anonDataUser

I work at an algorithmic trading shop and have spent a fair amount of time studying equity market structure. It's great to see an open source trading platform, but I think it's important to stress the following: Equity markets are highly competitive. If you choose to use this platform for trading, you will lose money on average. As a retail trader, you face numerous disadvantages that many market participants do not face. By increasing your trading frequency, you will increase your costs and decrease the likelihood that you will make money. Good luck!

Much smaller shop than BATS. I believe they have less than 20 employees.

Is it just a coincidence that Kansas City is also home to a very small shop that frequently accounts for 10% of US equity volumes?

Well, the cost of the initial device is $90. I suspect there's a comfortable margin on that. Beyond that, there are a variety of ways that you can pay for additional services. For example, $2.99 / month for higher speeds. You can also pay for more bandwidth ($20 / month for 2 GB). I ordered a device on Monday and got a confirmation that it will arrive in 4-7 days.

You can exchange it for something that you can eat and you can exchange it for somebody to build a house for you, just like dollars. Unlike dollars, you can't produce it out of thin air.

Sure. Here's a great video on the subject: http://www.youtube.com/watch?v=PTUY16CkS-k

Hi Eric - Firstly, thanks for the work that you do. I can always rely on nanex research to produce thoughtful and interesting discussions.

Many of the "bots" in your research seem to be adding quotes that are far away from NBBO. One theory is that these exist to provide market participants with more precise measures of their own latency - almost like echo location. They send out a pattern to the exchange, and then wait until they see it coming back on their market data feed. I think that its good for market participants to have an accurate means of measuring market data latency and that having that means ultimately enhances the efficiency of the market. Do you disagree with this stance? Is there some other better means of measuring latency that would be better for market participants to use?

Tableau does nearly instant plotting of millions of data points with a nice user interface; it may be worth checking out if your job depends on visualizing massive amounts of data.

This is great. Do you have any solution for highly sensitive data?

If only there was some other means of social collaboration. Threads tend to enforce a hierarchy that is not enforced in normal social situations. If several root level comments all present the same idea, maybe it would make sense to respond to all of them with a single well structured response. The only way to do that with threads is via copy/paste. If only there was less structure. Maybe a collaborative note-taking technology is the solution?

Here's the secret sauce: http://appli8.hec.fr/rosu/research/news.pdf

Human traders = past? You should see the floor that I work on. There are plenty, and they're doing very well. No algo has ivy league connections.

> You're not in business if you're looking at an average of 100ms.

You're not in business if your business is latency arb. Buffett doesn't care about your 50 ms.

To expand on this a bit:

Within the US there are a number of ECNs/exchanges. Each one publishes there own order book including prices and sizes on each side of the book. To get the most accurate information possible on market prices, you need to have a direct connection to each exchange and usually, you want to be co-located within the same data center as them. Unless you're a market maker, high-frequency trader, or run an institutional electronic trading platform, this level of data is not necessary.

For most human traders, a consolidated feed is sufficient; that data comes from an authority called the CTA. From wikipedia: "Since the late 1970s, all SEC-registered exchanges and market centers that trade NYSE or AMEX-listed securities send their trades and quotes to a central consolidator where the Consolidated Tape System (CTS) and Consolidated Quotation System (CQS) data streams are produced and distributed worldwide." The consolidation process delays the data by ~100 ms. This is still considered real-time by many people including professional traders.

Most HN readers are getting a conflated version of the consolidated feed. Google's "real-time" feed falls into this category and adding 5 seconds doesn't really matter at this point.

Sub-pennies, negotiated directly with exchanges. They do the same negotiation that Interactive brokers does, except unlike interactive brokers, HFT players can trade 10% of market volume which give them significant leverage.

SecondMarket is a start up pushing in this direction. The company whose shares are trading set the trade frequency. Sometimes once per quarter, once per day, whatever they want. Obviously, this is much less liquid.

HFT is not front running. Search comments for my remarks on latency arb - that may seem like front running, but it's entirely different. Latency arb involves information that is publicly available. Front running does not.

Your numbers are too high. Actual rates are sub-penny or free. Some markets give a rebate for taking, others for posting.

This seems inaccurate. Dark pools make up 15% of market volume.

FYI - I wrote the successor to posit. Point in time matching goes out of fad when volatility increases. Why take on the risk of executing a block at a single point in time when you can spread that risk out over the day?

Sorry for the lack of guidance in my original response.

Latency arb was born out of the fragmentation that was introduced when the SEC passed Reg ATS.

For those unfamiliar with trading, there are many exchanges, not just one. All of those exchanges are obligated to trade at the same prices. To ensure this, Reg ATS establishes the NBBO: National Best Bid/Offer. If you're buying, and one exchange has an offer at $10.00 and another has an offer at $9.00, $9.00 is the best offer. If you send an order to the exchange that has a $10.00 offer, they are legally obligated to send that order to the exchange with the best price.

Latency arb is the process of keeping quotes/prices in sync by trading when a specific exchange's prices don't match NBBO. Many of the largest HFT players work on a very simple principle: they subscribe to all of the exchange feeds and construct their own NBBO that is faster than the best commercially available NBBO feed. With this, you know what direction stocks are moving as it happens.

Keep in mind that a "price movement" rarely occurs at a specific instance in time. It occurs over the horizon that it takes for the market to synchronize -- which happens as fast as possible and is based on the infrastructure investments of high frequency traders. If you can do it faster and you build the infrastructure the world is yours. Like Vanderbilt with railroads.

This offers no insight into HFT and is not an apology. Why is it here?

For people interested in HFT, start your exploring with a google search for "latency arbitrage".

Tried this on a set of data that I have been looking at recently, and was not impressed. The software actually assumes all fields contain numerical data. Why not handle nominal data? Also doesn't handle temporal data. Maybe this is theoretically interesting but practically it is useless.