executing on the same field......this is like how we could bang on that derivatives don't add to society and they dont, still, they are a apart of market function, they facilitate trade, they allow liquidity to flow......that's all
> 
> i think the front running man-in-a-dark-raincoat idea is complete bubcus
> 
> ...




Hft add to liquidity only if its in their favour, other times they take away liquidity just as well. 

I can't believe how you could think front running don't exist either. Eg Shady brokers have been front running their clients ever since the stock market was invented. Plenty of people have been arrested for it. With HFT its a matter of been able to do the same but legally and more high tech.

As for the market evolving business, take a step back and think about it. What would be the point? All its doing is moving money around, heck most of it is not even money its just credit created out of thin air. It doesn't produce anything useful and instead just sucks money out of the real economy. Even if the market "evolved" light years away as you say, with every trade conducted in nanoseconds with bots, the only difference would be brokers raking in even more cash, computers will use up more electricity and financial market fill continue to suck in even more money and talent from the real economy than ever before. People would not benefit from this.

Lastly Ray Kurzweil's singularity refers to AIs reaching a stage where it would be smart enough to enhance its own intelligence (possibly humans too), leading to an exponential explosion of technological progress that would benefit mankind. Faster HFT bots is NOT what the singularity is about.


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## skyQuake (11 May 2012)

Iro said:


> Its not that hard to find. The fees schedule is on the asx website. Google "ASX Market Connectivity Schedule of Fees". You're looking for the ASX ITCH config and liquidity cross rates, added that to mandatory 5km collocation fees for that setup and you're looking at around 20k per month for basic Pure and Tradematch orderbook access. Plus additional fees charged on top for volume. Pretty good money for just connecting a few cables.
> 
> There's similar fees if you want access to Chi-X and the other various pools.




My orig question was in ref to 
"Heh they may not call it that but I understand you can still pay asx a hefty fee to have access to order book level information, hence be able to see orders develop before everyone else and *"see the future*""
Don't really see how access to order book info allows u to see the future. Market depth access for retail isnt exactly expensive.



> My opinion about the order filters is from reading one of HFT books or articles, forgot which one, but I remember author didn't think much of ASX claims given that they get so much money from the guys they're suppose to protecting us from. Also I'm fairly sure the pre-order filters, if they do much at all, would NOT be on the broker side. They would be on setup on the ASX computers or one of the intermediaries along the way. If they were on broker side, it would defeat the point, since the entire purpose of them is supposedly to prevent brokers from manipulating prices. Or perhaps you're thinking of something else.




Im pretty sure there are broker side filters for DMA (have encountered them before), iress has a whole audit trail of trade entry, trade authorization, and if price seems its missing a decimal dot it gets queried etc.
But then again seeing large caps get sold down to 2c every few months. The filters employed by broker and asx side seem pretty crap...



> Say for example a typical large institution wanted to buy from dark pool, with orderbook access you can see the order coming but not the limit price. So one way to get around this would be to issue tiny share lots with ‘immediate or cancel’ orders' (IOCs) say @ $20.10, if that order is ‘eaten’ the computer then issues an order at $20.25, then $20.30, then $20.35, then $20.40. When it tries $20.45 it gets no bite and the order is immediately canceled and you've just found out the highest price the institutional buyer is willing to pay. That's one example. There's also many algo bots that use small order to "scout" out the market to see if they meet conditions for various buy or sell entries. And others bots that try detect or obfusticate such activity, leading to the dueling bots thing that the articles before were talking about. Other activities like trying to flutter the spread or trying to quote stuff the system also requires large amounts of small parcels. I'm sure there's tons of other methods out there I don't know about.
> 
> Anyway if the asx really wanted to stop this sort of activity, it could enforce a minimum size threshold, making the above activity uneconomical. As the bots would have to actually have to buy or sell marketable parcels like the rest of us, instead of been able to dip their toe in without getting wet.




Doubt the spread would be 1.5% on a $20 large cap but i get your point, min size threshold would be tricky to implement. How small is too small? Insto algos wouldnt worry about p/l on a $500 ping order if they need to move a few $million of stock.

*Though I don't think the insto trying to hide the buy order has the moral high ground over the algo trying to find it.*


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## Trembling Hand (11 May 2012)

Iro said:


> Yes I can see from this reply you are not condescending at all. *sarcasm*
> 
> The fact is I gave you specific questions, and you not only have not answered them you and tech actually started insulting me when all I did was pose questions. You say I didn't understand position sizing, but did you bother to explain?
> 
> ...




LOL mate. Good luck in your travels.


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## DB008 (7 August 2012)

Bloomberg Video (2:30)
http://www.bloomberg.com/video/the-future-of-high-frequency-trading-SOTWkKwURMKc3xvt914Llw.html

(The video is pretty bad first half, but the audio is fine)


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## Trembling Hand (7 August 2012)

Here is a bigger problem.

Dark pools,


> THE Australian Securities Exchange has warned of increasing risks of sharp swings in the stockmarket with the rise of ultra-fast trading technology taking place on dark pool trading venues.
> 
> The ASX raised the risks of the trading in its submission to the Australian Securities and Investments Commission review over rules to regulate the flow of trading away from the public exchanges into so-called ''dark pools''.
> Dark pools are orders to buy or sell shares set up by brokers or specialist firms that are not submitted to transparent ''lit'' markets, such as ASX and Chi-X.
> ...


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## DB008 (2 October 2012)

Bloomberg



> SEC Leads From Behind as High-Frequency Trading Shows Data Gap
> 
> The U.S. Securities and Exchange Commission, stung by criticism that it lacks the knowledge to analyze the computerized trading that has come to dominate American stock markets, is planning to catch up.
> 
> ...


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## nulla nulla (3 October 2012)

Did the high frequency traders take a holiday on Monday? Volumes appeared to be down, to the one I watch anyrate.


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## DB008 (27 October 2012)

http://www.smh.com.au/business/highfrequency-trading-rewriting-the-rule-book-20121026-28azm.html


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## baby_swallow (3 December 2012)

From today's SMH........

HIGH-FREQUENCY traders could soon be held directly responsible for out of control algorithms and manipulative trading strategies, with the federal government considering reforms to the licensing regime under which they operate in Australia.

The recommendation is part of a regulatory push by the federal government to protect the integrity of the securities market as concerns grow about high-frequency traders and off-market exchanges.
Minister for Financial Services Bill Shorten released a paper on Friday discussing options for reforming Australia's financial market licensing regime.

The government has asked federal Treasury to consider whether high-frequency traders (HFTs) ought to be subject to the same market integrity rules that govern other market participants.
Advertisement

At the moment, some HFTs are run by ''non-market participants'', some of which are based overseas. These are not required to hold an Australian financial services licence.
That means that if these non-market participant HFTs manipulate the stockmarket, or fail to maintain control of their algorithms, the Australian Securities and Investments Commission cannot penalise them directly. ASIC can only penalise the market participant that provided them access to the market.
''There is an argument that changes to the regulatory framework should be made so that the HF traders themselves bear the regulatory burden directly, and provide some improved protection to market participants that are providing market access for HF traders,'' the paper said.
''This would improve the effectiveness of market integrity rules relating to HFT activity, and would more fairly share the compliance load.''....


Read more: http://www.smh.com.au/business/trad...accountable-20121202-2aoz6.html#ixzz2DwTp4EKt


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## DB008 (25 September 2013)

*Somebody Stole 7 Milliseconds From the Federal Reserve*



> Last Wednesday, the Fed announced that it would not be tapering its bond buying program. This news was released at precisely 2 pm in Washington "as measured by the national atomic clock." It takes 7 milliseconds for this information to get to Chicago. However, several huge orders that were based on the Fed's decision were placed on Chicago exchanges 2-3 milliseconds after 2 pm. How did this happen?
> 
> CNBC has the story here, and the answer is: we don't know. Reporters get the Fed release early, but they get it in a secure room and aren't permitted to communicate with the outside world until precisely 2 pm. Still, maybe someone figured out a way to game the embargo. It would certainly be worth a ton of money. Investigations are ongoing, but Neil Irwin has this to say:
> 
> ...



http://www.motherjones.com/kevin-drum/2013/09/somebody-stole-7-milliseconds-federal-reserve


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## Trembling Hand (18 December 2013)

Don't wory about front running. *This algorithm can tell if you’re a hipster*



> Researchers at the University of California, San Diego, are developing an algorithm that aims to identify whether you’re a hipster, a goth or a punk, just from the cut of your social media jib.
> +
> The team has been analysing pictures of groups of people in an attempt to place them within one of eight sub-cultures according to their appearance. These included hipsters, goths, surfers and bikers.
> +
> By looking out for trendy haircuts, telltale tattoos and jewelry, the algorithm is being trained to make assumptions about you based for example on your social media pictures.




LOL


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## DB008 (16 April 2014)

*Lawmakers Back High-Frequency Trade Curbs in EU Markets Law*



> High-frequency traders in the European Union are set to face some of the toughest rules in the world, after legislators backed rules that they said would curb volatility and make markets safer.
> 
> The limits include standards meant to keep the price increment for securities from being too small, mandatory tests of trading algorithms and requirements that market makers provide liquidity for a set number of hours each day. The curbs are part of revamped EU markets legislation approved yesterday by the European Parliament voting in Strasbourg, France.
> 
> The price increment rules and other measures requiring trading to stop if “price volatility goes beyond a certain level” will slow down high-frequency trading “to a more manageable pace,” Markus Ferber, the legislator who led the assembly’s work on the standards, said in an e-mail before the vote.





http://www.bloomberg.com/news/2014-04-15/lawmakers-back-high-frequency-trade-curbs-in-eu-markets-law.html


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