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Retail stop orders being leaked to HFT internalizer firms
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Retail stop orders being leaked to HFT internalizer firms

  #1 (permalink)
Elite Member
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Retail stop orders being leaked to HFT internalizer firms

This morning on my twitter feed (bottom tweet is first):

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  #3 (permalink)
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The guys who work at KCG are good, honest and hardworking people.

I take issue with their new business model since IPO and order flow internalization, but they are honest people.

These allegations are conspiratorial and if you read the rest of that thread, it seems that he refused to provide any evidence or article to support his view.

In fact, even if the allegations are true, this is an outmoded view that you can just trade through stop orders and make money from it. There is no fundamental reason why trading against a stop order would go in your favor. You're still taking on a substantial amount of risk.

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May you share what thread you speak of when you say "the rest of that thread" ?

If you base your "refusal to provide any evidence or article to support his view" based on the absence of any, may I point your attention to the fact that his tweets are from around 1am on a friday.

Here's what I've found while digging in replies:

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Original tweet: https://twitter.com/nanexllc/status/645092560113942528


Last edited by JustinIsHere; September 19th, 2015 at 11:26 AM.
 
  #5 (permalink)
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I'm no fan of HFT, but just because they can push the market around doesn't mean they really benefit from it. It makes more sense to trade in the direction of the market, regardless of whether you scalp or work on a longer time frame, to do anything otherwise is to take on a lot of risk, like artisimo said. So if they actually are doing that, which I doubt, they're just going to get their asses handed to them in or out of court.

 
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Not sure where you two get the idea of risk from. Or even have any idea of how HFTs make money.

See: Virtu Explains Why It Lost Money On Just One Trading Day In 6 Years | Zero Hedge
And this: The HFT "Treasure Map" - Presenting The Rigged Stock Market's Full "Latency Arbitrage" In One Chart | Zero Hedge

 
  #7 (permalink)
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Let me see if I got this straight.

He had a stop order at a given level. This stop was triggered. Turns out who took the other side of his order was a HFT firm.

For me, this seems perfectly normal. Someone MUST take the other side of his order, otherwise, he wouldn't get a fill. Just because it was a firm known for using HFT doesn't mean anything. Could be his neighbor, sitting right across the street. Would he then claim his neighbor knew where his stop was and "hunted him down"?

Another thing, most retail (and some institutional) traders have the habit of placing the stop a tick or two below the last low (or above the last high when short). Doesn't take any "rocket science" to figure it out and actually profit from these orders being triggered for a quick scalp... Some levels are so "obvious stop levels" that no "leakage" is needed to figure out where a great number of stop orders will be.

I don't really think that there are HFT firms out there "conspiring to take out the retail traders stops". Smells like rubbish talk to me...

 
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This applies to the US stock market, not the futures market.
See: https://twitter.com/nanexllc/status/645373458214481920/photo/1

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and this tweet explains why it matters that your stop loss order is being leaked:

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Original twitter post: https://twitter.com/nanexllc/status/645333127209066496

 
  #9 (permalink)
Market Wizard
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artemiso View Post
The guys who work at KCG are good, honest and hardworking people.

I take issue with their new business model since IPO and order flow internalization, but they are honest people.

These allegations are conspiratorial and if you read the rest of that thread, it seems that he refused to provide any evidence or article to support his view.

In fact, even if the allegations are true, this is an outmoded view that you can just trade through stop orders and make money from it. There is no fundamental reason why trading against a stop order would go in your favor. You're still taking on a substantial amount of risk.



I probably shouldn't comment here, and I certainly don't want to get into any arguments, but:

1. I think that @artemiso has a very good idea how HFT's make money.
2. Most traders who make money in the markets do not have the idea that other people, HFT's or otherwise, are grabbing their profits by hitting their stops. In fact, you never see a profitable trader expressing that view.

Being responsible for your own wins and losses is kind of an important thing.

Having said that, I'll just bow out. I did want to raise these points, though....

Good luck in your trading, and I do mean that.

Bob.

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Lol! As if traders can't see where retail stops are anyways without "leaks".

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