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Direct Edge CEO Redirects Flash Anger Back To Exchanges
So let's get this straight: the exchanges (NYSE, NASDAQ) are blaming the Flash guys (Direct Edge, NASDAQ... yeah that last one makes much sense)... and the Flash guys are blaming collocation (Exchanges, HFT)... At least we have full circular blamage. And Schumer and the SEC are somewhere in the middle, trying to figure out this Frankenstein. Good luck.
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...different time horizons.... lol..
So with these running speeds, how does one prevent naked shorts?
What does speed have to do with it?
What mechanism is in place for a short sale made with a latency of 1 second to ensure that the shares were available?
Since HF strategies close out their positions quickly in general, naked shorting shouldn't be much of an issue. If you are going to buy back the shares micro-seconds to minutes later, the purpose of your naked short was not to manipulate the share price down... since your closing transaction (when you buy back) is going to lift the price back up.
Anyway, it's not particularly hard to pre-borrow shares before the trading day so as to avoid a database lookup from slowing you down.
What is your answer ? Either the stock is located and borrowable or it isn't. The regulation is blind to the holding period . The fact is that these strategies create so much message traffic they are near impossible to police.
"Nobody understands quantum theory." Richard Feynman
Great, and very applicable quote (esp with respect to any regulators, politicians, most media, and myself)!
While I am not going to defend the SEC on most fronts (Madoff, today's craziness with BofA, Mark Cuban, Martha....), I do think that the SEC does understand most of the issues that people seem to be getting all heated up about w/r/t HFT and flashes.
The SEC did a pretty good job working through a lot of really thorny issues with market micro-structure when they rolled out Reg NMS (over 1K pages), and they have been on top of looking at flash to see if they want to change the regulations.
Politicians, media and blog readers in general are not going to understand this stuff... but the SEC for all of its warts does seem to get it. As with Reg-SHO however, my fear is that politicians and the masses led by Cramer will convince the SEC to do something that it knows to be wrong.
"on top of"
http://www.zerohedge.com/article/sec-begins-probe-flash-trading
http://search.sec.gov/secgov/index.jsp#queryResultsTop
Type in "flash" in the search box.
They have not be asleep at the wheel here... they just seem to disagree with the public sentiment about this issue (and it is an odd feeling for me to align myself with the SEC).
Tyler, I'm sure you'll enjoy reading http://www.sec.gov/rules/sro/cboe/2009/34-59359.pdf
sue hererrreeerrrreeerrrerrra really gets on my nerves.
And this is the thinking that is leading our financial centers? What a friggin' joke.
NEW YORK, Aug 3 (Reuters) - U.S. Treasury Secretary Timothy Geithner blasted top U.S. regulators in an expletive-laden tirade amid frustration over President Barack Obama's faltering plan to overhaul financial regulation, the Wall Street Journal said on Monday, citing people familiar with the meeting. Geithner told regulators that "enough is enough," the newspaper said, citing one person familiar with the meeting last Friday with Federal Reserve Chairman Ben Bernanke, Securities and Exchange Commission Chairman Mary Schapiro and Federal Deposit Insurance Corp Chairman Sheila Bair.
http://tinyurl.com/mlq8vy
Trouble in Paradise?
Took this from deninger's blog:
http://www.marketwatch.com/story/fdic-tells-banks-to-recognize-loan-loss...
Wow, nice find ! Wonder what that's all about.
Sheila has to get her budget requests in soon; I doubt she wants to come back two months into the cycle (at Christmas) to request more funding.
Hey Tyker he said that we "had liquidity" and now they are exposing the general market to liquidiyt? Then why the fuck did we need an SLP?
The key is to bury the technology in mystery and confusion that is too complicated for the regulators to understand, that no one even bothers to understand what harm it can do. Only a select few will know and one find day, just like the subprime crisis, this too will implode.
"But how is one to make a scientist understand that there is something unalterably deranged about differential calculus, quantum theory, or the obscene and so inanely liturgical ordeals of the precession of the equinoxes.” Antonin Artaud
there is nothing deranged about the precession of the equinoxes. Don't know about quantum theory, but diffeq isn't really deranged, it's just not as pretty as calculus.
He's got nothing to worry about.
If these CNBC geniuses can't figure it out, none of their viewers will either Whew!
Probably true. I would guess most of the people who understand market micro-structure are watching Bloomberg.
I'd guess most people who understand (nay, work on/in/with) such things probably don't spend much time really watching any TV period.
I keep having this picture in my mind of a guy wearing a T-shirt that says:
"I trade the HFT desk at Goldman Sachs. I'm kinda a big deal"
Nice.
When Duncan Neidemeyer joined the NYSE from Goldman there was a very famous story about his opinion of the floor in which he was quoted as saying " I don't want five guys from Brooklyn named Vinnie cutting up my orders "... Imagine that.. a bigshot at Goldman worried about the riff raff shooting against him... So who's cutting up the orders nowadays ....?
So, I'm confused. Is CNBC a legitimate source for ZH now? Aren't CNBC clips only for bashing?
Sorry about that...Who's creating the child orders for our co-located servers where we can message in submicrosecond timeframe and create the liquidity that's worthy of the maker fees we generate using the fantastic undisplayed dark interest of competing liquidity pools ? We all know that the best liquidity is the liquidity that lasts at least .000000001seconds.
He is speaking "obfuscation"
The new WallStreet language to confuse, hide, misdirect the uninformed.
Which happens to be a tried and true military strategy as well, financial warfare? financial terrorism? I think a real argument can be made for either..
NYSE is in Manhattan. NYSE = no flash trades.
BATS is in Kansas City. BATS = yes to flash trades.
Enter Schumer. This is a no brainer.
Now I get why my entries have been at or below BATS quotes. I thought my broker just liked me :>
I think this guy just made the case against flash.
2 points they claim
a) "DE offers p&q improvement est 10% of the time."
This doesn't make a case for flash, an improvement 10% of the time. What about the other 90%? Could a good pottion of that be frontrunning which they keep saying is illegal yet never say it doesnt happen.
b) Flash is available on an opt in basis.
I been actively trading for almost 15 yrs and have NEVER seen an opt in form.
I can personaly attest that flashing my orders has effectively caused me to not get fills and get fills at lower prices on market sales and higher prices on market buys. This happens far to often.
Question: which platforms should i direct orders to so as to avoid being flashed?
Interesting read on HFT via Baseline Scenario
http://baselinescenario.com/2009/08/03/who-should-hide-behind-the-regulatory-shield/#more-4545