How's that working out for us?
EDIT: Meta, I will never tire of hearing people be all, "But markets!" as if they aren't just as corruptible as any other human institution — if not more so.
Arguably, the transparency for pricing that matters is only the final trade price, but I'd argue, in any case, that providing liquidity and actually pricing trades that occur is the more important function of markets, not providing pricing information.
OTOH, transparent pricing information brings some participants to the market, which increases liquidity; conversely, though, so does providing various dark trading vehicles. So, in the liquidity-focussed view, there is a trade-off and a balance to be struck.
Hint: if the minute long auction closes at precisely the minute boundary at what time do you want to put your orders in?
i have no idea what he's trying to come up with. there's no need to belabour the point plenty here have tried to show that the power of information (of all kinds: central bank actions, Donald Trump's tweets, corporate filing, obituaries, declaration of war, natural disasters, etc) and the ability to push order submission to the last moment is going to be king. the only way i can imagine one would nullify the value of information is to assign every participant of the market a random price on their trade that has no correlation to the value of the asset that they are trying to buy or sell.
Serious question: Why do people always forget this? This comes up ALL THE TIME when people talk about quantized auction times.
Separating the last moment when bids are accepted from the time when the auction closes has no practical effect, other than just a simple time delay.
This is not true. Lots of things are happening in the world all of the time. You can't tell everyone to stop what they are doing every 15 minutes and wait for the stock market auction to close.
So rather than a race vs time, it's a race to better interpret information. And considering that's basically the point of the stock market in the first place I would call that a net win.
He gets more advantage from outside information sources.
You are correct that you cannot gain info from the bids that are happening on THAT market, but you can instead get bid/price info on OTHER markets/auctions.
Just remember that from a market structure perspective, the continuous cross is the best for liquidity. All markets for things like derivatives try to move in the direction of a continuous cross over time.
That won't change anything, he who trades first still wins, HFT will still exist.
I thought modern physics leaned more toward “the real world is quantized, but the quanta are small enough that things usually seem continuous to human perception.”
- They often end at a randomized time in a given window
- They often cross a very large proportion of a day's trading
So in some sense the things you are after - hard to game, transparent auctions - are already in existence. If you're happy with waiting, you can pretty much ignore the continuous trading when you're buying/selling your shares. The exchanges I look at all have an opening and closing auction, and a few have a midday auction as well.
I'm literally coding a system that uses the auctions right now. To game the randomized end would not be easy, though there are a number of particular market models that open for it.
In general, the exchange system has gotten out of hand. There's a lot of weird rules that only make sense if you're told what they're for, and it will undermine confidence if they continue to grow. It's become a catch-22 though, as the markets need the market makers, and the market makers can't make money so easily without an advantage of some sort.
I hadn't heard of this. But then again, I'm not an institutional investor and I don't place a lot of trades.
They're not smarter, they have massively more resources. The SEC investigates and takes to court the tiny, tiny portion of investors which are the most egregious and easy-to-prosecute criminals. This isn't like hackers fighting against security systems.