Why Be A Market Maker When You Can Just Be A HFT Scalper?

Tyler Durden's picture

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Thu, 09/30/2010 - 09:49 | 615280 Lenny
Lenny's picture

Where are the adults?

Thu, 09/30/2010 - 09:51 | 615283 Plainview
Plainview's picture

This is entirely predictable and an utter shambles.

Binary liquidity is where we are headed: 0 or 1.

Thu, 09/30/2010 - 09:51 | 615284 RobotTrader
RobotTrader's picture

Bears are getting destroyed today.

More and more sectors are taking off.

Must be those HFT algos.

Thu, 09/30/2010 - 10:26 | 615347 Tyler Durden
Tyler Durden's picture

Robo, you really have a knack at top ticking stuff.

Thu, 09/30/2010 - 11:01 | 615412 Hephasteus
Hephasteus's picture

Man. Stop it. I was using jonny as a tell for when gold breakout was imminent. Now you're messing up the stock junkies tell.

Fear and confidence. It's whats for dinner.

Thu, 09/30/2010 - 11:04 | 615423 thepigman
thepigman's picture

I would get in on this

dip, Robo. Be a

stage 3 parabola

buyer. Secret to vast


Thu, 09/30/2010 - 12:00 | 615637 Hephasteus
Thu, 09/30/2010 - 11:14 | 615467 Tell me lies
Tell me lies's picture

Robot, I am a fan because the whole point of this exercise is to make$$ or was it that fight club ting? I am on the sidlines and scared to go long and been squeezed on the short. What do you see happening near term?

I like the oil play but a little rich for me now.

Thu, 09/30/2010 - 10:04 | 615313 sbenard
sbenard's picture

I have been using Interactive Brokers for years. I wonder now if I should jump ship!

Thu, 09/30/2010 - 10:04 | 615314 Bob
Bob's picture

Hey, CONGRATS, Tyler!  Best wishes, man. 

Thu, 09/30/2010 - 11:55 | 615623 traderjoe
traderjoe's picture

Hey Tyler, is it you getting married or was this a guest post? Congrats. Where are you registered - I'll get you the gravy boat and ladle. I love getting the gravy boat and ladle - both useful and a little odd at the same time. And everyone asks for a set. 

If I don't hear from you, I'll drop a donation in the box. You do take FRN's don't you?

Thu, 09/30/2010 - 10:05 | 615315 Djirk
Djirk's picture

Bye bye you front running snot nosed pirate sell side scum bags!

dark pools bitchez!


Enjoy your honeymoon!

Thu, 09/30/2010 - 11:06 | 615428 kato
kato's picture

you = gay

Thu, 09/30/2010 - 10:06 | 615316 ToNYC
ToNYC's picture

I suppose the SEC is waiting to see where the Banks and Broker Dealers are going so they can pretend to notice and await the political wind to put up another net to catch the wind. Meanwhile back in the real world, the regulators would preserve the blood by starting with a tourniquet, and bring back the human time frame for whom the real deals are done.

Thu, 09/30/2010 - 10:09 | 615318 Cognitive Dissonance
Cognitive Dissonance's picture

As to what this means for the market, the answer is another virtually assured flash crash:

Tyler baby,

I would appreciate it if you could tell me when the next flash crash is coming. It's getting mighty expensive popping popcorn all day to ensure there's a fresh bowl ready at all times. I mean, when the crash comes, there'll be no time to pop the corn since it will be all over in 12 minutes tops.

Please, give us a clue. I just went through an IRS audit and they didn't like my $934.82 deduction for popcorn. They said it was entertainment and not business.

Thu, 09/30/2010 - 10:11 | 615319 Samsonov
Samsonov's picture

I'm a low frequency trader who simply owns stocks; I don't buy leveraged ETFs, mess with calls or puts, use stops, or buy anything I don't understand (ahem, GLD).  So I don't see how all those shennanigans affect me at all, for instance the last flash crash during which I was in a meeting and it was all over with practically no ill effect on me at all by the time I got back to the screen.  It's almost like my market is a different place from their market.

Thu, 09/30/2010 - 10:40 | 615375 Xedus129
Xedus129's picture

As long as after it crashes it comes back up :)

Thu, 09/30/2010 - 11:02 | 615414 Trifecta Man
Trifecta Man's picture

If you used stops to limit your downside on a particular stock, your stop could have been executed at a low price, and then return towards its prior value in a short time.  That is how it could affect you adversely.  FYI.

Thu, 09/30/2010 - 11:27 | 615527 Tell me lies
Tell me lies's picture

If you are under the "15%" threshold, your stops will be executed and thus flushed out of your position with no recourse?????

Thu, 09/30/2010 - 12:02 | 615638 Samsonov
Samsonov's picture

I don't use stops for this very reason, so it's irrelevant to me.  Look, no matter what you invest in, you have to guess right.  If it's a stock, you are betting on one variable.  If it's a stock with a stop limit, now you are betting on two variables.  The more complicated, the more variables, the more random.  Why make things more complicated than they already are?

Thu, 09/30/2010 - 10:14 | 615325 Bearster
Bearster's picture

It looks like the regulatory failure is that regulation coercively creates a disadvantage to those companies labelled "market maker".  So the solution is to coercively create even more disadvantage for those labelled "HFT"??

By the way, the market maker is not there to buy what no one else wants to buy, and no regulation can force them to get in front of a steamroller.  The market maker, therefore, cannot keep a market from going bidless.  The market maker narrows the bid-ask spread.

If the market goes "no bid" that is because of stress, or fear, crisis ... or perhaps people are starting to realize that everything is badly overpriced.

Thu, 09/30/2010 - 10:16 | 615327 wcvarones
wcvarones's picture

Similarly, why be a business/consumer lending bank when you can just ride the Treasury curve with free Fed money?

Thu, 09/30/2010 - 11:11 | 615454 badnews...buyspus
badnews...buyspus's picture

The hft game will end only when the exchanges STOP paying rebates. Everyone in this negative externality game has NO benefit in ending it. Like all new money making schemes, it will not end until it breaks or gets shutdown(think AIG writing insurance or lenders allowing for 100% financing to a sub-600 credit score). The exchanges want to see more volume for fees (non-rebate trades), the SEC likes the apparently smaller bid/ask spreads bc the hfts have convinced them that they provide liquidity driving down spreads and costs (yes, for a 100 shares, but for the 10,000 shares you need to trade, it will cost you much more), and almost every ws firm has a hft group making good money. So, no one will step forward and call for an end. If you can't beat them, join 'em (IB). Once again, ws is near-sighted and will be hurt in the end as more and more investors (myself included) will never invest in a publically traded company while this game is played bc stock prices are just numbers and therefore companies can't be valued on the open markets. Since, all hfts view the rebate as their profit potential (scalping is just gravy), make it go away and so will the hfts.

Once again, you are a contrarian getting married while marriage numbers continue to decline - congrats.


Thu, 09/30/2010 - 11:44 | 615586 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

This reminds me of the rounding scam in the movie Office Space. Rob the market a few pennies at a time. No one will notice until a large amount of money vanishes. The only problem is the HFTs are legal in the market.

Thu, 09/30/2010 - 13:59 | 615994 MarketFox
MarketFox's picture

Let's make this simple....

Defragment all exhanges ...to the BATS model....

No market makers...

The exchange charges service only....

ie...  .0001

Then let the players do what they will....

The core exchange is secure....and in service....add on only mode....


Since when do MMs give away money ?

Nobody gives away money....except the FED....




Next....no min acct size....

There will be large size limits....

No short sale rules....limited to shares authorized....via electronic tag....


The exchange just becomes a utility company....not interested in gaming anybody.....


Also all participants pay the same .0002 commission rate....no exceptions as to the size of each account...


Next...banks cannot game RETAIL...only allowed to service RETAIL...


Next....the focus should be getting rid of the massive size accounts that have heavy influences....

All goes RETAIL....2 BILLION hopefuls....getting their info. from wiki based format.....


And with no interest payments left....a 20 cents move in a $10 dollar stock....is 20X the annual rate paid otherwise....


Everybody becomes a trader....not by choice....but by lack of other options....




Thu, 09/30/2010 - 14:19 | 616070 cowdiddly
cowdiddly's picture

Congratulations Tyler, on your upcoming wedding. May you live a long and prosperous life. If this in fact a statement about you and not a guest post.

Thu, 09/30/2010 - 14:51 | 616228 TraderTimm
TraderTimm's picture

High Frequency Trading is on the way to becoming the 'herpes-simplex' of the market. Dang thing will dig in there and *never* go away. Really wondering what the market will look like in a few years if ineffectual regulation (if any) comes about. 90% of market volumes? What the hell will that turn out to be? A frickin square-wave?

Thu, 09/30/2010 - 18:43 | 616903 ViewfromUnderth...
ViewfromUndertheBridge's picture

Emily (hearts) Elliot not Tyler....and the late added attribution (without explanation) means no one gets the gravy boat with ladle...

Worthwhile reading the link expaining low volume melt-ups too.

Sat, 10/09/2010 - 09:37 | 637566 senthil456
senthil456's picture

There are certainly a lot of details like that to take into consideration.I read and understand the entire article and I really enjoyed it to be honest.
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