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Sick And Tired Of Being Frontrun By HFTs? Interactive Brokers Has A Solution

Tyler Durden's picture




 

Tthe real backlash against HFT begins:

  • INTERACTIVE BROKERS TO OFFER CUSTOMERS ACCESS TO IEX: CNBC
  • INTERACTIVE CUSTOMERS CAN SPECIFY TRADE BE DONE VIA IEX: CNBC

And from CNBC which broke the news:

Interactive Brokers is launching a new service that will for the first time allow retail investors to specify that their orders only go on the new IEX trading platform.

 

IEX, whose founder Brad Katsuyama is the core character in author Michael Lewis's new book "Flash Boys," has said that its structure is designed to keep high-frequency traders from getting ahead of others' orders.

 

IEX, which some have called an exchange, does not post public prices and as such is more like a "dark pool" for private trading.

 

Interactive Brokers is an online discount broker perhaps best known for its founder and CEO, Thomas Peterffy, the Hungarian-born billionaire who stars in the brokerage's commercials.

Should the HFT lobby be worried? Yup.

This is how the Goldman-backed IEX exchange proceeds to slowly take over lit markets, and take all important frontrunnable order flow - the lifeblood of HFTs of course- away from the vacuum tubes.

More about IB here:

 

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Thu, 04/03/2014 - 13:32 | 4621699 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

How much does this service cost? Sounds like extortion to me.

Thu, 04/03/2014 - 13:43 | 4621748 MillionDollarBogus_
MillionDollarBogus_'s picture

Take away the high frequency traders and the markets may collapse.

Who really cares, as long as we are all making paper profits?

You libertarians...

Thu, 04/03/2014 - 13:46 | 4621752 Pladizow
Pladizow's picture

This is how you hurt them, along with purchasing physical gold!

Thu, 04/03/2014 - 13:56 | 4621818 Thought Processor
Thought Processor's picture

 

 

OK, Stupid Question time:

 

1)  Why are they not regulating the clearing of trades within set intervals / segments of every second that the markets are open?

2)  Why is there not a penalty on placing false orders?   This should clearly be illegal and abuse of order placing / false order creation is easy to spot.  Why does this not exist?

 

If the SEC wanted to they could solve this entire issue in about a day and make the markets 'fair' again quite easily.  

The fact that it has not happened means that the markets either totally corrupt (we knew this) and or there is a larger plan that this all fits into (conspiracy 101).

 

Strange days indeed.

 

Thu, 04/03/2014 - 14:01 | 4621853 Divided States ...
Divided States of America's picture

Lets see what this does to market volatility.....or lack of market volatility since the market only goes up in one direction lately...UP

Thu, 04/03/2014 - 14:04 | 4621864 jaxville
jaxville's picture

This is the poster child for a "Tobin" tax. A small tax on every trade would eliminate HFT nonsense overnight. That our regulators even allow this makes the case for buying gold or other forms of portable wealth and getting it 100% out of the financial sector. The financial sector does not contribute one thing to the well being of our economy. It is a big parasite that people everywhere would be better without, aside from those who work in it.

Thu, 04/03/2014 - 13:56 | 4621820 ParkAveFlasher
ParkAveFlasher's picture

Pardon me, and I know ZHer are in the throes of a grave dance, but are we not taking down one frontrunning scam in order to reinstall a more conventional, girl-slow one?

Thu, 04/03/2014 - 14:26 | 4621979 CrazyCooter
CrazyCooter's picture

Personally I just assumed they finally realized that HFT ran off all the bag holders and now they are just jerking each other off at all time highs hoping the music doesn't stop.

IEX is a strategic plan to get investors, who left the stock market, back in so there is an exit door for insiders.

Whoops!

Regards,

Cooter

Thu, 04/03/2014 - 15:20 | 4622239 Confused
Confused's picture

Yes, it would seem this is a move into the lions den. The exchange is Goldman backed? Sure, totally trustworthy, must be better than HFT's. 

 

Either way, you lose. 

Thu, 04/03/2014 - 16:08 | 4622444 Pure Evil
Pure Evil's picture

Yep, let's bring the retail customer back in at the all time high, somebody needs to be the bag holder, or in this case the Golden Sachs scrotum holder.

Thu, 04/03/2014 - 17:14 | 4622648 ThroxxOfVron
ThroxxOfVron's picture

Come on in ( to the deep end of dark pool ).

The water's fine ( and very opaque ).

Come swim with us ( said the sharks ).

I contend that GS will continue to skim their Muppetstomers in the GS dark pool under the guise of acting as a portal to the safe/fair market IEX.

Thu, 04/03/2014 - 18:34 | 4623004 Freddie
Freddie's picture

Interactive Brokers and the other online firms should do their own exchange not Goldmans. The problem is many online firms ended up setting up Knight market maker which was another way to screw customers. Then Knight got a stuxnet probably from The Squid and died.

It is all a ponzi.

Thu, 04/03/2014 - 13:46 | 4621766 LibertarianX
LibertarianX's picture

Flash Cunts !!

 

Thu, 04/03/2014 - 13:49 | 4621779 Bryan
Bryan's picture

I just downvoted you only because your name and avatar looks like MDB's.

Thu, 04/03/2014 - 13:58 | 4621830 CHX
CHX's picture

Actually have not seen MDBoner in a while now that I come to think of it. Sorta miss to downvote him too.

Thu, 04/03/2014 - 16:07 | 4622438 MillionDollarBoner_
MillionDollarBoner_'s picture

CHX!

You're the one!

You...you...Bitch!!!

You said just the once...and just the tip....

Thu, 04/03/2014 - 13:57 | 4621824 wombats
wombats's picture

Doesn't this just allow Goldman exclusive access to frontrunning?  Helping Goldman frontrun the frontrunners?

Thu, 04/03/2014 - 14:31 | 4622005 bagehot99
bagehot99's picture

How often do your message handlers at OFA give you your talking points?

Thu, 04/03/2014 - 19:01 | 4622782 Freddie
Freddie's picture

Avoid the joke stock markets.

Thu, 04/03/2014 - 13:34 | 4621707 101 years and c...
101 years and counting's picture

"Goldman-backed IEX exchange proceeds to slowly take over lit markets"

ahhhhh, so this is why HFT is "suddenly" an issue.  GS looks to take complete control. Option 1: get fucked by HFT. Option 2: get fucked by the squid.

(secret option 3: keep your money out of all banks and rigged markets.  buy assets that will be useful for years to come. and keep cash at home)

Thu, 04/03/2014 - 13:53 | 4621800 Bastiat
Bastiat's picture

I found myself entering a state of cog dis as I began to cheer for the Squid backed IEX play -- thanks for helping resolve that for me!

Thu, 04/03/2014 - 18:42 | 4623029 Freddie
Freddie's picture

Goldman sucks. I expected Interactive Brokers to come up with their own solution as they appear to be more tech savvy that Katsyuma who sent all hit market orders to BATS when he was at Royal Bank of Canada.

RBC should sue him for stupidity. Michael Lewis looks silly making him out to be the hero. What trade desk like RBC's uses market orders and routes everything through BATS.

Thu, 04/03/2014 - 14:01 | 4621855 alangreedspank
alangreedspank's picture

A squid a usually well lubricated, at least.

Thu, 04/03/2014 - 17:21 | 4622663 ThroxxOfVron
ThroxxOfVron's picture

Option 4: get fucked by the Squid Prop Desk in their Dark Pool, get ported to IEX to be front-runover by GS' special Hedgie frieds that have been tipped off to your being transported to IEX for NoLube2.0, pay an IEX 'policing fee'; and then get flash crashed at the close triggering GS derivatives bets on your failure.

Thu, 04/03/2014 - 13:34 | 4621711 TaperProof
TaperProof's picture

So now goldman can front run the front runners?  Hah!

Thu, 04/03/2014 - 13:48 | 4621763 TaperProof
TaperProof's picture

Honestly, this whole thing is evolving to a delay being added at each exchange to make most (all?) trades equal in speed.  It may take years, IEX may make money for awhile but eventually will be made obsolete/useless.

Or am I missing something? Would that not be possible?

Thu, 04/03/2014 - 13:58 | 4621829 ParkAveFlasher
ParkAveFlasher's picture

I would like to see the clerk in this bucket shop.  It appears the chalk man isn't updating prices fast enough.

Thu, 04/03/2014 - 14:08 | 4621890 wombats
wombats's picture

They are just doing God's work by making a market.

Thu, 04/03/2014 - 13:51 | 4621787 Squid Viscous
Squid Viscous's picture

God's work is complicated, got to have all the angles covered...

Thu, 04/03/2014 - 13:56 | 4621817 toothpicker
toothpicker's picture

I'm sure everything will be nice and dandy from now on

Thu, 04/03/2014 - 15:01 | 4622131 Dr. Kenneth Noi...
Dr. Kenneth Noisewater's picture

Why bother with the expense and hassle of manning your own prop desk, when you can own the exchange and front-run ALL the muppets trading on it?

The squid may be evil, but it sure ain't dumb.  I bet they even have their own 'shoebox' interconnect with only 10m of fiber in it, welded shut.

Thu, 04/03/2014 - 13:35 | 4621713 Kaiser Sousa
Kaiser Sousa's picture

look, all u dumb ass mother fuckers out there that think u r gonna make or preserve whatever little savings/wealth that u might have left after 2008 -

EXIT THEIR RIGGED FUCKING CASINO COMPLETELY!!!!

BUY PHYSICAL GOLD OR SILVER...

for fuck's sake man...

Thu, 04/03/2014 - 13:49 | 4621777 Dr. Richard Head
Dr. Richard Head's picture

I will say that I have had a much better life since exiting the casino of Wall Thief.  I am eating better, have no revolving debt, and could give a shit less about market gyrations or the noise from financial analysts on TV (other than laughing at them and seeing through the pravda). 

I could give a shit less about what exchange is where, by whom, or through what.  Perhaps I am missing the "upside", but the downside risks of letting coke addled math geeks in a slick suit far outweight missing out. 

Just keep stacking...and losing it on canoe trips.

Thu, 04/03/2014 - 13:56 | 4621819 Kaiser Sousa
Kaiser Sousa's picture

for sure brah'..

im there with you...

save those u can reach, and avoid "the walking dead..."

see u on the otherside...

Thu, 04/03/2014 - 13:36 | 4621721 PlusTic
PlusTic's picture

Goldman Sachs, at the forefront of frontrunning!

Thu, 04/03/2014 - 18:04 | 4622868 Freddie
Freddie's picture

Interactive Brokers is tech savvy enough to do their own exchange. They should not use this Goldman IEX shit.

Thu, 04/03/2014 - 13:38 | 4621728 Kilgore Trout
Kilgore Trout's picture

Recent "revelations" by MSM/PTB of the evils of HFT are smelling increasingly rat-like.

Thu, 04/03/2014 - 13:39 | 4621733 buzzsaw99
buzzsaw99's picture

out of the hft frying pan and into the squidly fire

Thu, 04/03/2014 - 13:47 | 4621741 Dr. Engali
Dr. Engali's picture

Uhmmmm... Question. What's to keep the HFTs from getting to the IEX first? Personally  I think I'd be more afraid of getting into bed with the squid than I am of HFTs. 

Thu, 04/03/2014 - 13:44 | 4621757 bam
bam's picture

i actually use IB. here's a quick review/comments.

 

1. their execution is decent, commission is one of the cheapest for retail investors/traders.

2. you can get around most HFT strategies by using limit order and being patient. unless your trading huge # of block trades, setting your limit a couple of pennies below the mid will usually result in a fill. if you want to get filled immediately, look at the top of the book and directly buy/sell the bid/ask size. 

3. i personally haven't traded equities in years but i highly recommend just trading the options. you can easily build positions which are far less risky than straight out owning shares. plus no one is HFTing options since it's not really liquid enough. 

4. IB's software sucks, GUI is very outdated but gets the job done. 

 

Thu, 04/03/2014 - 22:12 | 4623673 sumo
sumo's picture

Another IB user here.

5. Spreads and charges for currency (cash) conversion are good (I'm not talking about forex positions).

6. IB took a look at acquiring Corzine's Clusterfuck Global just before the muppet massacre, but ran away as soon as it learned the accounts didn't balance. Sensible.

Thu, 04/03/2014 - 13:47 | 4621768 Bryan
Bryan's picture

If Goldman's behind it, I can guarantee that IEX is not the answer for the 'muppets.'  Follow the money.

Thu, 04/03/2014 - 18:20 | 4622950 Freddie
Freddie's picture

Goldman Sachs are among the most evil **cks on the planet.

Thu, 04/03/2014 - 13:49 | 4621774 philosophers bone
philosophers bone's picture

Kind of hilarious how the free market eventually comes up with its own solution to a problem while the regulatory bodies just sit on their asses.

Precious metals markets will go the same way - real participants will ignore COMEX and just focus on physical exchanges.  I understand this is already happening.

Thu, 04/03/2014 - 13:52 | 4621790 Cursive
Cursive's picture

@philosophers bone

There is nothing "free market" about IEX.

Thu, 04/03/2014 - 14:26 | 4621976 philosophers bone
philosophers bone's picture

Thanks, I did not mean to state or imply in any way that we actually have "free" markets, anywhere.  Just trying to make the point that IEX is finding a "market based" solution to illegal activity that the securities regulators have allowed.

Thu, 04/03/2014 - 14:29 | 4621994 alangreedspank
alangreedspank's picture

Yes, it is the ostensible reason why they do this.

Thu, 04/03/2014 - 13:51 | 4621783 Cursive
Cursive's picture

The problem with GS aside, Chuck Schwab only knows how to write letters to editor and IB is giving its customer choice.  Fuck Chuck.

Thu, 04/03/2014 - 13:55 | 4621810 larry david
larry david's picture

I have physical gold and silver but I'm only 28. You would think a nice portfolio of high quality names like JNJ, P&G, some gold miners, some REITs, and some other trusts that pay a nice yield would be a good idea. But there are so many issues!

 

1. Counterparty risk. 

 

2. With rates being suppressed, if and when they rise there is huge risk to either the dividend itself or the underlying stock (or both)

 

3. When I cash out will my dollars be worth anything?

 

4. Will I be able to withdraw all my profits? Bank runs, capital controls etc

 

5. With 3D printing and other tech will these major players even be around in 20 years?

 

6. How will tax policy change? 

 

Etc etc etc. 

 

I like the idea of high yielding REITs and high quality names to lower risk but I can't bring myself to stop buying physical silver at $25 (with premium). Maybe if the markets were actually fair I would invest. And I may invest still but not yet

Thu, 04/03/2014 - 14:19 | 4621942 bam
bam's picture

just sell put spreads on the market until the fed stops printing. then start selling call spreads. this is how you make $$ in this kind of market.

Thu, 04/03/2014 - 14:01 | 4621851 unplugged
unplugged's picture

Its Goldman-backed!  Right off the bat I don't trust it.  In fact, I don't trust much of anything/anyone these days.

Thu, 04/03/2014 - 14:07 | 4621886 alangreedspank
alangreedspank's picture

Damnit, I thought you said "gold-backed".

Thu, 04/03/2014 - 14:04 | 4621863 NAP
NAP's picture

Do the futures exchanges suffer from the same HFT related troubles as the stock exchanges?
If so, would someone pls start an "IEX" for futures and options on futures.

Thu, 04/03/2014 - 14:06 | 4621875 alangreedspank
alangreedspank's picture

Better than hamfisted regulations stitched together on the fly...

Thu, 04/03/2014 - 14:09 | 4621899 mccvilb
mccvilb's picture

Ameritrade has the best analytical software, allows trading in blocks of 10K shares (but good luck finding 10K bids and offers. They're buried in those dark pools), Fidelity has the best price, IB has historically catered to traders moving larger blocks of stock, like 100K sh. Think or Swim, the Canadien version of Ameritrade, used to be better than Ameritrade for larger blocks but now essentially is the same.

Thu, 04/03/2014 - 17:13 | 4622645 Papasmurf
Papasmurf's picture

I have traded on both Ameritrade and IB.  Ameritrade will eat all your profits if you trade low price, low volume small company shares.  Twenty dollars round trip is way too much to pay, not to mention the worse spread I get.  I have also found that orders place on IB vs Ameritrade for a limit price will be executed quickly on IB and late or never on Ameritrade. 

Fri, 04/04/2014 - 01:57 | 4623994 mccvilb
mccvilb's picture

Hey, I started with Ray Jay and Schwab at 35/100 sh trade one way before electronic trading. 20/5K round trip I can live with. Good to know you're getting better executions on IB.

Thu, 04/03/2014 - 16:11 | 4622460 urrterrible
urrterrible's picture

This is so simple......FRACTIONAL system, let's go back to it.  Good luck scalping then

Thu, 04/03/2014 - 16:19 | 4622489 SmittyinLA
SmittyinLA's picture

BREAKING NEWS!  There!  Now I have your attention.  Our Beloved Muzlum Congressman, Keith Ellison says it would be a great idea to tax HFT and let them continue to frontrun you.  That way you get to pay 0bama and the frontrunners to screw you.

Thu, 04/03/2014 - 21:42 | 4623614 exartizo
exartizo's picture

out of the frying pan...
into the fire.

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