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5

The primary quant skill needed to make the market is optimal control (a typical paper is Guéant, O., L, and J. Fernandez-Tapia (2013, September). Dealing with the inventory risk: a solution to the market making problem. Mathematics and Financial Economics 4 (7), 477-507), because you need to control your inventory and adjust your quotes accordingly: be ...


5

I would reckon this to be a very hard exercise. Unless you know the inner workings of such algorithm and how the news was exactly interpreted you have no idea about what went "wrong" and on which side such opportunities reside. One thing I know for sure is that most all algos that capitalize on news capture primarily the numeric part of the news event. I ...


4

You can find a varying number of practitioners and academics on both sides of this debate. To be honest, the question of whether "High Frequency Traders" increase liquidity is ill-posed. The label is often misused and is broadly encompasing of too many different types of traders. So, in general: Any trader that posts resting limit orders is adding ...


4

I have heard of several allegations in the recent days, but they are mostly baseless. However, there are a rare, few trading venues whose matching rules are most often accused of giving unfair order execution advantages to certain firms. These usually arise from violations of the standard price-time priority: IEX's broker priority rule. "All orders will ...


3

Successful strategies in both areas can have the same math requirement. It just depends on the algorithm. PhD level mathematics is not a requirement in either area, despite the impression you may get from academic papers (note that a lot of these papers use math to build a sim market, which is completely dislocated from what a researcher needs to do). I feel ...


3

Unfortunately, the ability and tools to develop a low latency trading system are extremely commoditized and will be insufficient for you to make a living in this field. An overwhelming majority of electronic market makers are staffed 100% by PhDs because trading experience and research compose their primary differentiators, e.g.: SIG EMM - 100% PhD. DRW ...


3

If I understand correctly the TCP roundtrip time can be used as a posteriori proxi for the order entry gateway delay. So assuming the roundtrip time is composed of gate delay and independent other delays $RTT_g(t) = dT_g(t) + d_g(t)$ with assumed $Cov(dT_g,d_g)=0$ and $Cov(d_i,d_j)=0$. Minimizing the this combination of gate delay and other delays is ...


3

A bit belated, but nevertheless: It's worth noting that at least some of the various visible shapes of "quote spam" shown on e.g. Nanex analyses, such as sawtooth patterns, can be explained without assuming malice on the part of the order originators. By way of example, two poorly designed agency execution algos trading buy child orders may each have a ...


2

I think it's alive and well. I don't think there's a specific "decoupling" time, but if you look at e.g. Munnix et al. "Statistical causes for the Epps effect in microstructure noise", it seems that the biased correlation is about 60% of the real value for 1 min data and about 90% for 5 min data, so you could say that 5 min is pretty safe, but 1 min is ...


2

I have a little experience with this. First, NASDAQ has shared a dataset with researchers that flags whether an HFT participated in each trade or not but not the actual MPID - probably less granular than what you want. You generally need a professor to "cosign" your request, write a brief project proposal, and sign an NDA to get it. They also have shared ...


2

I think the market participants behavior on the micro-level is not different in principle from the behavior on the macro-level. The challenges of better news interpretation, and faster response time are very similar on all levels. There may be a little bit more trading opportunities in HFT, but building HFT strategy and infrastructure is very expensive, ...


2

If you can observe prices at a very high frequency, then "news" is defined as a lot more things than if you are observing prices at a lower frequency. So what you are calling corrections are also news for the high frequency guy because he can observe prices that fast, so do not consider these as corrections to the original news, consider this to be a ...


2

Proof of work systems are generally used where you do not trust the client; the Bitcoin one is used to slow down the generation of new coins and is adaptive; if hardware speeds up, the work gets harder. By contrast, an exchange has a contractual agreement with the client, and can require it to authenticate, encrypt etc. The central problem, though, is that ...


2

Here's a way to think about it: imagine you can do something in an ASIC (i.e. directly in hardware). However, the process of fabrication is in itself expensive, and you get a design that you cannot change afterwards. ASICs make sense for predefined tasks such as Bitcoin mining, well-known data processing algorithms, etc. On the other hand we have ordinary ...


2

Your question really makes not much sense. It's like asking how much of the wiring in trading infrastructure uses optic fiber and how much of it uses copper. The best answer that we can give to you is that an FPGA is not a magic bullet. Vendors like Cisco claim they have achieved the same results with high performance NIC's ...


1

In addition to @madilyn's answer, there is one point that needs to be addressed and that is often called an unfair advantage although it is merely a competitive advantage. Take the US Equities market. There are now several venues on which the same symbols are traded. If one HFT acquires information about one symbol in one venue - e.g. due to a limit order ...


1

KDB is a column oriented database and is optimized for time series. As far as I know there are no libraries available for statistical testing and you pretty much have to write things on your own. This page has tutorials http://code.kx.com/wiki/Main_Page You can download the free version from here http://kx.com/software-download.php The most popular book ...


1

For the question in your title, The mean reversion of the volatility is due to the Moving Average part of the volatility process. The solution would be to set $\beta = 0$. In other words you have to use an AR process for the volatility (so an ARCH model for price). The restriction in p and q come from the estimation process of the parameters. You test ...


1

You're playing against people who would take the opportunities you're going for in microseconds or milliseconds. What kind of latency are you getting with TradeStation? You need to do two things: measure this latency. get tick by tick data and do a real backtest. Probably your opportunities are gone in 10 milliseconds so you need to do this.


1

I know it's not what you want to hear, but the smaller the time-frame the more limit orders should be focused on (which can change the design of a strategy entirely). Due to the nature of the futures markets, having a gap in liquidity can obviously cause discrepancies with market orders, but can guarantee some nature of being filled using limits.


1

Perhaps not the most encouraging answer, but: I would think that it is contingent upon the specific implementation, magnitude, regularity, and transiency of arbitrage available as well as the volatility estimate time-scale. In a very simple case, the existence of arbitrage opportunities would likely result in larger fraction of informed traders (relative to ...


1

If you look at it from a mathematical point of view - presence of arbitrage should not matter for volatility estimates. Absence of arbitrage can be associated with the existence of an equivalent martingale measure for the bank account numeraire. (first fundamental theorem of asset pricing) Let's assume the real world process is something like ...


1

FPGA's are really nothing more than the same logic blocks repeated again and again throughout the silicon, with configurable switches to connect the logic blocks together. This makes FPGA's very good--and fast--at dealing with repetitive problems that can be described in a hardware circuit that does not change during operation. And you can have literally ...


1

different features? a euro is a euro no matter where it's traded. You have to identify what you want to do. Why are you trading? Do you want execution only, or delivery? Are you covering cashflows or taking speculative positions? Are you going to trade manually or with automation? How many provider relationships do you want to refer to? Do you want to trade ...


1

I'm guessing that your question will be closed soon, but I wish to help you. Your question doesn't make complete sense. Are you looking for a "trading platform" as in an electronic trading venue, or a software built around handling market data and order execution? FXAll, Currenex, Hotspot and Integral are trading venues, while Apama, FlexTrade and Portware ...


1

This is a really confused question and the OP clearly doesn't work in this industry. Any connection to an exchange requires using the format the exchange has chosen. I.e., you don't get a choice. That said, I don't know of a single exchange that allows order entry via SBE. CME Group will use SBE for their new market-data feed (replacing FAST compression), ...


1

Market participant ID data is extremely unlikely to be available without the collaboration of regulators and the exchange itself, as it is a closely guarded information. Even "anonymized" data with no reference to a specific firm could reveal private information to informed market participants. If obtained at all, it is likely to come with draconian ...


1

The equivalence you are trying to find can only exist in the framework of static volatility. I think the problem is that in the real world, statistical volatility varies a lot with time; and worse off the relative rate at which it varies increases with smaller time increments. So not only does the answer not apply in real-world markets, an estimation of ...


1

std(PPS) PPS = Packets Per Second (wiki article: network packets) The standard deviation of packets per second received from a liquidity source are directly related to the number of quotes per second, or the number of trades per second occurring on that liquidity source. Thus, the higher the number of network / data packets per second, the more volatility ...


1

Yes. You're right that queue position is less important in a pure pro-rata market. But in a market that is very deep, such as Eurodollars, the cost of getting adversely selected ("catching a falling dagger") is huge (very large bid/ask spread). So it is critical to cancel any open orders quickly when the price is about to move.



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