Reddit automated trading system

r/algotrading: A place for redditors to discuss quantitative trading, statistical methods, econometrics, programming, implementation, automated is it sensible to build a Trading System completely from scratch? Infrastructure. I'm learning QT.
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Automated trading, or high-frequency trading, causes regulatory concerns as a contributor to market fragility. The use of high-frequency trading HFT strategies has grown substantially over the past several years and drives a significant portion of activity on U. Although many HFT strategies are legitimate, some are not and may be used for manipulative trading. A strategy would be illegitimate or even illegal if it causes deliberate disruption in the market or tries to manipulate it.

Such strategies include "momentum ignition strategies": spoofing and layering where a market participant places a non-bona fide order on one side of the market typically, but not always, above the offer or below the bid in an attempt to bait other market participants to react to the non-bona fide order and then trade with another order on the other side of the market. Given the scale of the potential impact that these practices may have, the surveillance of abusive algorithms remains a high priority for regulators.

The Financial Industry Regulatory Authority FINRA has reminded firms using HFT strategies and other trading algorithms of their obligation to be vigilant when testing these strategies pre- and post-launch to ensure that the strategies do not result in abusive trading. FINRA also focuses on the entry of problematic HFT and algorithmic activity through sponsored participants who initiate their activity from outside of the United States. FINRA conducts surveillance to identify cross-market and cross-product manipulation of the price of underlying equity securities.

Such manipulations are done typically through abusive trading algorithms or strategies that close out pre-existing option positions at favorable prices or establish new option positions at advantageous prices.

In recent years, there have been a number of algorithmic trading malfunctions that caused substantial market disruptions. These raise concern about firms' ability to develop, implement, and effectively supervise their automated systems. FINRA has stated that it will assess whether firms' testing and controls related to algorithmic trading and other automated trading strategies are adequate in light of the U. Securities and Exchange Commission and firms' supervisory obligations.

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This assessment may take the form of examinations and targeted investigations. Firms will be required to address whether they conduct separate, independent, and robust pre-implementation testing of algorithms and trading systems. Also, whether the firm's legal, compliance, and operations staff are reviewing the design and development of the algorithms and trading systems for compliance with legal requirements will be investigated. FINRA will review whether a firm actively monitors and reviews algorithms and trading systems once they are placed into production systems and after they have been modified, including procedures and controls used to detect potential trading abuses such as wash sales, marking, layering, and momentum ignition strategies.

Finally, firms will need to describe their approach to firm-wide disconnect or "kill" switches, as well as procedures for responding to catastrophic system malfunctions. From Wikipedia, the free encyclopedia. BW Businessworld. Retrieved Soft Dollars and Other Trading Activities ed. Thomson West.

Automated trading system

ISBN Commodity Futures Trading Commission. September 9, Archived from the original PDF on November 27, Retrieved December 22, Patent No. Archived from the original on January 6, Retrieved June 24, Retrieved 21 September Working Papers Series. European Central Bank This supports regulatory concerns about the potential drawbacks of automated trading due to operational and transmission risks and implies that fragility can arise in the absence of order flow toxicity.

Archived from the original on Categories : Share trading Financial software Electronic trading systems Algorithmic trading. Hidden categories: CS1 errors: missing periodical All articles with dead external links Articles with dead external links from May Articles with permanently dead external links All articles with unsourced statements Articles with unsourced statements from July Namespaces Article Talk. Views Read Edit View history. As I learn more I'll be able to decide for myself what I think of that perspective. Your side is great too.

PebblesRox on Feb 27, [—]. Matt Levine does a great job of explaining concepts like these to a layperson and I love his sense of humor. Thank you for the recommendation. I'm already pretty deep in to a lot of economics and finance newsletters and podcasts. I am also familiar with Matt's work, though not a direct follower. I hear great things though! The trading system and its operators deserve whatever fate results from such a decision. In Sweden someone was convicted for triggering such bots to do stupid things.

Morale: if you are big player, you file a lawsuit. If you are a small player, you get convicted. If your bots do "stupid things". In Norway they were acquitted. Same story. Seems like a significant difference in the law tradition. Do you have more details? But they make money anyway, it's the customers pension funds that lose There is no way Wall Street is using trades by retail traders as a signal except maybe to counter-trade them. Also btw Wall Street can easily differentiate trades made by big players versus hordes of retail traders, because the banks and HFT firms are who executes the trades from retail brokerages.

Retail brokerages like Robinhood don't have the authority to execute trades. They subcontract to a HFT firm who then uses the order flow to seek alpha i. What does counter trading and running circles around clueless retail traders mean?

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Is that another way of saying that retail traders buy on the offer and sell on the bid while HFTs buy on the bid and sell on the offer? This is market making which is the bread and butter of HFTs. This is the one thing they do which helps, not hurts, human traders. They can do thousands of trades in the time it takes your nervous system to react and click the mouse.

They parse a news headline many seconds before it ever shows up on the internet. They rent satellites to count how many trucks leave factories. They have access to person-to-person dark pool trades that never show up on the normal exchanges. Algorithmic trading is a secretive black box, but who knows.

'Geared to favor the big'

These are just my speculations from hearsay and random research. If they can make a fraction of a cent from messing with you, they will. It can scale up infinitely.

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It's just software--there's no marginal cost to do so, provided they are properly hedged. Your comment has a lot of misinformation in it. Providing liquidity is their job, and it benefits the market as a whole. Quant funds certainly do this, but HFTs look for alpha in market microstructure. Institutional investors can use dark pools to minimize market impact when trade large blocks. HFTs run high sharpe, low capacity strategies. You contradicted your sentences. I do know Robinhood gives zero commission trades by selling order flow data to hft and market making hedge funds but I don't think those funds execute the orders themselves.

The orders still go to brokerages I think may be wrong about this or just hit Prime Services from non hft hedge fund books. Either way, those hft firms definitely like retail order flow data. My guess is they're easier to "pick nickels in front of steamroller" kinda trades than institutional money which may cause extended one way moves that hits high frequency balanced traders adversely. I'm also entirely talking out of my ass in the last paragraph.

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I don't actually know that any of what I said is true. Just speculation. It depends on the model being used. Most hft models aren't even concerned about the inflow of big trades from institutional money. Most of their models are simple short period time series forecasts they trade around. Which means the model is pretty agnostic on where the trades come from as long as enough back tests show that their predictive power is good enough.

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So I contradict my previous speculative comment by saying this but volumes of institutional flows absolutely dwarves retail flows. You'd have much more opportunities trading around institutional money than retail money. Surely the order flow is mostly going to look like noise, random. But things like local information and employee information would provide some signal - correlated trading patterns - that indicates there could be some information available to inform a trade.

Allowing one to either trade on the meta-signal or seek the information behind it and then trade. So if you've got a company and the city in which it's headquartered just gets a strong buy signal, sure that could be random but I'd imagine Surely having the meta-data on who is trading and linking that to trades is the primary benefit? I would hope that spying on trades of employees of specific companies would be illegal, but it would not surprise me if Wall Street does use that information. You get the orders to fill, not the identity if the counterparty as far as I know.

This is not true of Interactive Brokers, right?