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Defending against predatory trading strategies

Technology has revolutionized trading, delivering benefits but also enabling the potential for abuse. IEX is a new U.S. Equities trading venue – the first to be owned by a consortium of buy-side investors. Come hear Matt Trudeau, Head of Product, describe an increasingly fragmented marketplace and how IEX designed their technology from the ground up to protect investor orders from predatory trading strategies. 

Speaker bio: Matt Trudeau has over 14 years of experience in financial services and electronic securities trading spanning product, strategy, market structure and operations. Matt was previously Global Head of Product at Chi-X Global, where he was instrumental in building and launching new equities markets and products in Brazil, Japan, Australia, and Singapore and Chief Operating Officer at Chi-X Canada where he was responsible for launching a new alternative trading system (ATS) managing market and technical operations, product and strategy. Prior to Chi-X Matt held strategic development, product, and operations positions at Instinet and CyberTrader, a subsidiary of Charles Schwab.

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  • Jess S.

    Thanks for your patience all, please find a recap of this meetup along with the video recording of the entire event here: http://blog.quantopian.com/iex-head-of-product-designing-a-fair-stock-exchange/

    2 · September 4, 2014

    • Nik

      thank you

      October 20, 2014

  • Philipp M.

    I remember someone mentioned that it's going to be recorded. Can someone post a link to the video?

    July 30, 2014

    • Jess S.

      Hi Philipp - We were able to record this meetup, I'll post a link here to the video as soon as I have it available! Thanks for your interest, Jess

      July 31, 2014

    • Aaron G.

      Let the debate continue! ;-)

      July 31, 2014

  • Katie H.

    So this is how years of hard work and a stable, transparent US equity market structure ends, with the support of a room full and a waitlist pending. It's depressing. I've spent years helping people grow their retirement assets and it's all down the drain the day they take a dominant market share.

    July 23, 2014

    • Abraham (Abe) K.

      One glaring problem with IEX is the lack of transparency. Who are the share owners in IEX and why isn't that information public?

      1 · July 27, 2014

    • Eric L.

      Abe - We know at least Scoggin Capital, Bill Ackman, Danny Loeb, Senator Investment Group are involved. There's one thing in common. Not one of these guys is an algorithmic trader, but they have more cash than the entire HFT industry combined.

      And they want us all dead. That's not just every HFT firm, but you, me, Quantopian, the ISVs and the fintech firms that support the algo trading ecosystem.

      What's more unusual is that IEX's rhetoric paints these guys as the underdog against HFTs. KCG's market cap is barely $1.4 billion. This is the same Bill Ackman that bullied Herbalife with a $1 billion short sale. His net worth alone is more than the market cap of KCG. It's evident that IEX's founders are not proponents of fintech when Brad Katsuyama barely credits some IT technician for teaching him about the existence of data centers, when that IT guy should be the true hero of "Flash Boys". At least GETCO funded Quantopian and doesn't want us dead like IEX does.

      July 28, 2014

  • Bill

    The book "Flash Boys" was my introduction to this topic. One thing I didn't understand: "Thor" seemed to solve the problem of front running. So why was it necessary to start a new exchange?

    2 · July 1, 2014

    • James M.

      The SEC is technologically-backward­ because it is saddled in bureaucracy and cost constraints. It is absolutely possible, with the present technology, to build a sequential, consolidated order book representation which has reasonable accuracy to conclude that IEX's allegations of frontrunning are false. How else are you supposed to trade the same product in multiple venues? The presence of dark pools, such as IEX, and internalizers, make it more difficult for anyone to construct this data from separate feeds, but it's nevertheless a trivial, day-to-day task for most firms. Even if this data was impossible to obtain, isn't it egregiously conspiratorial to accuse people of frontrunning on the grounds that you do not have data? I've never seen flight data of the Flying Spaghetti Monster but isn't the more plausible explanation as to why I've never seen that data that because the monster doesn't exist?

      July 3, 2014

    • Benjamin P.

      John, can you put some numbers on Your BXZ
      example? It's not clear to me how you make risk less profit.

      July 25, 2014

  • Benjamin P.

    Where can we find a link to the recording of the event?

    July 25, 2014

  • A former member
    A former member

    How does the wait list work? Is it just first come, first admit?

    July 23, 2014

    • Aaron G.

      Excellent! More people can comment on the recording and keep this discussion thread alive!

      1 · July 23, 2014

    • Philipp M.

      Link for record of meetup would be awesome!

      July 24, 2014

  • Bill

    If you're not going to make it to "Defending against predatory trading strategies", please change your RSVP to "no". There are a ton of people on the wait list.

    July 23, 2014

  • Abraham (Abe) K.

    Without the ability to clearly reconstruct the order of market events, regulators say they may struggle to detect abuses such as "spoofing," where a trader manipulates prices by entering and canceling orders for a stock to lure other traders into the market, and other illegal practices that distort prices.

    "If two clocks are out of sync by even a 10th of a second, it's impossible to do proper surveillance across multiple platforms," Martin Wheatley, chief executive officer of the Financial Conduct Authority, said in an interview. "People will always have an edge in trading, but you have to make sure the market still has integrity. That's very much a regulatory responsibility."

    July 14, 2014

    • Abraham (Abe) K.

      It's interesting to see that what the NYSE specialists and $2 brokers did manually - front running electronic Super-DOT orders - on the floor of the NYSE, usually taking up to 1 minute, has now been turned into automated algorithms occurring faster than the blink of an eye. However, the trader who got filled on the odd-lot did not "steal" anything. As far as I can tell s/he used technology to gain a competitive advantage. The trader who "needed" the 25K shares did not understand market infrastructure and signalled to the whole world his/her desperation. A smarter trader would have "worked" the order better. Electronic trading venues should NOT be used for a "block trade" unless you understand the risk.

      1 · July 16, 2014

    • NS

      The report is based on SIP feeds and not direct exchange feeds. It's misleading at best (or fear mongering at worst)

      July 16, 2014

  • Abraham (Abe) K.

    http://online.wsj.com/articles/iex-pricing-aims-to-drain-dark-pools-1404687705?KEYWORDS=Dark+Pools

    "As part of its "broker priority" pricing system, IEX will let broker-dealers jump to the front of the trading queue. This would put other groups, including retail investors, mutual-fund firms and high-frequency traders, at a disadvantage as it means there will be a greater chance their orders would go unfilled."

    2 · July 14, 2014

    • Bill

      I'm not a WSJ subscriber, so I can't read the article, but I can't see any great harm in having Matt come give a talk. You'll always have a chance to ask questions.

      1 · July 14, 2014

    • Abraham (Abe) K.

      Like Bill said, it is better to have Matt present and ask him the hard questions.

      1 · July 14, 2014

  • Abraham (Abe) K.

    Clock Synchronization With Traders Is Challenge for Regulators
    By BRADLEY HOPE
    Updated July 13,[masked]:58 p.m. ET
    As trading hits warp speed, market cops have a growing headache: Clocks can't always keep up.

    Most brokers and trading firms now use high-speed computers to fire off thousands of orders in the blink of an eye, and the acceleration is hindering regulators' ability to know precisely when buyers and sellers are matched up.

    The Financial Industry Regulatory Authority and Securities and Exchange Commission—the primary overseers of U.S. stock markets—and the U.K.'s Financial Conduct Authority are tightening rules to impose stricter time-keeping standards.

    Regulatory and trader clocks can fall out of synchronization when they don't regularly benchmark time keeping against government master clocks or if they measure time in different fractions of seconds.

    July 14, 2014

  • George O.

    Looking forward to hearing Matt speak.

    2 · July 5, 2014

  • James M.

    This is a slap in the face to your seed investor (KCG) considering IEX's founder says on TV that they should be wiped out of the dictionary.

    June 23, 2014

    • James M.

      (3) As you've mentioned, this is ultimately IEX and Quantopian's event, not mine. I can certainly apologize and bow out of this discussion if either party comes to the table saying they feel offended and that they prefer not to see such information that I'm sharing being disclosed publicly.

      June 28, 2014

    • fawce

      Aaron, right now we support using IB's smart order router, or routing to IEX. Those two were prioritized based on requests from our live traders.

      July 1, 2014

  • Abraham (Abe) K.

    James, I have no idea what your beef is. IEX is one destination among many others and is a part of "the market." I've attended many industry conferences and have heard from representatives of exchanges, ATSs, and banks. I don't have to like what they are saying and I have a choice whether to listen or to walk out. I think that putting a delay in an exchange path is a bad idea, but that should not impact Quantopian's right to invite IEX to speak at a meetup. You can then choose whether to attend or not.

    1 · June 28, 2014

    • James M.

      It's also misleading to title this talk "predatory trading" because there's nothing predatory with fading liquidity ahead of a directional market. That's the fundamental reason why volatility exists and this kind of trading behavior exists even in single exchange markets and very slow electronic markets (e.g. Korea). Selling the idea that you're helping others defend against predatory trading is like selling a pet rock - you're creating demand for something in which there's fundamentally no use for. Any ordinary smart order router is already capable of ensuring your orders are well-protected.

      June 29, 2014

    • fawce

      We'd be happy to host a speaker from Chi-x or BATS.

      July 1, 2014

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