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Themis Trading Responds To Jim Cramer
Posted earlier on Themis Trading Blog
Saw this headline on on ZeroHedge.com, “Cramer Launches Flash Defense Campaign” http://www.zerohedge.com/article/cramer-launches-flash-defense-campaign At first I thought it had to be a misprint, since almost every major market participant has distanced themselves as far as possible away from flash orders. After the controversy reached a fever pitch in late July, almost every major broker issued letters to their clients saying that they did not participate in flash trading. NASDAQ and BATS voluntarily pulled their versions of flash on August 6th. And even proponents of high frequency trading have recently come out against flash trading.
So, how could Cramer say that flash is no big deal. The CNBC website couldn’t even believe that Cramer was in favor of Flash trading. They wrote , “Believe it or not, Cramer said, “This is actually a part of the market that’s working.” http://www.cnbc.com/id/32915415
So, Cramer says milliseconds don’t matter for the average retail investor. But those milliseconds have contributed to a multibillion dollar high frequency trading industry. This money is not created out of thin air (sorry, Ben Bernanke not in this part of the business). Somebody is losing here. And, the retail investor is one of the losers. Lets look at an example of how they lose that somehow Cramer seems to have failed to mention:
1-The market on XYZ is 21.05 bid for 500 shares, 500 shares offered at 21.08.
2- Say you want to buy 500 shares of XYZ at 21.08. You place a buy order with a $21.08 limit through your online broker .
3- Your broker routes to a market center which utilizes the flash method. Before your order gets routed to the market center which has the $21.08 offer, it is flashed to a subset of market participants.
4- A flash subscriber see this buy order coming and decides to trade in front of it and buy the 500 shares at $21.08 for their own account.
5-You get nothing done and 500 shares trades at $21.08.
6- It is very possible now that another market participant sees this trade and then bids $21.09 for stock. The buyer who took your stock then offers it at $21.10.
7- You are frustrated that you got nothing done and then change your limit to $21.10 and buy the stock.
Some people may say that it is only 2 cents and shouldn’t make a difference. Well, maybe 2 cents isn’t a big deal for this one trade. But do this thousands of time a day and it adds up to real money that is being siphoned away from retail investors.
So, as the retail investor, you were disadvantaged because your broker decided to flash your order. If you don’t know if your order is being flashed, we recommend that you call your broker and ask them. And if you don’t want to be flashed, we recommend that you demand that your broker opt you out of this routing strategy.
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Just look at all this attention Jim Cramer is getting from this sillyness.
Folks, Jim is like Mr. Beck over at Fox News: entertainment -- not news. He's not even op ed news. He's comedy gold. Thus, saying silly things just to get attention is more important than, well, you know, actually being correct.
Let's not give the clown any more attention than he deserves.
How is leading a revolt against socialism "entertainment" and how is using propaganda to quell outrage against front running "comedy"...?
I think you are misguided to say the least...
The guy is just pointing out that Beck is a tool. it's not a commentary on revolt against socialism. And he's right, Beck is a tool, just like Cramer. A lot of yelling and crying and exaggerated none sense.
You're better than that!
Complete tools. And they go to bed at night (after several doses) telling themselves they serve a greater good. Which of course is what anyone weak minded enough to be a tool would think.
They are both tools but millions of sheeple follow every word they say and that makes them powerful fools.
Cramer is by far the biggest idiot in the history of television. Some idiot from Goldman probably talked to him about flash
Cramer = pwned
I wish every hot girl would 'flash' me before I decide which one gets the full monty from me. Then at least I dont have to waste, so I agree with Cramer, flashing is good for everyone.
Cramer needs to get Punk'd...that'd be a riot...might help cnbs ratings as well
i thought that's what his appearance on Jon Stewart was.....
Very civilized of you to say. But Cramer needs to be euthanized. That's the truth.
Is Cramer any different than Kneale? I mean other than not being a circus sword swallower.
I beg to differ. Cramer is swallowing something. It's just not swords.
bbbjcimws?
Watch "Office Space" to see how somebody can try to justify this type of theft in their mind...and just think about it, the whole HFT industry was started by a bunch of guys watching Superman 3.
Cramer will get punked, when this bubble collapses into a double-dip and he realises that his next BOOYAH could be a year or two away!
The bigger deal, to me, is how they sit in front of (if I had one anymore) index fund's buy program. In a lot of corporate 401K programs, you don't *get* another choice.
It partially negates the advantage of a low expense ratio for every 401K index investor if they get raped on execution.
The example given...let me tell you, it has to be real. I am a small peanuts retail part-time trader and that exact thing happens to me time after tiem after time.
It is like someone is looking straight at me through my monitor and knows exactly my keystrokes. I make a bid, the bid moves up a penny or two, I hit the offer, the offer moves before I get a fill. Fvck it, I ain't chasing it up no further, and miss a trade.
It's cause you suck at trading.
+ If a computer can predict your behavior -- you fail.
+ If you still haven't figured out how to direct route your orders -- you fail.
Go right ahead and blame others for "cheating" you. You are fooling yourself. They are just traders too, and they are a lot better than you.
huh? lloyd blankie, is that you hiding anonymously?
yeah, I pretty much suck at trading, yet I make money at it. but your logic sucks more than my trading. if a computer were able to see my bid/offer I have no way to outsmart it, it isn't about prediction...I guess that is why they call it FRONTrunning. eh Mr Anonysmartazz?
Anonymous tool = fail
Ditto! Seen it with options. When they see you are interested--in even a tiny trade--they'll raise the price up to see if you'll raise your bid.
It's like playing poker with someone who can see my cards.
So which brokers are routing orders to Direct Edge when it's not at the NBBO? Someone needs to start naming names.
Oy!
No institution sees a flash trade for a retail trade and tries to jump in front of it. That is a strategy called "losing money".
In the example you gave:
> 5-You get nothing done and 500 shares trades at $21.08.
>
> 6- It is very possible now that another market
> participant sees this trade and then bids $21.09 for
> stock. The buyer who took your stock then offers it at
> $21.10.
And what about the statistically more likely scenario - that the intercepted retail order (aka a "one and done") is the only bid at $21.08, and that this position needs to be closed out at a loss by selling to the $21.05 bid???
You can come up with all of the crazy nonsense examples you want, but when it comes down to it - markets do not behave in the way that you describe in a consistent enough manner to statistically drive a HFT to attempt what you are describing, not because they are benovolent - but because it would be a very good strategy for losing money.
Flash is a problem for large institutional traders who are too dump to route their orders to non-flashing venues.
You guys over at Themis should work on drumming up that business (there apparently is quite a bit of dumb trade execution in the large institutions) - but please don't try to scare monger a non-issue for retail investors.
On the other hand (and I will admit it) I've had quite a few option trades flashed and had executions up to 4 pennies (4 bucks per contract) lower. Still think flash is evil.
I don't why this issue is so difficult to grasp. If I can rob a bank in a millisecond or two are they going to hold hearings and take comments about the issue of flash robbery? Front running is illegal, pennies or not, it is a crime. If I rob a bank and only get 5 bucks, is it now "irrelevant to to the system", I get a pass? We don't care about small robberies they are good for the security staff, keeps em on their toes.
This is blatant theft, black and white stuff. Cuff em and stuff em.
you are absolutely right, JohnKing- what Themis describes above is completely illegal. Unfortunately, it's probably not at all typical of what really happens to flash orders.
A lot of things can happen in a millisecond, keeping the customer order walled in while you poke around in the broader market could result in many different scenarios, none of them beneficial to the customer (with the exception of doing nothing with the data). It's a riskless enterprise, wholly parasitic. I actually think the Themis example carries too much risk, why not buy it at 21.07 (or less) from broader market and sell it to the walled in guy at his bid (21.08)? That's riskless.
there is plenty of benefit to the customer: he has the opportunity for 1) price improvement on his order and 2) internal matching (at a lower commission cost) instead of paying to route externally.
the entity receiving the flash quote can't buy at $21.07 because there is no $21.07 offer. The NBBO is $21.05 - $21.08. If there is a better offer in the broader market, they are given the opportunity to match that offer before the order is routed away. they are not given the opportunity to arb the flash order.
LOL
Yes, these systems are setup to benefit the customer and I have a few pre-contruction condos for sale in Miami if you are interested. :)
Are you that blonde with the Moldavian potato farmer accent?
i'm a brunette with a Czech accent - but i have great tits.
yes - i know it's hard for anyone to believe that there are actually reasons for market methods that don't involve enriching GS, but it's true.
yes, yes.. it's true, click your heels 3 times and you'll be in Kansas!
Each flash is not that big of a deal. But distorted over months it's makes stock prices stupid. Cramer is a total freaking tool. He KNOWS this. I was proud of him for fessing up on The Daily Show but he just won't EVER quit. Sell him to a zoo for meat.
Maybe Jim Bob Cramer just wants a date with Irene Aldridge?
This isn't frontrunning...the flashee is actually buying the whole lot from the flasher...that's a trade. The flashee is still taking on risk.
This is no different than me offering a trade to my friends before I post it on the exchange. This just happens faster.
Frontrunning can't be done unless one party is a broker-dealer buying for their own account...not two market participants.
The example above is flawed, there is no guarantee of any bids at 21.09 or higher...this is stupid.
As much as I hate Cramer, and as much as he does not deserve any attention, he actually says in this video that naked short selling was bad and the uptick rule was good... he goes on to beg the SEC to arrest the criminals... hahahahahha, what a shill!
Heck, Cramer and his producers cannot even manage to hold a camera shot still for more than 4 seconds. No wonder he believes a rapidly moving trading system that leaves the viewer nauseous is a good thing.
I think I have it figured out.
Everytime Cramer says "booyah", he's telling Satan that another person has lost his soul.
i am retail trading in qid and i see routinely how the bid/ask suddenly moves up a cent a second i enter the trade. usually i do not chase, opposite i bring my price down by 5 - 10 cents, wait for few seconds and - boom - bid/ask moves back to the same old spot. At that point i decide if i want to keep my lower order or if i want to adjust my order so that it executes. I noticed that if i chase they keep moving the bid/ask higher. And i see how bid/ask sizes go craze changing every millisecond yet the total volume for the day stays constant. So no actual trades happen but they want you to beleive that here is huge activity on the stock.
Themis's argument doesn't hold water. Using his example, unchanged:
> 1-The market on XYZ is 21.05 bid for 500 shares, 500 shares offered at 21.08.
> ...
> 5-You get nothing done and 500 shares trades at $21.08.
except let's add some new information:
The 500 shares offered at 21.08 is *my* order and I'm frustrated I'm not getting a quick fill.
So I place a flash order to buy 500 shares at $21.08. Just as in the themis example, the flash subscriber robotically buys my 500@$21.08 and my sell gets filled. My flash order goes unfilled and I cancel it. I am happy as I have sold my shares. The flash subscriber is unhappy as he's now holding my 500 shares in a 21.05x21.09 market (or worse if you believe the themis example).
Anyone responding to flash orders in such a naive way is going to get gamed in this way and will have to stop.
There is no way to automatically interpret a flash order as a market-moving event (even by a penny). It could be a small "one and done" retail trade or it could be a feint.