[nanexllc]

Here's an animation showing the SIP vs Direct Feed issue: http://www.nanex.net/aqck2/4599.html

Much of the games being played no would no longer work if the SIP was the defacto source of "real-time" prices (as specified in Reg NMS). Sure, there would be new games, but we have rules specifying the SIP as the key to Reg NMS. At least there would be a decent audit trail if rules were being followed. People would be able to detect delays (currently obscured by the changing time stamp) and many games would be exposed.

It's helpful to actually read Reg NMS - a link is provided on that animation page.

P.S. I'm the veteran programmer in that article.

[hft_throwaway]

Can you describe in detail what "games" this enables and how often they actually happen in the data? You claim SIP slowness enables a fictional trade called "latency arb" where HFTs can trade with orders at stale prices, for example:

-A user is pegged to mid at a pool where they think NBBO is bid: 20.01 ask: 20.02

-An HFT with direct feeds sees the market go to 20.02 bid 20.03 ask

-The HFT buys the midpoint order on the dark pool at 20.015

-User regrets trading since they could have sold 20.02

How often does this really happen and how is it really any different from the following scenario:

-A user is pegged to mid at a pool where they think NBBO is bid: 20.01 ask: 20.02

-An HFT with direct feeds sees the market as 20.01 bid for 100000 shares and 20.02 ask for 1 share.

-The HFT predicts the price will move up with near certainty and buys the order for 20.015

-User regrets trading since they could have joined small 20.02 ask and traded quickly

If the user or broker is pegging their order to the midpoint and not adjusting it based on market conditions, they're going to trade at disadvantageous times no matter what. I'm not sure how pricing off the SIP makes a big difference. It's not HFT's fault that the broker sucks and can't trade well.

[jcfrei]

thanks for cutting through all the bullshit and showing the real technical facts. I'm tired of listening to HFT defendants pointing out the necessity of their service in their own overly generalized and useless models.