# Tag Info

9

You need to differentiate between OTC and listed options in order to appreciate the fact market makers are still active and relevant in either segment: Listed Options: Actually most listed options market making is governed by market making algorithms, however, most such algorithms are implemented with manual overlays. Something very similar goes on in the ...

6

I found this solid overview of different trading algorithms by Deutsche Bank Research: Trade execution algorithms Designed to minimise the price impact of executing trades of large volumes by ‘shredding’ orders into smaller parcels and slowly releasing these into the market. Strategy implementation algorithms Designed to read real-time market data and ...

5

If you're missing ticks, then no technique will get those ticks back. If you have two sources, then designate one source as the primary feed and then fill-in gaps from the secondary feed. Of course, you'll have to mind the timestamps when determining whether the secondary feed can be used properly.

5

Each venue will allow diferent order types, and will have different matching rules (the queue positions you mentioned), so this is not general to the whole market, but this is a paper from Nyse that is pretty much explains most of the order types I have heard of: http://www.nyse.com/pdfs/fact_sheet_nyse_orders.pdf Also, one factsheet/regulation from the ...

4

You will struggle to put a number on the potential returns of high-frequency trading (HFT) and I think it wouldn't make any sense anyway if you don't take into consideration its risk and its leverage. Achieving 100% return with low volatility seems highly improbable; so ask the trader in question his Sharpe ratio to start with and compare it with yours. ...

4

Repeating groups are a way for FIX to represent arrays. A "number of" field prepends the repeating group to alert the recipient how many elements to expect. For example, Arca uses TradingSessionID (tag 336) to identify pre-open (P1), primary (P2), and post-close (P3) market hours. This group is prepended by NoTradingSessions (tag 386). So, I would use the ...

4

On the request, here are my two cents. Suppose that the price follows the dynamics $$\begin{cases} \mathbf z_{k+1} &= F(\mathbf z_k,\mathbf i_k,\mathbf w_k), \\ \mathbf i_{k+1} &= G(\mathbf i_k, \mathbf w_k) \end{cases}$$ where $\mathbf z_k$ is a price of a traded assets at the time $k$, $\mathbf i_k$ is the value of parameters of the ...

3

Obviously merging two streams is harmless and it should be done. But it's hard to advise you regarding the "interpolation" methods you can use to generate the ticks without knowing why you need this. The reason is that any method will introduce a certain bias to the data. Therefore, it very much depends on what are you going to do with your altered data on ...

3

Indeed, algorithmic trading is a very hidden subject. It is even known that working in the algorithmic trading sector is very lonely because nobody is willing to share secrets, ideas or innovations. Mentioning this, I have recently talked to a Technical Analyst/ Quant who has exposed some of his secrets. One of which was risk management. The terms you are ...

3

Whether its possible? Absolutely. However, you should probably keep in mind a couple points: * Many people claim a lot while proving very little to none. This is fine if the issue is a small-talk conversation. Believe it or not, no harm done. However, this is about money, and from my experience I cannot stress enough how important it is to do a very ...

2

it depends on how applied the class is. A deep understanding of stochastic calculus is not required for "P-Quants", the type of person that lives in the physical word of forecasting and risk. That being said understanding the type of models that get used by the Q-Side (requiring lots of stochasic theory) is a useful skill to have. Like John said, if you ...

2

The broker algorithms or the trading algorithms are designed to the optimal execution of large amounts of stocks with different benchmarks (e.g. VWAP, PoV, Implementation Shortfall or Slippage, Price Inline, TWAP, DWAP, etc.). These algorithms sometimes uses statistical methods and market microstructure analysis (to analyse spreads, volume, seasonality, ...

2

Some reading that may be of interest to you and which proceeds along similar lines of thought is that of Shmilovici in "Predicting Stock Returns Using a Variable Order Markov Tree Model". Abstract: "The weak form of the Efficient Market Hypothesis (EMH) states that the current market price fully reflects the information of past prices and rules out ...

1

It's got nothing to do with you being identified as a market maker or not. It is simply that the other participants at that time are passive traders. The choice between hitting a bid or lighting a new level with a new offer are distinct and very different (especially, in some markets, in terms of fees paid or rebates received). So, you're not being ...

1

It depends on your goal. Suppose we have a stock whose top-of-book quotes show far more size on the bid than on the ask. If you want the weighted mid to reflect sentiment at this moment, then certainly the market participants agree that the fair price is less than the mid. However, if you assume that these participants are informed market makers and your ...

1

Take a look at FIX4.4 protocol, accessible from http://www.dukascopy.com/swiss/english/forex/api/fix_api/ Thread about C# libraries: http://stackoverflow.com/questions/4876279/fix-library-for-net

1

No, it doesn't have to do with time frames. It's a protocol feature designed to enable something akin to nested data, whether for more compact data transmission, or just to allow one to adhere to rules of semantic sense. Take market data requests, for example, i.e. retrieving the current market depth for a certain instrument. Not only would sending one ...

1

Assume $n$ markets where each market $n$ has features $Bid(n)$, $Ask(n)$, bid volume, $BidV(n)$, ask volume, $AskV(n)$, fixed costs, $FixC(n)$, and variable costs, $VarC(n)$. Assume you buy on market $n$ and sell on market $n+1$. The profit $\Pi(n,n+1)$ of each arbitrage opportunity amounts to  \Pi(n,n+1) = V * [(1+VarC(n+1))*Bid(n+1) - ...

1

You might want to check out the book Evidence Based Technical Analysis by David Aronson. In it he applies statistical techniques to determine whether certain time series patterns have any predictive power. It's an interesting read and should equip you with some ideas on how to differentiate between folklore and statistical rigor. It also gives you ample ...

1

Algorithmic Trading in general is no different from normal trading except all of the trading is automated. So it encompasses the same risk parameters that normal traders would. When it comes to High Frequency Trading, the risk management checks would be at Strategy Level as well as "individual trade" level.There would be checks for sizes, values etc. ...

1

The best options AMM guys are rumored to capture roughly 1/3tick per round trip, net of transaction costs + implementation shortfalls. I had worked for a regional index options MM. With the growth of competition in the recent years, expected returns are actually much lower than that today. So realistically, in today's environment, you could net maybe ...

1

One way to think about this is as a missing data problem. You observe the order book constantly, but trades only occur infrequently. One way to resolve this is to perform full information maximum likelihood (other techniques, such as multiple imputation, may be too slow for your needs but it might be useful to look into them), which has analytical formula ...

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