
Flash Boys in the US Treasury Market - jim_greco
https://medium.com/@jgreco/flash-boys-in-the-us-treasury-market-87e5cd389556
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tcbawo
Why are these large investment banks, with quarterly revenues that dwarf every
HFT player in the market, painted as victims? Since when is it unfair to be
fast? The exchanges offer co-location sites with access to GPS clock
synchronization. Market players could easily coordinate their moves.

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jim_greco
I hope I didn't give the impression that banks are the victims here. The
situation most fixed income departnents are in is entirely their own fault
because they haven't invested in their people or technology. Heck, most don't
even talk to their equities departments about how they adapted 15 years ago.

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antr
_> Heck, most don't even talk to their equities departments about how they
adapted 15 years ago._

I'm curious to know who you are referring too here. As far as I'm concerned,
FI desks have always been more forward thinking than equities, both asset
managers and FI brokerage houses.

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jim_greco
Definitely not among banks. The FI tech is stuck in the stone age.

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toast0
On the one hand, if I really wanted my resting orders to fill, of course I
would list them at all possible venues, and once it filled in one place, I
would remove the order with all haste at the other venues.

On the other hand, if I really wanted my orders to fill against others'
resting orders, I would time the sending to each venue so that they arrived at
roughly the same time; if I'm in Chicago, that means send to the New York
venues first, wait about 20 ms and send to the Chicago venues. Staggered
sending should work pretty well as long as venues are far enough apart; I
don't know how many venues are located in the same city.

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steveplace
Simple fix to this.

Charge a cancellation fee for any orders cancelled under 150ms.

That way it's no longer advantageous to quote stuff or float out fake
liquidity.

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galen211
define fake liquidity

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bostik
I'll have a go.

If orders are pulled the moment someone actually tries to match the market
price, it's a clear indication _the parties putting up the offers were not
willing to accept the price they had put up_.

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jim_greco
I think that's fair. It would mean much less liquidity available though as
your risk taking capability was reduced. Would traders actually be willing to
accept the much thinner books if some kind of economic or regulatory
enforcement of this was in effect? Maybe if they knew it was 'higher' quality
liquidity and they could depend on it being there.

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yxhuvud
What I don't understand is why the markets doesn't create a new order type, a
delayed one that is created with a set trigger time. That way bulk sellers and
buyers could set up big distributed trades in advance without having to resort
to the same game as the arbitrage players are doing with locations close to
the market and whatnot.

~~~
jim_greco
The biggest obstacle to this is that the Exchange's primary customers are the
electronic trading firms. A firm like NASDAQ makes the majority of its revenue
from co-location services and high-speed market data lines.

It's difficult for a new exchange to break into the space (or an existing one
to go out on its own) with rules that disadvantage high speed traders. IEX at
0.9% market share for example has been working on solving the problems with a
slow SIP feed for a couple years now.

I like these kids of ideas, but a bit of regulation couldn't hurt to speed
things up...

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galen211
So bottom line, the people paid millions of dollars per year by banks to
understand the market have to ask IT for an explanation of the market? Hmmm...

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revelation
I was getting the same impression. Surely these traders couldn't be so dense?

This isn't even necessarily a HFT issue. If I go look at the quote for a stock
on Google Finance, the only thing I'm completely sure of is that the value
displayed is not in fact the accurate price. It's a reflection of the _past_.

