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Fidelity Responds To Flash-Critical Customer
The following response is what Fidelity submitted when a concerned customer demanded that none of his orders be flashed to other market participants.
"You requested that we verify in writing that the equity trades you place in your Fidelity brokerage accounts are never subject to "Flash orders." I have reviewed your request and determined that we are unable to verify this information, since flash orders involve the activity of stock exchanges to which orders are routed, not the brokerage firms which receive the orders from their clients."
To their credit, Fidelity is right. To Citadel's benefit, and Mary Schapiro's chagrin, all her claims that retail customers can toggle whether their orders are Flashed or not, have been refuted. In other words, even as Flash is facing a death squad, the HFT machines keep on seeing major order flow ahead of non-Flash enabled participants, courtesy of the exchanges that have still not voluntarily removed Flash, such as Direct Edge and others.
Dear Mary Schapiro: please get at least one thing in your "career" right.
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so there might be collateral benefit in us all asking for
confirmation that our orders are not being 'flashed' in
that it might be a wakeup call for at least the retail
brokerages?
What? You didn't really expect Mary Schapiro to either speak the truth or actually know what she was talking about, did you?
Shes there for the benefit of tha bankstas. She doin a fine job.
remove Mary Schapiro from the SEC now!
She is an embarassment as is the SEC.
This shit is going to haunt you in the midterms rahm, make no mistake about it. as you are so fond of saying: "...bad politics..."
better take your own advice.
But the other party is just as bad! No votes for D or R.
+10
how is Fidelity right? they are too lazy to not flash their retails orders - they certainly could choose NOT to flash them if they wanted to! repeat after me: the order enterer chooses if they want the order flashed. Obviously, in this case, the end order enterer is NOT you, John Q Public - it's Fidelity's trader/system. They are being lazy. solution: don't use Fidelity if you don't want your orders flashed!
A great idea... collective demand to not have your order flashed or you will take your business elsewhere!
If you want your orders to not flash, then use any direct access broker and send your orders to the exchanges or ECNs of your choice.
This seems like a setup to me though... since anyone who cares about the economics of a trade and whether trades are flashed is NOT using Fidelity.
The lowest tier on Fidelity is $8/trade, whereas a retail trader can get $0.005/share and direct the orders themselves.
So... I question the relationship between the person who wrote the letter, their motives in doing so, and how this letter ends up on this blog.
To the extent it sheds light on the value of a good broker - great.
you are missing the problem Peter - people THINK they care about the economic impact of flash trading on their trades, because they read on the internet that they SHOULD care... no one is telling them that they wont see any difference in execution cost whether the trade is flashed or not - they are being told that Goldman Sachs is stealing their money... thus, they write a letter to Fidelity.
The beauty of Fidelity's horrendous response here is that this is America and we have choices as consumers - if you don't like Fidelity's executions, you can choose another broker who will listen to your concerns/wishes.
HFT and Flash aren't 'trading programs', they are 'stealing programs'. Traders occasionaly lose money and have down months. If you are truly taking risk for a living, sometimes you lose. That is a fact. Any program with a 100% win rate isn't trading, it is pilfering.
So, if money is being stolen, it is being stolen from someone. Thus, people should care, and this person has every right to write a letter.
And, yes Citadel continues to large amounts of Fido's retail order flow.
Any software that attempts to trade ahead of a retail order that is flashed is a money losing proposition. It can not be made to work with odds over 50%... because there is no order flow after the first trade to position against.
The only way to program a system to game Flash trades is against those trades which are placed by large institutions who are trying to move a large number of shares in small pieces. Without that, there is no information in the single Flash that is actionable to attempt a trade which will on a statistical basis make money.
So, for a retail "one and done" trade, you should be thrilled if your hated HFT sees the order and mistakenly acts on it - they will on average lose money (albeit very small amounts).
what happened with banning flash orders??
That's so yesterday. Ms. Shapiro and the SEC have moved on to other less important matters.
I am glad that issue is cleared up. Next.
To TD:By the way,not all orders are routed to exchanges. Can't remeber the exact details,but you have to be approved to be able to route yoour orders. So the question is:how do they fill orders that are not routed to major exchanges?. My assumption was that they fill it from their inventory. Then the question becomes:what if they themselves flash your internal order(the ones not routed)?.
Could this pose a legal challenge to the indemnity of the exchanges?
I bet they are going to throw in bigger algo's that stop maxing the swap spread all the time and bunch of other crap to make it look like it's gone while still stealing half as much money.
The SEC is moving rapidly at fineing bloggers $11,000 for disseminating rumors about stocks or giving false product reviews. That they will jump on like crazy because when you have all the graft money from a total graft system nothing makes you feel better than a tiny check from the little guy.
This brief writes itself, no?
Mr. ______ v. Fidelity and Does 1 - a gazillion
Case No. ____, Rakeoff, J.
Motion for a TRO (a) to prevent breach of fiduciary duty on a massive scale by willful ignorance or failure to prevent customer account skimming via HFT frontrunning (b) for immediate disclosure of all internal HFT order filling; (c) disgorgement of any kickbacks from routing orders through HFT exchanges if any . . .
. . . Fidelity fails to perform even cursory examination of how an order will be routed for its customer, thereby exposing the customers with the least bargaining powers -- retail customers -- to the almost certain front running of high frequency trading programs.
Tyler -
I recently placed an order for SRS (2x short r/e) ETF. The confirm that Fidelity sent to me via email was interesting as it indicated that the order was crossed through NFS and never hit the exchange. I guess that there's not any reason to flash orders when NFS is crossing everything and not sending everything to the exchange.... ?
http://displacedema.blogspot.com/2009/10/cross-trade-bad-for-markets.htm...
This might be alittle off topic, but does anyone else think that flash orders are used on the major futures exchanges? I haven't heard much about the use of flash on futures. Any feedback would be appreciated.
Before leaving to the SEC, Schapiro was CEO of NASD, then FINRA.
In 2006, before the merger, Schapiro’s compensation was $1.9 million.
In 2007, as head of the newly created FINRA, her compensation jumped to $3 million.
http://www.senseoncents.com/tag/mary-schapiros-compensation-at-finra/
Maybe finally I'll be able to hit a 10k size offer and not just get filled for 200 shares, only to see the offer cancel and disappear.
Fidelity's order routing practices are disclosed as per rule 606:
http://personal.fidelity.com/products/pdf/fbsquarterly.pdf?refpr=fsc11
You can see who they routed to and how much they receive in payment for order flow.