German stock trading platform Xetra down, all securities affected
thestarphoenix.com
thestarphoenix.com
In a first statement, they blamed algo-traders which created (and within milliseconds deleted) a ton of pointless orders, like buying Wirecard for 0,05EUR (which is ~1/100th of the current price). Yes, they explicitly called out orders on Wirecard. So basically... Denial of Service by bot-traders.
Have you ever actually researched the economic effects, or is that just a gut feeling?
If you look at it historically, as machines have come to dominate market making, spreads (the difference between buy and sell price) have continually fallen, meaning institutional investors and retailers can buy what they want at a better price. Machines are able to offer these better deals because they know they can get out of their position faster if the market suddenly moves; removing their ability to react faster would remove their ability to offer better prices.
Show me the produce, some say it is liquidity, and I withdraw my criticism.
Machine based market making tends to work well when markets are operating "normally". When some regime-changing news comes out, it's not uncommon for the over-fit algorithms to perform badly so the managers just turn them off. I.e. liquidity disappears just when it's needed most.
https://www.wsj.com/articles/thinning-liquidity-in-key-futur...
Similarly, if your house is on fire, it is hard to complain that buyers go away until they can evaluate how much the hashes are worth.
Market makers mostly provide a service for retail investors.
Why do investors need orders filled instantly?
It seems the only customers of this service are day-trading troublemakers.
Both are used in many other sectors. If you have "industrial level" needs you usually have to pay extra either for the service or for additional infrastructure needed to provide you that service, or you simply get everything throttled to sustainable level (think water, electricity, etc). Most traders would not see any difference and the ones that would will have to think twice before DoSing.
It's actually quite common for exchanges to offer discounts/rebates to firms that trade more, because these firms are essentially providing a service to the exchange (market making, and generating turnover). Much like how other industries offer discounts for buying in bulk.
>The other option is to rate limit the biggest offenders when the system's performance limit is reached.
I don't know why people always suggest solutions like this when it comes to exchanges. If it was an e-commerce service and somebody suggested "let's rate limit customers to reduce load", it's be shot down as a lazy solution (and a great way to lose customers). If a platform isn't good enough to support the load its customers place on it, then it needs to be improved. If AWS goes down during the world's biggest shopping day, we don't blame the customers, we blame Amazon.
I reworded a bit to give a better idea of what I meant. In general there are bulk discounts but there's always some form of "QoS". Either you get throttled above a ceiling, or you pay through the nose to have that ceiling higher for yourself and have everyone else throttled.
All tiered systems work like this. The fixed price goes up and gives you access to better service, higher limits, lower price per usage, etc. As long as you don't have virtually unlimited capacity you can't treat your system as if you do.
Mobile operators have to do the same. They charge a base contract price that sets the tier, then charge per usage within that tier, give different ceilings, QoS priorities, and throttling rates. And no matter how big you are as a customer at some point you either pay a surcharge or get throttled so the system stays up and other customers are also served. (source: I worked both for a large telco, and for a customer that payed ~3million E per month to get the consumption costs for min/MB down to almost 0).
> I don't know why people always suggest solutions like this when it comes to exchanges.
By any chance do the suggestions always come after the exchange was down due to high transaction volumes? Sure, they could implement unlimited capacity. But since this is a tad unrealistic and actually crashing the system is worse than limiting to keep it just below crashing, perhaps the suggestion makes sense.
There aren't many sectors that I can think of which give you "unlimited usage no matter what". There's "rate limiting" even in hospitals, where lives are at stake.
I don't see a problem with rate limiting in general, if it's applied fairly. Good design should already entail that (it shouldn't be possible for customers to "crash" an exchange any more than it's possible for them to crash google.com). And many exchanges in fact have something like you described (customers can pay to buy more transactions-per-second capacity). But I don't think referring to customers as abusers or applying punitive fines is the right approach; if the exchange API let the customers crash it, that's the exchange's problem, and the customers shouldn't be blamed for taking advantage of whatever rate limit the exchange gave them (even if it gave them too much for its system to handle).
There are also limits on average order to trade ratios (this is required by MIFID2 IIRC).
In a physical store you wouldn't get to the shelves from the throng of clerks running around with sticker guns.
> If AWS goes down during the world's biggest shopping day, we don't blame the customers, we blame Amazon.
Yes. We do. But the customers blame us. It may not be our fault, but it's still our problem.
Most things trade with price/time priority. This means that first tie breaker is price but second tie breaker on what fills is who had their order into the market first. This means that market makers layer orders in as early as possible, some strategies I’ve seen layering them weeks or months in advance.
So this proposal would add cost to the market without changing anything about the cancel race.
The real solution to this sort of problem (which I don’t believe actually caused this issue) is the same mechanism you put in any request/reply system, rate limits. Most exchanges have them.
(When I started in equities in Hong Kong in 2007, the stock market was open for 4 hours a day... 10 to 12:30, two hour lunch break to drink and socialise^W^W^W have important business discussions with clients, then 14:30 to 16:00. Today it's open 5.5 hours a day. EDIT to add: "Reactions from both brokers and the restaurant industry were mixed." (1)
XETRA is open 8.5 hours a day without lunch break, while Frankfurt (FSX) is open 12 hours a day, from 8 to 8. WHY???)
(1) https://en.wikipedia.org/wiki/Hong_Kong_Stock_Exchange#Tradi...
The exchange wants to make more money, and people want to be able to trade at whatever time they feel like.
Berlin and London time are only off by one hour.
You probably meant the US instead of Berlin/London or there is something going on I'm not aware of?
One data point - 40% of the French stock exchange's turnover is now in the closing auction. Other markets have a similar trend. Longer trading hours mean thinner liquidity throughout the day, and the direction of travel in Europe is strongly towards shorter trading hours.
Shouldn't the question be "why not"?
More APIs than not on this planet are considered business critical and doesn't just close. Stock markets are strange as they must be highly available for a few hours and then can be shut down for the day. Imagine if AWS closed every night.
The real reason stock markets close is because financial institutions are very interested in keeping it that way. It is lucrative to play pretend stock markets after hours.
(This is a very real question all over Europe right now, and it is interesting to see which institutions talk the loudest about how beneficial a shortening of opening hours would be to just about everyone.)
They are called Periodic, or Frequent Batch, auctions.
This paper & earlier works it's based on were very influential in the design and regulatory framework for these: https://academic.oup.com/qje/article/130/4/1547/1916146
Here's a good intro to them: https://www.fca.org.uk/publications/research/periodic-auctio...
Volumes are small relative to the market as a whole, but execution quality is very good.
Maybe because they claimed it's easy to solve when the solution they proposed in fact has a whole lot of undesirable consequences that are obvious to anyone more familiar with how markets work.
The truth is that the real effects of algo trading are still poorly understood as a system, and they have been able to crash markets a couple of time in the past, for no reason. Do we really need this form of speculation "because liquidity"?
It's abuse if it's done for the purpose of manipulating the market (spoofing) or deliberately to slow it (quote stuffing), but not if it just happens because somebody put in a bunch of orders and then realised their mistake.
>"a whole lot of undesirable consequences" is, to whom
To all the institutional and retail traders on the exchange, who have to pay worse prices for their trades because the market makers can't quote so tightly.
Surely that would be an occasion thing though, not several times a second for a prolonged time?
I can see how throttling of some kind could work, as long as it's not too aggressive.
Imagine if every time you go to the gas station and see the big price for a gallon you write it down. Should the gas station still have to offer you the lowest price over the past {day,week,month} if the price has gone up? "Cancelling" orders is this same idea of changing the offer, only at a much smaller time scale because markets trade extremely fast.
Sometimes I cancel 4-5 orders before getting a fill on an option trade, manually.
and if a member does bad things the exchange can just cut them off
several good incentives for members to exercise control over their client's order flows
In English, a public company is a company whose shares can be freely traded by the public.
In German, a public company is a company that is owned to the government. Companies that are listed on the stock market are called "kotiert".
This could hint at a cultural difference, with the Germans more strongly identifying with the government ("if it belongs to the government, it belongs to everyone"), whereas the English speaking countries might tend to identify more strongly with the economy ("if everyone owns or at least could own some shares of it, it belongs to everyone").
At least public sector and public vs private in the context of privatisation are used in the UK also.
Also public and private schools (in the US.)
Also in the UK the "Public Sector" is government organisations.
The "private sector" is for-profit/comercial organisations, many of which are publicly traded comapanies, which is normally shortened to simply "public companies". So you could be a public company in the private sector that provides services to a public school, which is part of the private education sector.
Language is fun.
All these big finance companies should just be public utilities. They provide little to no benefit to society. They create nothing. They siphon so much money. The cost of the instability/fragility they create is sent downstream to the taxpayer. What society purposely sign up for this?
`Liquidity providing` is the side of the trade which had a `resting order` on the order book which traded against a new order (the liquidity taker). Various exchanges have various different fee schedules for your designation as a market maker, how much volume you do, whether you are taking or supplying liquidity, and what kind of order you are placing.
Asking around here, nobody is reporting any issues though, so it is possible only some stocks are affected.
it's better than Euronext Optiq, but that's about it
Source: https://www.eurexchange.com/exchange-en/technology/t7
Are those down as well?
I've enjoy your humorous reference.