General pool of liquidity would help, trading network akin to those existing in stocks
So there's some unified order book, not 30 separate books
Topic: . (Read 1084 times)
Circuit breakers and regulatory rule of law prevents manipulation in conventional markets (to a degree).
That doesn't apply in bitcoin. The only aim is to make money. Bitfinex found out to their cost during the ridiculous manipulative crash a few months ago that allowing one player to wipe out the majority of leveraged customers on your exchange means you rapidly don't have any customers making trades any more.
It works both ways as can be seen now we are out of the bear market and those on here who started to believe they could read the market actually were margin called as the trend changed with a vengeance burning shorts with ..short memories.
That doesn't apply in bitcoin. The only aim is to make money. Bitfinex found out to their cost during the ridiculous manipulative crash a few months ago that allowing one player to wipe out the majority of leveraged customers on your exchange means you rapidly don't have any customers making trades any more.
It works both ways as can be seen now we are out of the bear market and those on here who started to believe they could read the market actually were margin called as the trend changed with a vengeance burning shorts with ..short memories.
There is more than one exchange trading equities in the US, even for a NYSE-listed stock.
There are alternate exchanges, such as the Chicago Stock Exchange.
Also, there are futures markets, including single-stock futures for selected stocks, and also options on the stock and the futures.
The circuit breakers are harmonized across exchanges by the Federal Reserve Bank.
But BTC exchanges act like pre-Fed stock exchanges.
There's an anecdote told by Edwin Lefèvre (pseudonym of the speculator Jesse Livermore) in Reminiscences of a Stock Operator:
- Livermore had a big position (and leverage was commonly 10:1 in those days) in Union Pacific.
- The company was headquartered in San Francisco, where there was a small stock exchange that would telegraph its trades to NY.
- Suddenly, the telegraph relay stopped moving, and but NY trading continued.
- Livermore sold his position for a good profit.
- What had happened was the 1906 San Francisco Earthquake, which destroyed the city.
- The stock subsequently collapsed, and Livermore had gotten out in the nick of time.
Lesson: don't just watch a single exchange.
There are alternate exchanges, such as the Chicago Stock Exchange.
Also, there are futures markets, including single-stock futures for selected stocks, and also options on the stock and the futures.
The circuit breakers are harmonized across exchanges by the Federal Reserve Bank.
But BTC exchanges act like pre-Fed stock exchanges.
There's an anecdote told by Edwin Lefèvre (pseudonym of the speculator Jesse Livermore) in Reminiscences of a Stock Operator:
- Livermore had a big position (and leverage was commonly 10:1 in those days) in Union Pacific.
- The company was headquartered in San Francisco, where there was a small stock exchange that would telegraph its trades to NY.
- Suddenly, the telegraph relay stopped moving, and but NY trading continued.
- Livermore sold his position for a good profit.
- What had happened was the 1906 San Francisco Earthquake, which destroyed the city.
- The stock subsequently collapsed, and Livermore had gotten out in the nick of time.
Lesson: don't just watch a single exchange.
@OP
Interesting. Didn't know these mechanisms are in place on the real markets.
That said: if I understand it right, the trigger is a 10% or 2% move respectively. Which still seems to give ample space for bot wash trading - as long as you don't rock the boat to much. I'm not under the impression that in today's market, most of the manipulation is performed by shifting price in a major way - that seemed to be more of a 2011/2012 thing. Now, painting volume is a different matter, but I don't see how the above mechanisms help against that.
Interesting. Didn't know these mechanisms are in place on the real markets.
That said: if I understand it right, the trigger is a 10% or 2% move respectively. Which still seems to give ample space for bot wash trading - as long as you don't rock the boat to much. I'm not under the impression that in today's market, most of the manipulation is performed by shifting price in a major way - that seemed to be more of a 2011/2012 thing. Now, painting volume is a different matter, but I don't see how the above mechanisms help against that.
They don't! In traditional markets, you can't have opposing orders (not sure if HFT has the ability to circumvent this through API access) but that doesn't mean you and I couldn't buy and sell to each other in a concerted effort.
That's what I thought. Which is why I don't think ghdp's point below follows from the mechanism he suggests:
Quote
- it is much more difficult for pumpers and dumpers to buy or sell into their own walls. They always risk having somebody else providing the liquidity they know is missing (and taking their money in the process).
This cascade of stoploss orders due to volatility causes more volatility and more volume, which means more profit for the exchange and more action for the day traders who support the exchange. It would completely not be in their interest to implement such a measure and it's probably only done in the stock market due to regulations
@OP
Interesting. Didn't know these mechanisms are in place on the real markets.
That said: if I understand it right, the trigger is a 10% or 2% move respectively. Which still seems to give ample space for bot wash trading - as long as you don't rock the boat to much. I'm not under the impression that in today's market, most of the manipulation is performed by shifting price in a major way - that seemed to be more of a 2011/2012 thing. Now, painting volume is a different matter, but I don't see how the above mechanisms help against that.
Interesting. Didn't know these mechanisms are in place on the real markets.
That said: if I understand it right, the trigger is a 10% or 2% move respectively. Which still seems to give ample space for bot wash trading - as long as you don't rock the boat to much. I'm not under the impression that in today's market, most of the manipulation is performed by shifting price in a major way - that seemed to be more of a 2011/2012 thing. Now, painting volume is a different matter, but I don't see how the above mechanisms help against that.
They don't! In traditional markets, you can't have opposing orders (not sure if HFT has the ability to circumvent this through API access) but that doesn't mean you and I couldn't buy and sell to each other in a concerted effort.
@OP
Interesting. Didn't know these mechanisms are in place on the real markets.
That said: if I understand it right, the trigger is a 10% or 2% move respectively. Which still seems to give ample space for bot wash trading - as long as you don't rock the boat to much. I'm not under the impression that in today's market, most of the manipulation is performed by shifting price in a major way - that seemed to be more of a 2011/2012 thing. Now, painting volume is a different matter, but I don't see how the above mechanisms help against that.
Interesting. Didn't know these mechanisms are in place on the real markets.
That said: if I understand it right, the trigger is a 10% or 2% move respectively. Which still seems to give ample space for bot wash trading - as long as you don't rock the boat to much. I'm not under the impression that in today's market, most of the manipulation is performed by shifting price in a major way - that seemed to be more of a 2011/2012 thing. Now, painting volume is a different matter, but I don't see how the above mechanisms help against that.
Where's the incentive for the exchanges?
That's a good question.
Maybe it's in the "more security when issuing a market order" for small players. In the end small players are the majority of traders, so an exchange where it is more difficult to be "scalped" is attractive.
It also would avoid having to reverse trades when someone issues an order that consumes the whole order book (not that I approve the process).
There are some circuit breaker type functions on a few exchanges. For instance, BFX limits how forced liquidations are processed. In late 2013, Mt Gox halted trading to try to limit the cascading sells (which was amplified by trade engine lag). It didn't work well. When trading resumed, it continued another 100% of the pre-halt move. I think it has to do with the free market idea. If you trade, you do so at your own risk and you face the consequences. Putting a circuit breaker in just makes it less "free" through what could be considered a "regulatory action" and that isn't what Bitcoin is about.
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