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Webinar: Telvent DTN / Nanex High Frequency Trading (HFT)
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Webinar: Telvent DTN / Nanex High Frequency Trading (HFT)

  #51 (permalink)
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Looks like Eric is confirming what I said earlier. If retailers completely left trading, it would largely ONLY affect HFT internalizers/order flow.

you have to separate internalization and regular HFT firms. Internalizers RELY on retailers. HFT firms in general do not. You have to keep that distinction. There is simply not enough retailers to affect typical HFT firms. Where an internalizer relies completely on it (granted some HFT firms buy order flow along with their "normal" HFT trading).

If retailers account for 10% of the market volume, then it simply won't make a dent if they all disappeared. Saying that 10% of the volume is their primary bread and butter is ridiculous. That only makes sense if you are only doing internalization.


Last edited by lookOutBelow; July 27th, 2012 at 02:09 PM.
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  #52 (permalink)
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I finally had a chance to finish listening to the Webinar. It seems clear to me that Eric has little understanding of HFT. It is almost as-if he only gets a very small segment of it. Namely, the internalization and pay for order flow. It comes off as a very simplistic view. Either that, or he is purposely avoiding a huge part of it.

Here are some of his (paraphrased) comments from about the half way point. During this so-called dinner conversation.

"Profits come from having access to order flow from retailers. if you don't have access to order flow, you won't make money in HFT"

This is crazy. This statement alone is enough to show he doesn't know how most firms are making money. Again, he is focused on order flow/internalization. Even we, a small HFT firm that does not pay for order flow, nor involved with internalization, has had less than 7 negative days in more than 16 months of trading. We have yet to see a negative week. I guess we aren't making money. Nor are any of my colleagues that also do not deal with pay for flow or internalization. This guy needs to do a little more research. There are countless papers describing HFT strategies and general descriptions of their strategies. Everything from liquidity provision to stat arb. BTW- I may of missed it, but I didn't hear one mention of these in his talk. It was completely pay for flow/internalization discussion. (to be fair, I listened to the webinar in two parts, a couple of weeks apart, I may of forgotten what was said in the first half).

He also made another claim that HFT *only* trades against retail. Again. This is factually incorrect. I'm not sure what gives with Nanex. But given their level of tech knowledge, you think they'd have more of an understanding of what HFT firms are actually doing.


Don't accept what Nanex says as Gospel. Don't accept what I say as Gospel. Read some papers/opinions that are freely available. I'm starting to question the agenda some of these people have.


Starting point. Social Science Research Network (SSRN) Home Page. Search for HFT. Start reading. Maybe Eric should do the same.

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  #53 (permalink)
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Incredible Webinar, I thought Mike uncovered some revealing and real-time relevant information and his questions were spot-on pertinent. Hide-not-slide!


Last edited by VegasFlyer; July 27th, 2012 at 06:13 PM. Reason: More Thanks
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  #54 (permalink)
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@lookOutBelow

A reminder to you, and all - we do not allow rude behavior on futures.io (formerly BMT). Name calling even when implied is not welcome here. Rude behavior and baiting people, not allowed. If you are unable to have a civil conversation, then don't post - or better, just leave the site.

It seems you are cherry picking things out of the webinar just to support your position. It also seems you are taking this quite personally, maybe because you work for an HFT firm. Why resort to attacking someone, why take a discussion so personally and get defensive?

If you have something of value to add, please do so without insulting others.

Mike

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  #55 (permalink)
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I've talked with Scott Patterson, and we are in the process of setting up a webinar. More details when I have them. I want to thank Eric @nanex for the introduction with Scott.

Mike

Due to time constraints, please do not PM me if your question can be resolved or answered on the forum.

Need help?
1) Stop changing things. No new indicators, charts, or methods. Be consistent with what is in front of you first.
2) Start a journal and post to it daily with the trades you made to show your strengths and weaknesses.
3) Set goals for yourself to reach daily. Make them about how you trade, not how much money you make.
4) Accept responsibility for your actions. Stop looking elsewhere to explain away poor performance.
5) Where to start as a trader? Watch this webinar and read this thread for hundreds of questions and answers.
6)
Help using the forum? Watch this video to learn general tips on using the site.

If you want
to support our community, become an Elite Member.

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  #56 (permalink)
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My apologies. I didn't mean to be rude or insulting. I re-read my post and didn't see any name calling. Sorry if it came out that way. I tend to get fired up sometimes. I didn't mean any disrespect to Eric. Or especially to this website. For what is it worth, I am not baiting. At least not on purpose. I just feel there was quite a bit of misinformation presented in the webinar that was taken at face value when it isn't really true. (Again, don't believe me either. Everyone should do their own investigation if they are truly interested)


My main point is that retail is not HFTs bread and butter, unless you are an internalizer or paying for order flow. How can it be when it is such a small percentage of the volume? I should of been more tactful in my response.


Last edited by lookOutBelow; July 27th, 2012 at 09:35 PM.
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  #57 (permalink)
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It was on my "To Do List" for quite some time, and finally I watched it today. What a webinar ! Superb !

I would specially thank Mike for not following the normally good behavior of being quite during the presentation and waiting till end, for the questions time.

All the questions that you asked were BANG ON,, in fact those are the same points which were going on through my mind and thank god you asked them then and there. These are the real things which are important for us as retail traders. I wholeheartedly thank the presenters for the patience that they showed with the interrupting questions "and understanding their importance for the retail traders" and answering them with honesty and straightforwardness without trying to be "diplomatic / playing it safe by not speaking the truth". I respect their depth of knowledge and the ongoing research that they do in this field. I honesty had no idea about a lot of stuff that they have shared in the presentation.

After watching this it has become more clear to me that there is absolutely no point in looking for scalp type of trades. Also, I am forced to think again about a lot of misconceptions that I had about - Cumulative Delta, Block Trades, Trying to label the trades as buy or sell based on bid-ask etc. Very informative webinar, I will watch it again and hopefully we will get to see more webinars with these guys in the days to come.

I am posting a link to a site which has got some nice information related to HFT and Algos -
Tradeworx, Inc. Information on High Frequency Trading

Since this webinar has shown the details of events during the flash crash, I am posting the link to a video which shows the exact state of the order book during those crash moments - this video is "Very Interesting"

Order Book Visualization of the Flash Crash (Video)
Tradeworx replays the flash crash using a powerful order book app which provides a visual interface to its ultra-fast direct exchange feeds

http://www.tradeworx.com/movie/booklet_demo/temp/wmv/booklet_demo2.wmv

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  #58 (permalink)
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another trading glitche causes Huge Loss

Knight seeks financing after $440 million loss; shares drop | Reuters


Quoting 
Knight seeks financing after $440 million loss; shares drop

(Reuters) - Knight Capital Group Inc is being forced to raise money after an erroneous trading position wiped out $440 million of its capital, the firm said on Thursday, causing its shares to shed half of their value.

Problems at Knight, one of the largest firms that buys and sells stocks to provide liquidity to the markets, emerged at the beginning of trading on Wednesday.

"The company is actively pursuing its strategic and financing alternatives to strengthen its capital base," Knight said in a statement. Its shares were down 49.7 percent at $3.49 in morning trading after hitting a 13-year low of $3.15.

Knight has already approached JPMorgan Chase & Co for financing, according to a report on Fox Business Network. But it was unclear if that financing would be granted. A spokesman for JPMorgan declined to comment.

Wednesday's technology breakdown roiled the prices of some 140 stocks listed on the New York Stock Exchange, undermining fragile investor confidence in the stability of U.S. stock markets.

Speaking on Bloomberg Television, Knight Capital Chief Executive Officer Tom Joyce said the firm had "excess capital right now." On Tuesday night, it had put in new software that had a bug, he said.

The firm said it was in compliance with capital requirements and that it had traded out of the entire position.

"This issue was related to Knight's installation of trading software and resulted in Knight sending numerous erroneous orders in NYSE-listed securities into the market," Knight said. "This software has been removed from the company's systems."

The trading glitches are the latest in a series of market snafus that have eroded retail investors' confidence.

Others include the botched Facebook Inc initial public offering, the 2010 "flash crash" in which nearly $1 trillion in market value disappeared in minutes, and the failed public offering of BATS Global Markets, a rival to the NYSE and the Nasdaq.

Specialists in securities industry operations issues said the wave of recent problems pointed to an unsettling reliance on automated trading facilities that is robbing investors of confidence in the markets.

"We're losing the human control in our business," said Joe Anastasio, a founding partner of financial services consulting firm Capco who specializes in stock trading issues. "We've been so focused on automated throughput of orders and high-volume execution with no human intervention that we have lost the human logic factor when things go wrong."

One of the problems, he said, is that millions of orders stack up overnight for automatic execution at the opening of trading, with a single error potentially creating a deluge of bad trades.


Knight said its principal broker-dealer subsidiaries were fully compliant with their net capital requirements despite the pretax loss of about $440 million that has "severely impacted" the parent company's capital base.

The U.S. Securities and Exchange Commission and the Financial Industry Regulatory Authority are looking into Knight's trading error, according to William Brodsky, CEO of top U.S. options market CBOE Holdings Inc.

"It's obvious that it appears that there was a technology glitch in the trading algorithm," Brodsky told analysts on Thursday. "All markets have rules to address these types of situations."

On July 18, Knight reported second-quarter earnings of $3.3 million, down 81 percent from a year earlier after recording a $35.4 million pretax trading loss from the Facebook initial public offering. The company has not yet filed its second-quarter report with regulators.

Knight's average daily U.S. equities market-making volume has fallen from a year ago as trading volumes have declined across the stock market. Daily market-making volume was $19.5 billion in June, a 12 percent decline from a year earlier.

More than 83 million shares of Knight stock have changed hands on Thursday, making it the most actively traded issue on U.S. exchanges.


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  #59 (permalink)
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FWIW

Al Brooks last webinar here at futures.io (formerly BMT) he briefly addresses HFT and implies retail isn't even close to being on the radar screen

-Bill

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  #60 (permalink)
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lookOutBelow View Post
I finally had a chance to finish listening to the Webinar. It seems clear to me that Eric has little understanding of HFT.


lookOutBelow View Post
I don't think retail is the main target of HFTs. So, if they disappear, I don't think they'll be hurting.

obviously nanex is not going to tell the whole story to the public.

a. because the industry might not like that and the nanex money is in the access to the deep parts of the industry - they might loose it quickly.

b. because it doesnt make any sense - imagine you are a business and you have knowledge of some stuff like how make money a lot by using a computer and then you go to the public and givem these ideas, what would happen?

would nanex make money out of it? none. 1000 hits to the webinare were like: 500 - activists, hackers, anti-establishment hippies, greedy people from outside; 400 - retail traders who cannot make money and dont have budget to even subscribe to nanex. 50 - people who can subscribe but dont have budget to implement HFT. 50 - other.

however negative effect of that kind of exposition would be huge as 90% of the first 500 would go vocal and scream like hell and disturb the political and regulation arena as it is already on the move and even 450 crazy voices can make difference.

so what nanex can do then? they can expose something what doesnt really hurt nobody and attract lot of audience to the catchy name as hft and advertise IQ once again and nanex - which is by the way very advanced feed but retail is mostly stupid so they have to force feed them with using HFT as a bait....

so all in all -

a. Nanex is great feed.
b. Nobody in his right mind is going to tell us secrets from the floor or HFT or hedge funds or whatever....
c. only people like Lookout (who works/worked in the industry) can tell you real information (not businesses like IQ or nanex) - please nurture him, soon he will grow up and realise how miserable public is and shut up forever..

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