It was the long term trader who first placed his order at 20.02 and actually improved the best bid. He didn't place a bid at 20.01, it was slid back there by the exchange and later rebooked to its original submission price.

what I am concerned with is a practical matter, regarding the upcoming NT8, Gomi, tick aggregation methods and display changes

on this thread we discussed how the exchanges are trying to catch up but not stop the abuses that the larger members and participants use to hide their nefarious actions and sometimes their trades,

the sophisticated retail trading block (us guys) have devised things similar to what Jigsaw trading, Gomi and others have proposed to reassemble and aggregate ticks into their original blocks or supposed blocks, so as to counter the breaking up of true size trades....

I'm sorry? But it sounds to me that you're the one who is trying to profit nefariously from other, good-natured people.

An 18 year old girl just inherited $50M of MSFT stocks from her deceased grandfather and needs to pay estate tax, or she will go bankrupt.

So she decides to sell 25% of those stocks through Goldman Sachs and 25% through GETCO, to pay for her taxes. Goldman breaks up her order and places hidden offers because they don't want to move the market with such a huge trade. What? Is this abusive? Does that mean you want her to sweep the entire order book so the hard-earned $25M that her grandfather spent 20 years accumulating becomes $5M now? You're trying to detect her trade presumably to trade against her and rob the money that the old man left behind for his beloved granddaughter so that she can pay for college - and that's not abusive?

I don't trade client flow but if morality was an issue here, I'd rather GETCO be on the winning side of the trade against Joe Blow, who is using NT8 and Jigsaw Trading(?) and hoping that he lands that big winning trade that robs an old man/young girl's money, so he doesn't have to work a 9-to-5 job ever again.

on this thread we discussed how the exchanges are trying to catch up but not stop the abuses that the larger members and participants use to hide their nefarious actions and sometimes their trades,

you know, if you were licensed with your Series and such, and paid salary to be a public broker, I would agree, but from the perspective of private traders, such as on these threads, one's perspective takes time to realize its you (p[personally] against all others on the other side of the trade, and every time you lose on a trade, someone on the other side got the better of your position, so making up auntie annie and such

I can prove to you with very solid evidence that:

1. We provide liquidity and decrease trading costs for long-term investors.
2. We don't compete against retail. Our strategies compete in a totally different space.

I happen to know the CEOs at 4 of the fastest firms in the world. Over the course of this year, the firm that I launched has become one of the fastest, at least in the instruments that we trade. One day, I coordinated an experiment that allowed us to share our trading histories without exposing our strategies.

This was simple. Each of us generated a random matrix of integers, {R1, R2, R3, R4, R5}, and overlay it over the sizes of our orders {O1, O2, O3, O4, O5} so we each obtained an augmented matrix {O1+R1, ..., O5+R5}.

The first person sent O1+R1 to the second person, who sent (O2+R2)+(O1+R2) to the third person. After this went through everyone, I sent O5+R5+O4+R4+O3+R3+O2+R2+O1+R1 back to the first person, whose order matrix O1 is now anonymous and can now remove R1, and send O5+R5+O4+R4+O3+R3+O2+R2+O1 to the second person. This repeats and finally I received O5+R5+O4+O3+O2+O1 and deducted my own key, R5, so I have the sum of all of our order sizes without knowing each firm's strategy. It's easier to visualize this if I illustrate each step:

1st: O1+R1
2nd: O2+R2+O1+R1
3nd: O3+R3+O2+R2+O1+R1
4th: O4+R4+O3+R3+O2+R2+O1+R1
5th: O5+R5+O4+R4+O3+R3+O2+R2+O1+R1
1st: O5+R5+O4+R4+O3+R3+O2+R2+O1
2nd: O5+R5+O4+R4+O3+R3+O2+O1
3rd: O5+R5+O4+R4+O3+O2+O1
4th: O5+R5+O4+O3+O2+O1
5th: O5+O4+O3+O2+O1

Unlike the CFTC/CME Section 8 audit trail data, which didn't actually identify the "HFT" participants and needed some deduction based on trading volumes (not a measure of speed), I knew specifically that our 5 firms dominated this particular instrument in terms of speed. Agreeing on the instrument and time period was a more difficult problem. We agreed on a fairly uneventful and short time, but an instrument that we knew each other dominated. I translated the price levels and made the instrument and date anonymous because this data was shared in trust.

Here are the 250 levels of best bids and asks of our trading strategies:



Now, I add the trading activity of all other participants on this instrument (pink and light blue graphs):



@Outlier said that a "HFT" erodes your return during the trade entry and exit. Well, imagine a market without low latency electronic market-makers then. In this instrument, most of your liquidity would have vanished and the spreads would've been 10-20 ticks wide. The problem is really when you get greedy: we've already brought the spread down to 1 tick wide and you are still trading passively on both ends hoping that you pay 0 ticks on the entry and exit. Your job is really to use market orders on both ends.

My graphs also show something important: We have a huge forecasting advantage over anyone. It has nothing to do with speed but rather that we have very sophisticated research that allows us to participate in 250 over price levels very intelligently. There's honestly no competition at all between us and even the 'sophisticated retail traders' (using NxCore or something) because your forecasts have practically no overlap with ours. During volatile times, our 5 firms are actually supplying most of the liquidity near the top of the book (see the parts where the orange and dark blue peaks are above the other participants' volume).



1. I gave a real example. I also know many instances where a $300B fund of IRAs, university endowments and charities that has its own trading desk, still handing 50% of its flow to 2 broker-dealers' high-frequency algorithmic trading groups, to reduce their slippage costs. Again, an IRA/university endowment/charity makes more meaningful contributions to society, yet Joe Blow uses NT8 and Jigsaw Trading(?) hoping to front-run their large trades so he could buy a nicer car for himself.

2. I have my series licenses but I don't think it's relevant here.

3. I've never been a 'public broker', but I've worked at a broker-dealer in NY before. (Not that this matters much, because we had Chinese walls: There were 2 secured entrances to the same firm on every floor - 2 sets of ID cards; 1 set gave you access to the left door and the brokerage and clearing functions of the firm; 1 set gave you access to the right and the principal activities of the firm.)

I can prove to you with very solid evidence that:

1. We provide liquidity and decrease trading costs for long-term investors.
2. We don't compete against retail. Our strategies compete in a totally different space.