Seems as if something like this would be a lot less effective and much more cumbersome to implement than something along the lines of requiring all orders to remain active for 10 seconds, for example, prior to being able to be cancelled.

Of course, the up-side for the exchange is that it's another source of money (if current HFT activity continued as before). However, one might argue that forcing longer order "active" times would increase income due to more orders being actually filled. I guess the big unknown is specifically how the current HFT folks would adjust their strategies to accommodate either type of rule change.

It would only accomplish the intended goal if transaction fees are not waived for Those Enterprises which enrich the Exchanges by purchasing private high-bandwith pipes into the System.

Billions have been spent by Corporations to access the Trading Platforms directly and They would likely not continue to pay the fees for this premium access.
-As a matter of fact; I believe that there would be intense lobbying to protect existing high frequency/high bandwith access making the existing pipes very valuable.

Of course preserving and protecting existing high bandwith private access infrastructure would only lead to de-factio .GOV/Exchane Cartelization/ protection from competition.

Be careful what You wish for: the CONgr*******s would sell out on this in a heartbeat.

"We had to pass the Bill to find out what was in it."

A strange game.
The only winning move
is not to play.

In Sweden, the outcry started last year. Several documentaries have been aired on national TV about HFT, several articles written, and a very large gathering of fund managers and other financial professionals have expressed their extreme displeasure at the "computer run market", many firms arguing that the reason they've had to close down their trading departments was due to HFT games.

On paper, the rights our state recognizes are fewer and weaker than in the US, but we still have a fairly large degree of representative democracy, and the media is less controlled. When enough people get angry, things change, and the threshold is not that high (depends on the issue though...).

The outcry here in Sweden to ban or severely limit certain types of computer trading will most likely be further amplified after the next market crash, regardless of the computers' hands in it.

I think we have a good shot of getting it restricted further in the future. We'll see.

Peterm that would work too -- I've argued that in the past and added it to the Ticker; either would make a significant difference, and both together would be even better.

Think it would be possible to create enough political momentum to get one or both enacted? I am certain the special interests that would fight this have deep pockets and many politicians in them, but it sure would be nice to see this implemented.

Maybe. I'd sure as hell like it.

Genesis -

Sorry. You certainly have mentioned the "minimum order active time" as a possible solution in the past, and I should have so stated in my earlier post.

No problem and no need to apologize.

I forgot to mention, Finansinspektionen (our SEC) has fairly recently started <punishing> firms that run computer programs that "malfunction" in various ways.

"Malfunction" is a code word for - among other things - spamming the exchanges or other illegal and/or immoral behaviour. A firm was recently fined, have forgotten which one it was, but one of the big players here.

Finansinspektionen's point of view is that each player is responsible for properly testing any and all programs they use.

Quote:

Finansinspektionen's point of view is that each player is responsible for properly testing any and all programs they use.

That's a radical position these days.

Peterm99 wrote..

Genesis -

Sorry. You certainly have mentioned the "minimum order active time" as a possible solution in the past, and I should have so stated in my earlier post.

At this point, with nearly 120,000 posts, Karl has said nearly everything at least once.

Rjazz wrote..

. . . Karl has said nearly everything at least once.

Sound awfully close to an accusation that he's taken both sides of nearly every issue. Beware the ban hammer!

get Ron PAUL to sponsor the bill ....OH YA

Pete...yeah, I thought of that after I posted it. I'm sure Karl knows I don't believe that of him for real, but his videos are where I came up with this:

"We could go up from here, or down...depending on, or independent of...stuff."

Just a bit of parody, since Karl does make it clear in his videos that there are often cases to be made for both sides, and usually advises caution as a consequence. Nothing wrong with noting both cases IMO.

On Topic...

IMO: These machines obviously need to be taken down before any real confidence in the market will return. Karl's suggestions would be much preferable to what we have now, where the big firms get to play Deus Ex Machina every day, jerking the markets around at whim.

Rjazz117 wrote..

These machines obviously need to be taken down before any real confidence in the market will return.

These games would have collapsed a long time ago if it wasn't for the arcane tax laws which funnel a bunch of money into the market that shouldn't be there in the first place (IRA and 401k contributions). They can only get away with this because Wall Street has access to a steady stream of captive money to play with. If people were free to choose how to save their money without the tax code pushing them in this direction a lot of them would find other uses for their surplus income.

Rjazz -

Yep, the videos are a good example of covering all the bases, and I was just trying to respond to your post with a bit of humor - perhaps it didn't come out that way, though.

I responded to Karl's comment because I did not want to leave the impression that I claim to be the first to come up with the "minimum order active time" idea.

Quote:

This one simple rule change would put a stop to 99% of the games and yet would do no damage to actual trading of actual securities, whether by machine or person, for actual accounts where the intent is to express an opinion of price (instead of simply trying to steal a few pennies from someone else.)

Incidentally I have previously argued for imposing a "must remain valid" time for all orders as well sufficient to allow human reaction time -- say, 2 seconds. Making both rule changes would be even better, although either would make a significant difference.

I think it would make a world of difference, but will the exchanges in the US cut their own throats to do it?

I sure as **** hope they will, because I don't see much hope in anything long term going like it's going.

Nanex has put out a number of articles that are just insanely on point with this too, and make it QUITE clear what the machines are doing. Hell, how many times have you seen charts with the bid above the ask and stupid **** like that? It wouldn't even be possible if the HFT wasn't inducing CONSIDERABLE lag at the exchanges with all the intentionally fake orders.

"Incidentally I have previously argued for imposing a "must remain valid" time for all orders as well sufficient to allow human reaction time -- say, 2 seconds." --Karl

Same thing I have been saying, only I think it should be like 60-90 seconds before you can cancel or change it. If you place an order you're committed to it. No more BS bait and switches by the hedges and HFT machines. It would be the end of those games.

2-3 seconds is enough for human reaction time and would shut down the games, especially if you had to have margin to open the position like we all do as humans.

The fine isn't high enough. That many cancel and replace orders in a row should create a fine of at least $50,000. 10 fines should earn someone a trip in handcuffs to post bail for a hearing to determine the intent of fraud. Non bank people with less than $1 million in an account should be exempt. This should be an insider penalty.

We would probably have a lot more honest market if we went back to pricing in 1/8th or 1/16th. I am sure they would still screw with the market. Put an large order behind a smaller order when the system detects a big order coming, buy the smaller order to let the market fall into the higher priced larger order. How much of that is going on, moving prices to move a market into a higher priced sale? Remember, these guys know where your stops are and know how many shares are short the majority of the time.

I'm not smart enough to know how the games work, but if you guys will get an account with an outfit like interactive brokers, spend some time watching the oil markets around midnight or the copper market. The prices march and the large order is generally at the back of the line. It disappears when it gets close to the trade. The point of this activity isn't to buy or sell, but to move the price. In a normal market, the seller tries to sell high and the buyer attempts to buy low. In this kind of market, the goal is to move the price with the least effort possible. I suspect at times these guys are buying their own offers. Putting one in and pulling it or buying it themselves isn't much different and can be highly profitable if it leads the market into a higher sales price where the order position allows for execution.

Karl, you don't think with just a 2-3 second rule the HFT platforms would just spam the market with multiple smaller sized orders? Staging the orders out in partial seconds so there is constant stream of ones coming off the 2-3 second rule? Since the retraction time is now in just a few seconds vs. nanoseconds?

Yep Mann, I see that all the time in the stack off-hours and did a video on it at one point.

Rentier: The key with the 2-3 second rule is that it gives even human reaction time enough time to hit the order. As it is now, the HFT machines are fast enough to see your order and pull theirs before theirs gets hit.