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In the example in the video presentation from 33:30 to 37:45, the long term trader was first to submit a buy order for 20.02, got partially filled and slid back with the remainder to 20.01. HFT detected this and then stepped ahead by posting a "hide and light" hidden order for 20.02 that lit up as soon as 20.02 was permissible. When both orders were rebooked, HFT had priority over the long term trader.
This practice clearly amounts to queue-jumping and front-running.
Neither HFT nor Chopper Trading are mentioned there, Nanex just generally noted there was a fine. You made it appear as if something were inaccurate, are you sure this was the link you meant to include?
You just said it yourself, the other trader posted a bid for 20.02 AFTER seeing the 20.01. A bid for 20.02 has price priority over a bid for 20.01. This is neither 'front-running' nor 'queue-jumping'.
That was before the market unlocked and orders were rebooked to 20.02. HFT unfairly gained time-priority over the long term trader who did submit his order for 20.02 before.
Do you know if the hidden "hide and light" order was active in the sense that others could trade against it even as the market was locked?
Thanks, yet I don't see any HFT or high frequency or specific division of Chopper Trading mentioned there. My impression was that this was your argument.
Price takes precedence over time. If you placed a bid at $10 and I placed a bid at $20 ten days later, and our orders are still standing, I'll be in front of you no matter what happens. It doesn't matter that I placed my order later than you; it also doesn't matter what order type I used.
Exactly. My point is that Hunsader's post implicitly attempts to show some "HFT" misdoing here, but in actuality, this was regular, automated trading activity that he had pointed out.
The trader who placed his (hidden) bid at $20.02 was already ahead of the trader who placed his bid at $20.01! He improved the best bid! Of course he should get rebooked ahead!
You're speaking as though the person who placed his bid at $20.01 should be rebooked ahead of the person who placed his bid at $20.02. If that's the case, why not just rebook the bids at $20.00, $19.99... ahead too? Why not rebook the bid at $0.01 at the very front of the queue at $20.02 when the market gets unlocked?
You'll certainly achieve Bodek's dream of getting rid of the hide-not-slide order type then, because certainly no one will want to improve the best bid in such a market. (You can prove this mathematically, by the way, since by iterated elimination of dominated strategies, everyone will want to place his bid at $0.01, so there's no use for the hide-not-slide anymore.)
It was the long term trader who first placed his order at 20.02 and actually improved the best bid. He didn't place a bid at 20.01, it was slid back there by the exchange and later rebooked to its original submission price.