Somewhat off topic, but an interesting post from Train Guy on IHUB. Hedge funds continue to grow, to the point that they may control markets. This is a view from a day trader and more applicable to heavily traded large caps, but an interesting viewpoint.
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I don't what to disappoint you but there isn't a lot they can do about the data feeds. They are what they are. The raw data coming from the exchanges is known to have bad data in it. There is nothing anybody can do about it. The best you can do is filter. But how? In the biz they call it scrubbing the data. Here's a 20 page white paper on the problem, tickdata.com Here's a short excerpt, #msg-2601329.
I'm going to assume that they are going to use a data vendor, so they then are at the mercy of how their chosen data vendor scrubs the data. Hedge funds are becoming a dominate force in the markets. Some are saying they account for half the trading volume. Most have gone to black boxes trading algorithms. They worry about 100 milliseconds. Some of them have gone to getting the raw feeds and scrubbing the data themselves trying to ring out that last little bit of latency. See #msg-5492578, and #msg-5492297. I don't care how good your data feeds are, do you think you can out trade the hedge fund computers? They have seen the data and acted on it, before your data vendor has even sent it to you. The best you can hope for is to try and out smart them using what is to them stale, old data.
You use Ameritrade??? Why don't you just get a big rubber stamp that says amateur on it and stamp your forehead. Ameritrade's data feeds suck. They aren't even tick for tick. Hello. They're snapshots a few times a second. You're wasting your time watching the "action" with them. On a high volume stocks like INTC, MSFT, QQQQ, you're seeing so little of the actual data that you're wasting your time watching the volume on the bids and asks. Totally worthless. L2??? Why do you waste your time with that crap? That isn't the market book. That is only the best bid and ask from each broker. Have you ever heard of "ice berg orders" or reserves. Only part of the order shows and the rest is hidden. And that is only some of the games that go on. Again, on high volume stocks, L2 is WORTHLESS!!!! Don't waste your time. On slow trading stocks, I guess it's better than nothing. But that ain't saying much.
And I haven't even bought up the fact about the trading that doesn't happen on the exchanges. The big boys trading among themselves that us low life aren't privy to. I forget, they have 30 secs. or 5 mins. to report it after the fact.
The SEC is looking at a new rule known as Reg NMS. Here's the cheat sheet on it, #msg-5492951. Part of the rule is the idea of opening the market book up to everybody. The problem with that is the volume of data is so large that data vendors are wondering if they could handle it all, #msg-5492872. And what would you do with it. On a high volume stock the numbers would be going by so fast they would just be a blur. Again, can you out trade the hedge fund computers?
So before you start worrying about the data feeds, you might want to learn a thing or two out about them. And if you're using Ameritrade for your data feeds and complaining about them, you're clueless.
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