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hft_guy


Total Posts: 4
Joined: Jun 2020
 
Posted: 2020-06-01 18:49
Hi guys,
I've been deploying a high frequency trading strategy focused on market making. I've been doing really well with it and what I'm really looking for is a dark pool or ATS that allows market makers to place sub penny bids. Most of my volume happens off exchange in dark pools. I send my orders to as many exchanges and pools as I can and they usually get filled first in the pools. I am concerned that I'm not optimizing my order flow because as I understand it the pool doesn't have to give you a queue position like an exchange does. I know UBS used to allow this sub pennying and I believe others did as well. I'm new to this game and I'm not sure what the legality of this is either at this point it time, but from what I gathered UBS just got a small slap on the wrist and they were a giant company and were perhaps doing some other things wrong too. I've actually tried to get in touch with UBS ATS and others but they don't really have any documentation or customer service, even though I'm doing 10k trades a day with them. I would be very happy to pay for access to more pools or to have a way to compete for higher priority in getting my orders filled. I would greatly appreciate any suggestions on where to go next with this. Thanks!

anonq


Total Posts: 36
Joined: Aug 2018
 
Posted: 2020-06-02 04:41
Every ATS is different. The first thing I did when going down this path is to read every Form ATS-N which will explain how each ATS works. Here is UBS: https://www.sec.gov/Archives/edgar/data/230611/000091412120000126/xslATS-N_X01/primary_doc.xml can find the rest at https://www.sec.gov/divisions/marketreg/form-ats-n-filings.htm


The most important thing is the tiering you have. Secondary to that sometimes the order type matters for example how the peg order type priority works on repricing. Don't think any of them allow for sub penny pricing for limit orders > $1. The far majority of sub penny prices you see printed on the tape are going to be price improved retail orders that were internalized, then a combination of price improvement and midpoint orders.

If you're unaware the majority of trades printed to the TRF's are a combination of retail and other orders internalized by broker dealers which unless you're at Virtu/Citadel/etc you simply won't be able to interact with. Those trades on the tape are useful for creating alphas but not for modelling fill rates.

I have direct relationships/connections with every broker ATS of note and they've all been very helpful and have given me deep dives on how their ATS works. So would highly recommend going down that route if possible.

hft_guy


Total Posts: 4
Joined: Jun 2020
 
Posted: 2020-06-02 13:57
Thank you so much, this is incredibly helpful. I never thought I would get to see UBS spell out how they segment order flow into different source categories and grades. I just read the whole SEC filing and it seems that they offer something called 'PeggedMidPointMode' with an option to 'FillToMidpoint' that seems to allow limit orders up to the midpoint of the bid ask spread. From what I gather if the spread is just 0.01 this would allow limit orders to specify 0.005 increments. I imagine this is for direct subscribers so I'm sending an email to inquire.

hft_guy


Total Posts: 4
Joined: Jun 2020
 
Posted: 2020-06-02 23:06
I also wanted to put it out there that I spent some time hunting down the contact information for every ATS that is registered with the SEC. If anyone would like this feel free to contact me
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