High-frequency trading and the $440m mistake

Long, short, Bitcoin, forex - Plenty of alternate market disuccsion.
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superfrank
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http://www.bbc.co.uk/news/magazine-19214294

Knight's Berserk Algo Bought $2.6 Million Worth Of Stock Every Second
http://www.zerohedge.com/news/knights-b ... ery-second

be careful with those excel spreadsheets!
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jimrobo
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have they not heard of something called a maximum liability setting?!?!?!?!
andyfuller
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I was catching up on Podcasts over the weekend and was listening to this one about the HFT loss:

http://www.bbc.co.uk/podcasts/series/mo ... ayepisode8
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Euler
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Saw this aritcle on Monday: -

One Algorithm Made Up 4% of Quote Traffic Last Week

http://finance.yahoo.com/news/one-algor ... 30799.html
PeterLe
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Euler wrote:Saw this aritcle on Monday: -

One Algorithm Made Up 4% of Quote Traffic Last Week

http://finance.yahoo.com/news/one-algor ... 30799.html
Do you think it was running on a VPS?! :D
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Euler
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How the Robots Lost: High-Frequency Trading's Rise and Fall

http://www.businessweek.com/articles/20 ... nd-fall#p1
PeterLe
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I think a lot of what was reported in that article echoes what's happening on betfair, or what has happened
I'd never heard the term momentum trading. perhaps the technique employed by the mad bomber!
steven1976
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Hi Peter Le,

I dont think your a million miles away Peter Le in regards to BF although I believe it is a slightly different version of high speed trading to what is explained in the article.

Ste
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Euler
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One of the things I have found remarkable about Betfair is how low the over round is getting. I figured a few years ago there would be a process of attrition to lower and lower values but if you look at some of the racing this week, we have seen a 28 runner stuck at 100.2% for a few minutes. Never thought I would see something like that.

The problem for the wider community I guess is that the lower it gets the less net losers there are in the pool.
steven1976
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Sorry Peter Le, I hadn't read the full article when posting before. It does actually mention towards the bottom of your article as to what I feel drives the very front of the BF markets. I also posted elsewhere a link about it which ill share here as well as it may be of interest to you.

http://webcache.googleusercontent.com/s ... clnk&gl=th

The BF markets were built around a financial system so i dont see why it would be any different from the real world.

This type of trading would explain to frustrated traders why the short term market always feels to turn against them and why some larger traders feel they cant get orders filled at times and the market makes sharp turns and in general why the markets volume tend to average about the same pre race even though many traders feel that nothing is happening at times.

Its not to say that it cant be used to benefit from however. To a certain extent, it makes it very predictable for short term moves and to a certain extent recognizing money that feels out of place and could actually trigger a bigger move. The downside is, you know you have to be quick as for 99% of the people out there, the market will have a bigger bank so you have to recognise the patterns to be able to slip in at the front of the queue as the next move starts.

Just so you all know how crazy I am, I also believe it is also used in play, although in a slightly different method using much wider spreads.
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L.o.S
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Those articles make for some interesting reading!

The practice of short selling.. it involves some mixture of borrowing selling and buying back but can anybody explain how this works? I'm assuming the equivalent process on BF is backing.

From studying my own reactions I feel two of things that drive the Betfair markets are fear and greed; prices are often chased far faster and further than I think they should naturally go, does this happen in the stock market too? So if you can master BF then you may be better placed to tackle the stock market/financials.
steven1976
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"The practice of short selling.. it involves some mixture of borrowing selling and buying back but can anybody explain how this works? I'm assuming the equivalent process on BF is backing."

If BF cared to do it themselves, it would mean borrowing nothing. Just basically flashing up a load of numbers until other money appears in the market and then go against it with bigger amounts. They wont always have it right and someone may keep gambling and they lose but this is the risk they take on. They look to either take it to a new position to sell it back to the panic buyer or by creating a fast sudden move, new people enter in the market behind them looking for a scalp on the way back out. Therefore, they could sell off to that scalper.

If it wasn't bf then it would require a minimum of 2 accounts linked to some nice software or spread sheet to do the same and always hedge the two or more accounts so that there was zero balance between against the linked accounts. It would also need a shed load of money! You are not going to get far trying to trick the trickers with a 500 quid bank.

As for taking it to the stock market, as them articles explain, the big boys are already doing all these tricks and more. so Im sure if the people that regulate the stock markets cant keep up with them then.....
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L.o.S
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steven1976 wrote:"The practice of short selling.. it involves some mixture of borrowing selling and buying back but can anybody explain how this works? I'm assuming the equivalent process on BF is backing."

If BF cared to do it themselves, it would mean borrowing nothing. Just basically flashing up a load of numbers until other money appears in the market and then go against it with bigger amounts. They wont always have it right and someone may keep gambling and they lose but this is the risk they take on. They look to either take it to a new position to sell it back to the panic buyer or by creating a fast sudden move, new people enter in the market behind them looking for a scalp on the way back out. Therefore, they could sell off to that scalper.

If it wasn't bf then it would require a minimum of 2 accounts linked to some nice software or spread sheet to do the same and always hedge the two or more accounts so that there was zero balance between against the linked accounts. It would also need a shed load of money! You are not going to get far trying to trick the trickers with a 500 quid bank.

As for taking it to the stock market, as them articles explain, the big boys are already doing all these tricks and more. so Im sure if the people that regulate the stock markets cant keep up with them then.....
I see, I got that explanation from a program called Million Dollar Traders, guess it's not entirely accurate. I meant in a more general sense, short selling makes money by prices going down, which we do on BF by backing.

I read somewhere that BF trade in the markets themselves, wonder how much truth there is to that. Maybe the mad bomber who has mysteriously disappeared was them experimenting!

Stock market seems so complicated. Granted I'm far from mastery on BF but at least conflicts on the other side of the world wont affect my trade on the favourite at Ascot.
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Euler
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A dark magic: The rise of the robot traders

http://www.bbc.co.uk/news/business-23095938
andyfuller
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Euler wrote:A dark magic: The rise of the robot traders

http://www.bbc.co.uk/news/business-23095938
Interesting listening - the best one I have heard to date on it. To give Redtra his due he spotted it first here:

viewtopic.php?f=2&t=8081

I personally don't feel to 'wound up' about it all. Like with the Betfair markets I see it as just part of the market and I am sure it creates opportunities as well as takes them away. Just part of the evolution of the market.

Has anyone read this book about it, if so any good?

The Speed Traders:

http://www.amazon.co.uk/gp/product/0071 ... ROKL5A1OLE
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