Topic: Buyer Beware. Proposal for a non high-frequency manipulatable exchange. - page 2. (Read 2627 times)

I didn't tell another reason, maybe Mt.Gox just have a bug in the implementation.

In the trading engine I am developing, this just can't happen by nature of implementation, but it aims for HFT trading because as I said - the market must be free, no artificial limitations should be added, and everyone should be in the same conditions (thus have same access time).

You misunderstand how the exchange works and start blaming HFT without understanding how it works.

If you see sell orders, e.g.

3.700 - z
3.600 - y
3.500 - x

and you place a buy order at 4.0 $ per 1 BTC for N bitcoins, then your order eats all those starting from the cheapest (3.5 in our example) to buy N bitcoins, as you asked.

Obviously, if you consumed those sell orders, and noone else is selling at those prices (they even didn't have time to put their new orders!), you start seeing orders above (e.g. 3.800, 3.900, 4.000, etc).

It's as simple as that.


Now about HFT.
First of all, Mt.Gox is not suitable for HFT at all, but there are exchanges that will be suitable (like my derivatives market one).
Second, why HFT is good. A usual, "manual" trader would not even notice the subtle difference where HFT play. They are talking about positions aimed to get 0.000x points, while keeping open position for a couple of seconds. So it introduces very small rate drift, which, I will repeat myself, is unnoticeable to the manual trader. It's only important for algo-traders.
Third. HFT and algo players provide additional liquidity to the market. That means, that when you just consumed those "cheap" sell orders as in example above in absence of HFT players, if they were present - it would not be so easy. There would be more bid/ask offers, and this is a key factor in a stably going rate.

More depth in the market - better. Market must be free, and provide equal access for everyone. Then there will be no "losers" or "winners", everyone gets what she wants.

As far as I know, all of the bitcoin exchanges have continuous matching engines.  I do think a discrete matching engine would be a valuable service, though I think 30 seconds is overkill.  You could operate a discrete engine on a 1 second basis and all but eliminate any advantage that a trader with a low latency connection would have.  Maybe 5 seconds if you are concerned that people in rural Africa on dial up modems might be at a disadvantage.

However, a continuous matching engine shouldn't behave in the way that the OP described unless it's compromised in some way or you just got extremely unlucky.  The buy order should have matched against standing sell orders right away.  If those sell orders were removed ahead of your buy order reaching the matching engine, then either it was a stroke of bad luck, or someone is able to view the incoming orders before they are placed with the matching engine and place or remove other orders before yours (obviously not a good thing).

If they have time this is a bug from mtgox. The issue is not with HFT which provides liquidity to the market.

And also I dont think HFT has any edge for bitcoin, usually HFT is used for arbitrage opportunities...

HFT is inevitable

This is a good question.  We know someone is placing many tiny bids and asks at 0.0001 increments,
and can get notified when they are bought instantly over socketio.  The question is, while mtgox is processing
a trade, do you have time between receiving notification one of your 0.0001 orders was filled,
to edit the order book and remove a larger order right behind it?

+1, i vote for a no-HFT exchange, we had a few threads talking on the subject already, i pledge some btc too

I dont think mtgox has any incentive to run shadowy business when they are making bank with a clean exchange, thus what happened to you was probably a mere coincidence

And yes, allowing some "insiders" to get market data and using it before executing trades would be very close to theft.

Edit : However i would love to see removed the option to trade for 0.00001 btc or wathever which currently allow bots to spam the trade history, it is annoying and useless

I placed several buy orders on MtGox last night which were clearly above market, inside plenty of bid orders as shown on MtGoxLive. I was amazed that I didn't get filled, and instead it moves the market to my offer. It is as if someone is seeing the order flow before orders are processed, and cancelling their orders on the order book before they're lifted. (MtGoxLive updated to show my bid, so it hadn't stalled)

It may be a high frequency trading expert has cornered the bitcoin market. This is very bad for everyone, as it means the bid / ask spread will be much wider than you think when anyone trades. At the moment, most people are ignorant of the cost of HF trading manipulation because it's so hidden. eg. http://ftalphaville.ft.com/blog/2011/12/19/797701/alphachat-sal-arnuk-on-high-frequency-trading/ It's effectively using inside information to front run your trade.

Here's a proposal to make it harder : exchanges only allow trading every 30 seconds. You place orders whenever, they get filled using an auction mechanism every 30 seconds where the market gets filled the best bid / ask price below/above their order. Think of it like decimalisation of time. It should also help reduce volatility. Please can someone make this? I'll pledge some BTC, I'm tired of paying huge BTC transaction fees.