HFT in Detention For Excessive Cancellations! LOL
Ha. Gotcha HFT Friends! Bet you guys were worried about really getting punished. Those press releases from NASDAQ OMX and Direct Edge? About punishing you guys for excess cancellations? Listen, we got you covered; we read the releases and you are in the clear! Nothing to see here… Move along! The headlines were meant to appease and impress the SEC, so that they won’t go all Italy and Euro on you with real cancellation fees.
Don’t believe us? Direct Edge’s plan is to:
A) Look at HFT’s that cancel more than 100 orders for every one they trade, which is an even higher threshold than the 90-95: 1 ratio the SEC thought was ludicrous. So you got margin there first off.
B) If your ratio exceeds that 100:1 ratio over a one month average, they will cut your rebate by a whopping single (1) mil. So no tax; they will just cut your rebate. And they won’t cut your rebate in half, or take it away for a month. They will just reduce your rebate check by less than 3%. LOL.
And NASDAQ’s plan is similar, involving small charges against rebates for quotes in excess of 100:1 cancellation/trade. Eric Knoll said they want to clamp down on excessive message traffic and noise to produce better prices for investors. He also said it would make NASDAQ’s data feeds more useful and cleaner. So that when you pay for these enriched feeds to create automated market trading strategies based on other users’ bids and cancellation activity, now they will be cleaner and help you pick each other off better! LOL.
Should you worry? Of course not. Even your brother Richard Gorelick, of RGM Advisors, and member of the Principal Traders Group Lobby – a 30 firm-plus membership of HFT firms, is for the Direct Edge and NASDAQ plans. From WSJ article:
“We have been encouraging exchanges to adopt and enforce policies like these for some time,” said Richard Gorelick, co-founder and chief executive of RGM Advisors LLC, an automated trading firm. “Exchange policies like this should provide economic incentives for traders to be responsible and efficient about their messaging.”
And if you are market makers on Direct Edge or NASDAQ, you are exempt from these “fees”!
So fear not, our HFT friends. Play along. “Good self-regulation is essential to a healthy marketplace.” Smile when you say it! And with any luck the Regulators won’t realize what a joke these plans actually are, and you can all escape real regulation for another few years. Hey, detention isn’t so bad; you all can sit around, tell stories, complain, and light up. Party on!