It seems very wrong to me to make an activity feasible, and allow it to be profitable, but then arbitrarily drop the hammer of criminal penalties when a trader crosses some murky line.

Why are people so fixated on the order book? The real information is the spot price and how fresh is that information (and the volume), the order book is a fantasy anyhow. There are people willing to buy stuff at pennies always, and sell at thousands. How does that help you? What if they cancel? It shouldn't matter if someone does it closer to the spot price, or closer to the best bid-offer.

If you want to buy, look at the price, decide how much you think it's worth, put in a limit order at that price. Go to bed. If you want to sell, basically do the same. If you want to live on trading, then smarten up.

That's not true, the order could execute if someone slams the market with a massive buy / sell order. It auto adjusts to stay away from the active market. The idea behind the order type is that you don't want to be at the current 'market price' but rather just outside to handle big fish. You might argue this sucks, but the the big fish don't mind as it gives them more liquidity that wouldn't otherwise exist. The trade also lightens load as you don't have to constantly send cancels.

Maybe you aren't being pedantic: are arguing the intent of the regulation was to have market-makers make markets only as a bulwark against single whale-orders that will probably be thrown out as clearly erroneous?

That is a real role-redefinition. A quoting obligation that falls apart if the big-order trader on the other side randomly decided to break his order two (or N) near-simultaneous orders?

Ideally, the order will never execute as the regular market will handle the volume. Things are in bad shape when you have to dig into the Market Maker's pockets.

order type description: https://www.nasdaqtrader.com/content/productsservices/tradin...

Yep, the order type is only for market-makers. That's pedantic too; I only ever talked about it in the context of market-makers, as an example of place-cancel not being the same as spoofing. I'm not sure if you are pointing this out to say I am conflating them. Maybe I should have picked a more noble non-spoofing example?

You maybe have equated HFT and ultra-low-latency trading in your mind? The latter is almost always high-frequency because it is hard, on a few pennies per trade, to make any money without the F in HFT, frequency. But all areas of HFT aren't necessarily so latency sensitive as areas like index-underlyings arbitrage where you have to be colocated at the exchange to be competitive and 4,000 miles away sounds like a ridiculous punchline.

At a heavily automated market-maker I worked at, we, not so long ago, had all our servers almost a thousand miles from new york, even farther from Chicago, and still did about 8 or 9% of all US equities volume. It sure as fuck didn't run on Visual Basic, but you would be surprised how much algorithmic trading does out there.

The "2.5 billion in orders" is just a number; in fact, the unreality of that number is the problem.

I think we might be a bit biased on this site because a lot of the HFT recruiting targeted at techies in other industries is going to be in cutting-edge areas of ultra-low-latency or generically-dealing-with-massive-data where experience in a different industry can directly cross over.

For the most part, I think HFT is innocuous.

For the most part, HN does not think HFT is innocuous.

All I'm suggesting here is, if an Excel plug-in talking to Globex from London is "HFT", that shoots a hole in one of the primary arguments used against HFT here.

Really, what we're running up against here is the silliness of the term "HFT". By the definition we're contemplating here, virtually every ATS in the world is an HFT.

Which one specifically? That the big players have an unfair advantage over the little guy?

> Really, what we're running up against here is the silliness of the term "HFT". By the definition we're contemplating here, virtually every ATS in the world is an HFT.

Not really, if it doesn't deal with market micro-structure, it probably isn't HFT. There are lots of ATSes that do routine things like rebalancing portfolios, or more sophisticated things like automated hedging of human traders, that is still happening at a human pace.

I haven't seen a detailed article yet that covers how many order modifications he made, and how far outside the money his spoof orders were (really far and it is something he could have managed by hand and I wouldn't call it HFT, pennies-close and his London Excel setup couldn't have handled it, but I think there is definitely a big HFT Goldilocks zone in there).

Look, spoofing is already illegal, and is already a problem in manual trading. Whether the guy did HFT spoofing or not isn't really damning to HFT at all. It really just shifts attention away from how fast all the illusionary HFT liquidity (tightening spreads and providing valuable liquidity is how pro-HFT arguments normally counter anti-HFT arguments about it a zero-sum game) evaporated during the flash crash.

My original comment can shed some light on that. Part of the regulators' approach, post flash-crash, to getting more liquidity in events like that was to add more stringent quoting obligations on market makers. The regulation was already ineffective and poorly thought out, but to get an idea of how much the industry really values liquidity don't look at the bullshit they sell in congressional hearings (we pay the market in liquidity!), but instead look at the product they demand as customers of Nasdaq (a new, explicitly anti-liquidity order type).

(edit: ok a bit overblown on that last part, I don't think the flash-crash was that big of a deal. The HFT industry just really oversells liquidity and it is kind of a farce, the market literally shuts down for two days each week and takes ten days of holiday each year.. literally a near universal zero liquidity for 30% of the year or more if you consider market hours)