friday after market comments, page-67

Just a quick bit of clarification on the difference between High Frequency trading and purported Goldman Sachs style algorithmic trading.

The contention about the GS trading is that their algorithms were/are sniffing orders in the exchange data stream BEFORE thy hit depth in the market and front running them... specifically large INSTITUTION orders supposedly enabling the "sniffing entity", in a MICRO second, far less than half a second, to front run the elephant orders which as they were/are coming from institutions had to be filled thus the "sniffing" orders would be filled as they would get on the queue just in front of and on the right side of the institution orders.

High frequency trading on the other hand, is purely a depth play as described by others on this thread where the purpose is to "bot trade" for a few ticks up and down.

The supposed practise of Placing Large "fake" orders in the depth queue to either scare price away or excite price away is something that one can see in just about any liquid stock on our ASX market... examples of BHP are good, and I do remember when FLT took off a year or so ago one could see bot tracks all over the depth queue.

Now from my in industry experience regarding the software created for market-makers, there are quite a few examples of inhouse and commercially availabe software that can read depth and place bids and asks at specific levels with the purpose of both making a market, and for trying accumulate or distribute large parcels of stock in a specific price range.


I am inclined to look at these "market Making" algorithmic trading tools in the same way as I look at real life tools...

How a tool is used can sometimes be purely based on the imagination of the person wishing to do so and sometimes may be far outside its original designed purpose.

Texas chainsaw massacre anyone? LOL!

;)