There are also mandatory fill rates - i.e., if you don't fill at least 30% (or some such fraction) of the orders that are flashed to you, you get kicked out of the ELP program.
When I read about these things it reminds me of when I was working for a gambling site a few years back. Arbitrary rules, designed to maximize profit for the bank.
Re:A High Frequency Trader's Apology, Pt 2
by yummyfajitas on Thursday April 26, 2012 @08:23PM
(#3896808)
The fill rate is not an arbitrary rule. The goal of ELP is to allow more orders to be filled on Direct Edge (i.e., not routed to INET/ARCA), thus saving Direct Edge customers routing fees (and making DE more money).
If your ELP members aren't filling orders, then customers pay more to have their orders routed and DE makes less money.
No, the SEC mandates that the limit be < 500ms, i.e. if it were > 500ms, then the exchange would be required to publish the flash order.
The limit was 30ms at Direct Edge, and I believe everywhere else as well.
There are also mandatory fill rates - i.e., if you don't fill at least 30% (or some such fraction) of the orders that are flashed to you, you get kicked out of the ELP program.
Your timeline is also wrong:
- said company goes and buys up the AAPL on the market, ahead of you - your order to buy AAPL hits, executing at a slightly higher price than you expected
Your limit order to buy AAPL at $610.00 hits the market and goes unfilled.
In fact, the ELP program was mainly about increasing order flow. It was a way for some HFT's to jump the queue - rather than being faster with public bids on ARCA, you can just flash people on Direct Edge.
The people being flashed chose to be flashed (note: there was a flag you could set to turn flash orders off) because it would reduce their routing fees.
A much more legitimate criticism of flash orders is that they benefit Goldman or Getco to the detriment of Joe's HFT Shop.