Random Activity, from Vince Fulco

September 15, 2010 |

random warThe seemingly chaotic action around markets the last few months has had me dwelling on institutions' attempts to break up order flow into patternless activity. To some degree, often hard to know if the HFT guys are probing with random behavior as we've seen from Nanex blog posts or the real money boys are trying to execute while covering their tracks. This comment popped up in a new interview with one of GS's senior elec. trading guys (I added asterisks):

Tusar: It's about the routing strategy, and the order placement strategy. The best techniques and the best mitigants to prevent what you just described from happening are pretty simple blocking and tackling kinds of things. In other words, ***randomize your order size and ***placement of orders, using 'Minimum Execution Quantity,' because I don't want people pinging me for odd lots and then finding out I'm there and stepping in front of my order, etc.

If a concerted ongoing attempt is being made to randomize order size, price & time, making activity less bursty (for lack of a better word), what big stat theories need to be applied besides our existing individual bag of tricks?


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