November 18, 2008
Good write up on Paul Rotter – the Eurex Flipper – here. It gives me hope to think that one expert human trader can repeatedly find and exploit inefficiencies in such a fast moving liquid order driven market as Eurex.
This paper is a very accessible treatment of finding the optimal price point for limit order submission.
November 13, 2008
Matt mentioned the addition of tuples to CLR 4.0. Very happy to see that. Tuples help avoid the unnecessary introduction of types that serve merely to aggregate data. Types or classes to aggregate data was a very mid 90s programming technique, manifest in code featuring classes with data members, getter and setter accessor methods, and no significant behaviour.
And in other news: I was fascinated to stumble across MarketSci and it’s blog. The recent post on the effect of drastic market moves on automated trading strategies was intriguing. Finally, thanks to Marc for the heads up on this one. I’ll be keeping an eye on it.
November 9, 2008
Geraint Anderson’s Cityboy: Beer and Loathing in the Square Mile is an amusing tale of debauchery and excess in the City. The Guardian’s John Crace has a slightly negative take, but I love this kind of stuff. The title is an obvious nod to Fear and Loathing in Las Vegas, Hunter S. Thompson‘s magnum opus of chemical excess, so I knew what to expect. If you enjoyed Jordan Belfort’s Wolf, you’ll like this one too.
November 5, 2008
Patrick Hewlett’s presentation includes a page on “the stylised facts of order flow”. The facts he notes, with my comments in square brackets, are…
- Limit order arrival rates are conditional on distance from best [the closer one's order to best bid or offer, the more likely it is to trade]
- Existing limit orders may be cancelled and immediately resubmitted [if you place a buy order a couple of ticks off best bid in the hope of price movement, and the market moves away due to big market buy orders, you'll need to resubmit to chase the market]
- Aggressiveness of orders depends on depth [understanding aggression as willingness to pay for liquidity, I read this as meaning one can only pay for order size if there is depth to match]
- Fewer market orders when the spread is large [market orders pay the spread for immediate execution, so the bigger the spread, the higher the cost of immediacy]
- More limit orders inside spread when depth at best is large [because orders placed at best will be at the back of a long queue]