tag:blogger.com,1999:blog-14963913.post6505214215770033675..comments2023-10-27T20:27:57.900-04:00Comments on Kid Dynamite's World: We Fear What We Don't UnderstandKid Dynamitehttp://www.blogger.com/profile/17475987512856310577noreply@blogger.comBlogger48125tag:blogger.com,1999:blog-14963913.post-5193573386920400392010-08-04T10:25:21.752-04:002010-08-04T10:25:21.752-04:00i understand your sentiments, J Willis, and no one...i understand your sentiments, J Willis, and no one is forcing you to trade - if you don't like it, you don't have to. good for you.<br /><br /> i think a key point is that HFT is not controlled by a tight group of Italians, rich people, Wall Street blue-bloods, or any other group. It's a democratic thing - anyone with the skills can do it. that is a VERY important point. Perhaps it's a philosophical difference between you and I, but i would never fault anyone for having a business model that they execute well.Kid Dynamitehttps://www.blogger.com/profile/17475987512856310577noreply@blogger.comtag:blogger.com,1999:blog-14963913.post-13700758220469138292010-08-04T10:14:15.731-04:002010-08-04T10:14:15.731-04:00And I read your posts and pondered each and every ...And I read your posts and pondered each and every one. The problem is that the mob can also put forth credible arguments as to why prostitution, gambling, and illegal drug distribution should be controlled in our country by a tight group of Italians residing in New Jersey. The mob rakes in the profits, the users get the services. But should it be legal?<br /><br />Look, I'm not here to engage in a lengthy back and forth debate. It's already been flushed out pretty well here. So this is my final post. <br /><br />I'm simply pointing out that after reading, researching and pondering all the issues around HFT ... the only one that impacts my opinion is the one of RISK. Do HFT traders have the risk of losing money? And right now, the answer is NO. Every HFT shop is highly profitable and every shop makes money no matter what the hell is happening in the markets. They win, everyone on the other side of the transaction loses, to the tune of $21 Billion a year. That just smacks of an egregiously unfair situation that needs adult oversight, rule change, or some damn thing done to level the playing field. And until it happens, I, and many other Americans, will simply stay the fuck away from the US equity markets. We aren't idiots. We won't put our money at risk while the other side takes a risk free $21 Billion out of our pockets annually.<br /><br />Let the forking computers trade each other into oblivion, then we'll come back to investing in the US Equity markets. Until then, HFT shops can kiss our ass.J Willishttps://www.blogger.com/profile/17972889379441686859noreply@blogger.comtag:blogger.com,1999:blog-14963913.post-73745802779870071982010-08-04T09:53:31.466-04:002010-08-04T09:53:31.466-04:00j willis - i have no problem with critical comment...j willis - i have no problem with critical comments. i get plenty of them, especially when i write about HFT. i absolutely do not censor critical comments, but i absolutely will censor comments which attack me personally by calling me names.<br /><br />i have addressed the issues you mention at length, multiple times, in multiple blog posts. <br /><br />the market structure has never been better for the individual INVESTOR (contrast that with the individual TRADER - who deserves no protections) - in terms of market access, execution speed, execution cost, and spread.Kid Dynamitehttps://www.blogger.com/profile/17475987512856310577noreply@blogger.comtag:blogger.com,1999:blog-14963913.post-68268913102275068512010-08-04T09:48:42.716-04:002010-08-04T09:48:42.716-04:00Calm down Kid.
Didn't Enron, Worldcom, Qwest...Calm down Kid. <br /><br />Didn't Enron, Worldcom, Qwest and a myriad of other frauds also object loudly when critical comments were flung in their direction? The more defensive a person/entity gets, the more guilty they appear. Chill.<br /><br />HFT is a license to steal, plain and simple. For a financial transaction to be fair, risk needs to exist on each side of the transaction. I'm sorry, but no one can convince me that the HFT trading shops have risk. They make money in good markets and bad, day in and day out. As a group, they pocket over $21 Billion a year in profits. I have never read of an HFT shop losing money. The only loser is the guy on the other side of the HFT transaction -the guy paying the $21 Billion. Collectively, that's the non-HFT US investor. Our pension funds, 401 Ks, IRAs, Coverdales collectively pay a $21 Billion annual tax to HFT traders.<br /><br />When I read that an HFT shop lost money on the year, I'll buy your points. Until then, HFTs are nothing more than another, and the largest, form of theft from American investors.<br /><br />Is it any wonder that US Investors are fleeing equity funds? Wall Street can only steal our money for so long, before we wise up and tell them to fuck off.J Willishttps://www.blogger.com/profile/17972889379441686859noreply@blogger.comtag:blogger.com,1999:blog-14963913.post-2857422479023918702010-08-04T08:44:34.112-04:002010-08-04T08:44:34.112-04:00note to all anonymous commenters: if you come on ...note to all anonymous commenters: if you come on my blog and start your comment by personally attacking me, it will be deleted.<br /><br />aside: rapid quoting and canceling, or "quote stuffing" as ZH has taken to calling it, doesn't help our markets, but it has absolutely no effect on the individual investor. the INVESTOR can't even see these quotes being entered and canceled 5,000 times a second.Kid Dynamitehttps://www.blogger.com/profile/17475987512856310577noreply@blogger.comtag:blogger.com,1999:blog-14963913.post-451414515693956472010-02-27T23:46:07.104-05:002010-02-27T23:46:07.104-05:00KidD,
I have nothing against your post. It is ful...KidD,<br /><br />I have nothing against your post. It is full of arguments. But the global idea doesn't make sense.<br /><br />I find that really childish to have something against the HFT. Ok, if traditionnal traders consider that 'evil' then, please let me know:<br /><br />- How about the small shareholders think about investment bank traders? <br />- How about the last year ELN's victims think about all those ELN's issuers? <br />- etc...<br /><br />Investment Banks actually take advantages over normal people and they do the same thing like HFT does to you. <br /><br />The world is not fair, especially in finance, only the smartest win. It is a fact. If you don't understand that, you'd better quit the finance.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-14963913.post-75675034786007570642009-12-10T18:53:48.255-05:002009-12-10T18:53:48.255-05:00lol. you must be joking. let me guess who designed...lol. you must be joking. let me guess who designed those HFT systems? was it built-in into ms´office software? right, those were guys who tried to exploit something. I do not know what they exploit and if those who know says it say fair I take it face value. But please do not say that human traders are useless. Those systems are useless unless they are taken care of. Within the limits of legally allowed practiceИгры рынкаhttps://www.blogger.com/profile/12001273098690387194noreply@blogger.comtag:blogger.com,1999:blog-14963913.post-58991302937390012482009-12-10T15:49:54.682-05:002009-12-10T15:49:54.682-05:00Kid, you are right on. Human market makers are toa...Kid, you are right on. Human market makers are toast, and its about time. All the complains on this blog are human traders who can no longer compete. Ignore them. They are useless.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-14963913.post-77353203813647716562009-08-08T08:56:40.886-04:002009-08-08T08:56:40.886-04:00there is nothing wrong with pinging. trying to fi...there is nothing wrong with pinging. trying to figure out what other people are trying to do in the market is the entire point of the marketKid Dynamitehttps://www.blogger.com/profile/17475987512856310577noreply@blogger.comtag:blogger.com,1999:blog-14963913.post-38887922948012634592009-08-07T18:20:41.236-04:002009-08-07T18:20:41.236-04:00HI guy I got one more thing to say to you
these du...HI guy I got one more thing to say to you<br />these dudes are getting the market order info by pinging which is done 100s of times per second. I guess your gone thoughAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-14963913.post-54304074088217324622009-08-05T15:50:27.957-04:002009-08-05T15:50:27.957-04:00I'm not pissed.I got over 100 accounts over he...I'm not pissed.I got over 100 accounts over here up over 55% this year. This is my eighth year of returns I have accounts up over 2000% this decade. So there aren't too many better than me. You got to understand that the odds of what you are saying ( a vwap order appears before it can be shown and is executed .0001 below is like impossible. Like if you told me you could flip a coin 1000 times and get heads every time. You got too address the main agrument I am saying 99% of these trade are no harm and 1% cost the market about 3-25mm per day. Btw I look at a lot of scams sometimes the perpetrator doesn't understand they are a scammer, like robert allen stanford. here is a clip from casino so you learn about odds Three fuckin' jackpots in minutes!<br />Why didn't you call me?<br /><br /> <br /> <br />It happened so quick. Three guys won.<br />I didn't have a chance.<br /><br /> <br /> <br />- You didn't see the scam?<br />- There's no way to determine that.<br /><br /> <br /> <br />Yes, there is.<br />They won!<br /><br /> <br /> <br />It's a casino.<br />People gotta win sometimes.<br /><br /> <br /> <br />Ward, you're pissing me off.<br />Now you're insulting my intelligence.<br /><br /> <br /> <br />You know goddamn well somebody had<br />to get into those machines<br />and set those fuckin' reels.<br /><br /> <br /> <br />The probability on one machine<br />is a million and a half to one.<br /><br /> <br /> <br />On three machines in a row,<br />it's in the billions.<br /><br /> <br /> <br />What's the matter with you?<br /><br />Also KD you are a good writer a little heavy on the confidence and maybe a little too trusting of WS. Its the pinacle of a greedy god damn game and those on top are winning it at the moment. not all are good guys<br />AC westwoodam.comAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-14963913.post-38434388299222570292009-08-05T11:06:22.395-04:002009-08-05T11:06:22.395-04:00http://www.sec.gov/rules/final/34-51808.pdf
You c...http://www.sec.gov/rules/final/34-51808.pdf<br /><br />You can have trades execute in fractions of pennies, but you can not post a bid or ask in a fraction of a penny. The sub-penny trades occur due to orders placed with WVAP (volume weighted average price), where the SEC does allow limit orders to improve upon posted prices by less than a penny against those contra-side orders where the system is moving the price. No one can however place a visible quote for a fraction of a penny.<br /><br />> You got to see that MARKET ORDERS are being flashed<br /><br />No. Limit orders placed at the inside bid/ask price sent to an ECN or Exchange that supports flash orders may be flashed... but a market order is not.<br /><br />Not that I am a fan of SA, but this is a good diagram.<br /><br />> There is no way a bid appears out of the blue for less than a second and execution .0001 cent IN Front of an order.<br /><br />On that front, you are correct. To be .0001, the order had to have been an order type like VWAP where the matching system is moving the price in the posted order (I believe a peg to mid-point could do the same, but have never bothered to confirm).<br /><br />No one sees your market order before it hits the matching engines except your broker-dealer. Find another reason to be pissed at those more skilled than you at making trading profits.<br />http://static.seekingalpha.com/uploads/2009/7/26/saupload_flash_orders_diagram.jpgAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-14963913.post-39638532241328171822009-08-05T00:22:54.416-04:002009-08-05T00:22:54.416-04:00OK you should watch the market trades are getting ...OK you should watch the market trades are getting done at fractional cents all of the time. why don't you check out where fxe closed today 143.951 or goog 453.7340 what are those things after the cent column??? Oh yeah they're fractions of a cent that were executed against sellers or buyers. Watch BIDU it trades with a 50 cent spread frequently and commonly moves 30cents at a time. You got to see that MARKET ORDERS are being flashed. There is no way a bid appears out of the blue for less than a second and execution .0001 cent IN Front of an order. This is not an in house order, which could be executed at parity, so the computer knew the market before the order and also stepped in front of a transaction. just learn that in games of random chance or independent outcomes shifting the odds slightly to one party causes a major advantage that is evidenced over time, similar to a roulette wheel. <br /><br />Also a lot of these guys will do anything to make Ka-ching and I want you to consider the full depth of that comment.this game is being heavily abusedAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-14963913.post-28274662296112499642009-08-04T23:41:40.585-04:002009-08-04T23:41:40.585-04:00In response to Anonymous of 10:38PM...
It is you ...In response to Anonymous of 10:38PM...<br /><br />It is you who does not get it.<br /><br />First, ever since Regulation NMS, there is no quoting of equities in anything other than rounded pennies. So, your first example of 134.9999 is - well - not plausible.<br /><br />Second, no one ever sees a market order coming down. ECNs and exchanges are just computers that match buyers and sellers. When a market order comes in, the order needs to be filled according to Reg NMS with the best posted bid/ask. Market orders by their nature remove liquidity from an order book, and they are not flashed - rather, they are just executed against what is on the top of the NBBO. The only way to see a market order is to be in the path between the person executing the order and the ECN/Exchange receiving said order (i.e. your broker-dealer, or someone sniffing packets on the network - which is not a realistic scenario inside the data center cages of an ECN/Exchange).<br /><br />Third - while it was not possible for me to follow your example to its natural completion (because it made no sense), I should like to point out that an actively traded equity like BIDU typically has a bid/ask spread measured in a very small number of pennies. I could spend the time to look at today's tape, but will not since the spread after hours is $1.85, representing 52bp. There is no chance that the order book is going to move 30 cents. Pull up a level 2 quote on BIDU and watch it.<br /><br />Give KD a break. This was one of the few well written threads on the subject of flash trades, and it is clear that KD does understand at least something about market micro-structure, which is apparently not the case with most journalists covering this story, and certainly not the case with most blog posters.<br /><br />-PeterPeterAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-14963913.post-85801156222503113022009-08-04T22:38:52.252-04:002009-08-04T22:38:52.252-04:00HI
I can tell that you have not worked on a tradi...HI <br />I can tell that you have not worked on a trading desk before.Also algos aren't so smart if you believe that they are actually creating value by assembling random info you are way over estimating these things. You gott to realize that if you can't see every single bid offer and "market order" and others can that there is a serious propensity for abuse. Which I have personally witnessed. So if I was offering my BIDU @ 135 and a mkt order came in and got filled 134.9999 by a hft for 600 shares your benefit to the market place is 6/10 of one cent for that order.(also I am basically backstopping this mothers loss with my offer now) Now if the HfT sees a mkt order coming down for 3Xbid it has the opportunity to cancel its own bid order and or execute a sell in advance, or commonly execute on another secondary exchange. It follows this execution with a bid 30 cents lower for the 600 shares and the order is done there. So the cost to the market participant is 180.00 or 30,000 times higher than the benefit provided in the previous trade. So if there are 100 beneficial trades for every front run trade the net cost is 179.40...Now multiply this by a 10 million trades a day using the same ratio of 100 to 1 and you find out the cost of flash to normal people is in the millions per day. Just play around with the numbers..use a thousand to one. You got to understand that these guys are just there to make money. You can't say what you think is happening because you have no clue about how this valuable knowledge is used by everyone who has access. But if you were able to slow the game down to the extreme or just read the tape of the market and the HFT executions all at the same time I am relatively sure you would see the abuses. <br />By the way assuming that people don't get it sounds like the internet bs from 98. I can pretty much tell you that you need to find out more about odds and how one gains an advantage over another by turning an independent outcome into something more controlled. I give you one more example. Lets play blackjack 2 person but I will keep 1 or 2 face cards for myself and determine when to lay them down. Now this is only 3.8% of the cards but I can shift the win 15 or 20% to my favor. So although I get the 100s of different ways a computer can arb or lay on and remove risk and concede that probably 90 or 95% of these guys may not be abusive the net cost is a cost of $3-25mm per day for the participants who are just executing.<br />good luck! but wake up dudeAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-14963913.post-26684118140186224932009-07-30T15:51:30.268-04:002009-07-30T15:51:30.268-04:00I work primarily with options. I couldn't agr...I work primarily with options. I couldn't agree with you more about putting in a limit and staying the course. I'm stubborn. GTC/AON and if it fills great, if not, that's okay too. Every third Friday I take advantage of all the pinning. Shhhh! According to the SEC and NASD, there is no evidence it takes place. Painting never happens either, just in case, you know, you thought it did.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-14963913.post-17472994540286850942009-07-30T00:47:45.370-04:002009-07-30T00:47:45.370-04:00KidD, you've done your homework. there's ...KidD, you've done your homework. there's not much to add.<br /><br />narrow spreads require price discovery and lots of trading. They also need to be continuously adjusted to reflect the current state of information. Contrary to what many people have said, the advent of high frequency trading corresponds to an enormous drop in volatility over the last 9 years. The explosion of volatility last fall had nothing to do with HFT, in fact the markets performed extremely well during that period, it was always possible to trade.<br /><br />From my perspective the blind rage that I see from the blogs was fueled by a completely erroneous figure from the Tabb group that implied a $21B profit by HFT. HFT typically make less than $0.001/share, if they traded *every* share on every exchange that would only amount to about $2B. Even that is optimistic, but it's still a lot of money.<br /><br />There seems to be a large group of people who are saying that using a computer to trade should be banned. When you point out to them that they probably don't fax their orders in to their broker they effectively say that using one well should be banned. Being fast or smart is somehow equated to cheating or being evil.<br /><br />I fully invite these people to make the necessary investment to become fast and smart themselves. Failing that I suggest that they utilize the services of a broker who is fast and smart.<br /><br />There are circumstances where flash orders are not ideal for the person using them. Please don't use them if you don't like them. I assure you that there is no way for a HFT to use them to read your mind. People who say that there is some huge advantage to be had from them don't know what they are talking about. They appeared about 4 months ago and have not changed anything measurable. If they have done anything they have enabled more competition amongst the market makers, some of the smaller market makers were not as adept at using ISO orders.<br /><br />I don't like dark pools. They are the wild west. I would recommend not using a dark pool or a broker who routes your order through one. If I were to use a dark pool I would carefully monitor the quality of trading through it. If you don't have that ability (and it's not trivial) then don't use one.<br /><br />If you don't like dark pools don't send your orders to them. I don't recommend banning them.<br /><br />RAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-14963913.post-70274803331545223612009-07-30T00:27:26.971-04:002009-07-30T00:27:26.971-04:00How the hell have I not come across your blog unti...How the hell have I not come across your blog until now? Fantastic write-up. Thank You.Mike Maslandhttps://www.blogger.com/profile/06275851037612575206noreply@blogger.comtag:blogger.com,1999:blog-14963913.post-28816049057431068162009-07-29T09:45:11.003-04:002009-07-29T09:45:11.003-04:00re: GM: i may write a longer post about this at so...re: GM: i may write a longer post about this at some point but the short answer is very simple: the only way to keep the price of GM above $1 when no one wants to buy it is to keep buying shares. That's not what HFT or anyone else does, unless they like losing money.<br /><br />bidding $1 for GM to collect a .002 rebate and then losing $1 on your GM shares is not a good business planKid Dynamitehttps://www.blogger.com/profile/17475987512856310577noreply@blogger.comtag:blogger.com,1999:blog-14963913.post-22183828159956961542009-07-29T09:37:10.977-04:002009-07-29T09:37:10.977-04:00Kid D...I for one would love to hear your explanat...Kid D...I for one would love to hear your explanation as to why HFT is NOT responsible for GM trading above $1. <br /><br />Not saying you are wrong, generally curious. TY A different anonymous.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-14963913.post-69050516828616297902009-07-29T01:38:04.756-04:002009-07-29T01:38:04.756-04:00They don't do "it". They do us. Th...They don't do "it". They do us. They screw us on a daily basis and laugh all the way to the bank, to the tune of $21 Billion a year.<br /><br />I'm sorry, but I don't buy it. Our markets are NOT better off when these overpaid SOBs bank $21 B in slamdunk profits a year.<br /><br />Informative post Kid. But you're drinking the 'effing kool-aide.J Willishttps://www.blogger.com/profile/17972889379441686859noreply@blogger.comtag:blogger.com,1999:blog-14963913.post-18849393740913964872009-07-29T01:33:28.993-04:002009-07-29T01:33:28.993-04:00this is getting crazy now. It is there, it is doab...this is getting crazy now. It is there, it is doable. And nobody will make me believe that all those bankers/hedge fund guys/etc. do not do it. It might be that some really do not. But those who can surely do itAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-14963913.post-26326896263027038482009-07-28T23:53:29.674-04:002009-07-28T23:53:29.674-04:00Kid, awesome post. Should be required reading for ...Kid, awesome post. Should be required reading for anyone reporting on this topic.<br /><br />Flash orders are public information so hitting bids based on them isn't front running. And since the "injured party" made the choice to send the order as flash obviously they feel they are getting some value out of publicly tipping their hand.<br /><br />But like you I don't really care if flash orders exist or not.Stevenoreply@blogger.comtag:blogger.com,1999:blog-14963913.post-69979121164560255832009-07-28T23:30:46.991-04:002009-07-28T23:30:46.991-04:00awesome post KD -h0awesome post KD -h0Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-14963913.post-52058082053334920962009-07-28T22:04:15.762-04:002009-07-28T22:04:15.762-04:00oh by the way - if anything, i'd be incentiviz...oh by the way - if anything, i'd be incentivized to dislike HFT. If i were to go back to work at my old job, it would be MUCH MUCH easier if HFT guys weren't competing with me.Kid Dynamitehttps://www.blogger.com/profile/17475987512856310577noreply@blogger.com