Hacker News Reader

Comment by chroma205 | Hacker News Reader

>but for various reasons can end up flopping when actually executed in the real market.

1. Your order can legally be “front run” by the lead or designated market maker who receives priority trade matching, bypassing the normal FIFO queue. Not all exchanges do this.

2. Market impact. Other participants will cancel their order, or increase their order size, based on your new order. And yes, the algos do care about your little 1 lot order.

Also if you improve the price (“fill the gap”), your single 1 qty order can cause 100 other people to follow you. This does not happen in paper trading.

Source: HFT quant

View on HN

Dear HFT Quant,

> And yes, the algos do care about your little 1 lot order.

I'm just your usual "corrupted nerd" geek with some mathematics and computer security background interests - 2 questions if I may 1. what's like the most interesting paper you have read recently or unrelated thing you are interested in at the moment? 2. " And yes, the algos do care about your little 1 lot order." How would one see this effect you mentioned - like it seems wildly anomalous, how would go about finding this effect assuming maximum mental venturesomeness, a tiny $100 and too much time?

Retail speculator here. Re 2 it's often quite easy to demo on thinly traded markets - I'm more familiar with crypto. Say the spread is 81.00 buy, 81.03 sell. Put in a limit buy at 81.00 and watch someone/something immediately outbid you ate 81.01. In the short term that kind of thing is done by algorithms but there are humans behind it and doing it too.

There's quite a lot of other game playing going on also.

if you are targeting such "scales" you are highly speculative, that is something like 0.0xx% :-D Can you sleep well with this? :-))

Even a 1 lot order could be the deciding factor for some algorithm that's calculating averages or other statistics. Especially for options books.

Sometimes the spread is really tight.

If you actually were in the industry, you would know that most retail traders don't fail, because they lose a tick here or there on execution, they fail, because their strategies have no edge in the first place.

> If you actually were in the industry, you would know that most retail traders don't fail, because they lose a tick here or there on execution

Where did I say “retail trader”?

Because “institutional” low-latency market makers trade 1 lot all the time.

The context from parent was obviously that. Instis don't trade on Alpaca.

> Because “institutional” low-latency market makers trade 1 lot all the time.

That sentence alone tells me that you're a LARPer.

> That sentence alone tells me that you're a LARPer

cope.

Equity options are sparse and have 1 order of 1 lot/qty per price. But usually empty. Too many prices and expiration dates.

US treasury bond cash futures (BrokerTec) are almost always 1 lot orders. Multiple orders per level though.

I could go on, but I’m busy as our team of 4’s algos are printing US$500k/hour today.

There is a big difference between back testing scalping and back testing buy 100 NVIDA at $103 and sell at $110.

>Your order can legally be “front run” by the lead or designated market maker who receives priority trade matching, bypassing the normal FIFO queue. Not all exchanges do this.

Unless you're thinking of some obscure exchange in a tiny market, this is just untrue in the U.S., Europe, Canada, and APAC. There are no exchanges where market makers get any kind of priority to bypass the FIFO queue.

Anyone can be a market maker on a trade just take the other side of an offer. All they really do is make a market with you and then make a market with the other side and pocket the change. It's good for market liquidity.

> There are no exchanges where market makers get any kind of priority to bypass the FIFO queue.

Nope, several large, active, and liquid markets in the US.

Legally it’s not named “bypass the FIFO queue”. That would be dumb.

In practice, it goes by politically correct names such as “designated market maker fill” or “institutional order prioritization” or “leveling round”.

I can tell you as someone who is a designated market maker on several ETFs in the U.S., none of this exists as a means of giving market makers priority fills. You're taking existing terms and misusing them. For example institutional order prioritization is used as a wash trade prevention mechanism, not as a way for designated market makers to get some kind of fill preference. Leveling rounds also do not involve exchanges, this is an internal tool used by a broker's OMS to rebalance residuals so accounts end up with the intended allocation, or cleaning up odd-lot/mixed-lot leftovers.

I am getting the feeling you either are not actually a quant, or you were a quant and just misheard and confused a lot of things together, but one thing is for sure... your claim that market makers get some kind of priority fills is factually incorrect.

++1

thanks

Reply on news.ycombinator.com