Virtual open outcry via IM | Forex Factory

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Virtual open outcry via IM

  • #1
  • First Post: Jan 6, 2014 10:34pm Jan 6, 2014 10:34pm
The more things change the more they stay the same.

The open outcry pits considered dead due to computers taking over the trading landscape are raising from its ashes.

Right after getting pretty much extinct, open outcries are metamorphosing on something else and assuming a virtual identity via instant messaging,
chat rooms etc.

Base on this article http://www.bloomberg.com/news/2013-1...ong-firms.html we humans
are already finding a way to fulfill our socialization instincts.

I would like to exchange ideas and maybe learn more about this new way of trading that is emerging.

Will twitter become the future NYSE, where people text their bid/ask and the first one to reply gets the deal?

I can see a exciting future for us traders with the embrace of this new technology.
So, you think you have rights? LOL
  • #2
  • Jan 6, 2014 10:40pm Jan 6, 2014 10:40pm
I'm just starting to research about it so here is another article.


http://www.ft.com/cms/s/0/ff39ba8a-a...#axzz2pgUcOFAY
So, you think you have rights? LOL
  • #3
  • Jan 6, 2014 10:57pm Jan 6, 2014 10:57pm
Abuse of technology gets you 5 to 10 unless you work for NSA.
  • #4
  • Jan 6, 2014 11:04pm Jan 6, 2014 11:04pm
The second article is not so much about a real open outcry. It is more on using twitter to exchange ideas, just like in a forum.

The bloomberg article goes deeper in a real virtual house of trading where people virtually shout their prices and real transactions are executed.

Thats more what I'm interested to know about.

Will it be possible in the future for lets say trade bitcoins in a place real time, where the first to chat BUY gets the order?

That would be awesome, think about the possibilities!
So, you think you have rights? LOL
  • #5
  • Jan 6, 2014 11:16pm Jan 6, 2014 11:16pm
We already have this. It's called your broker.
  • #6
  • Jan 6, 2014 11:18pm Jan 6, 2014 11:18pm
Thinking about the subject....

FF could open a "Demo virtual outcry" where all the members get 100 grand of fake money.

People would go there and trade a "parallel" forex market in a real time chat room. Each member will have a number
and a underlying software would act as the clerk and clearing house based on the chat.

That would be cool
So, you think you have rights? LOL
  • #7
  • Jan 6, 2014 11:22pm Jan 6, 2014 11:22pm
Quoting Baggi
We already have this. It's called your broker.
I don't agree.

The broker is a market maker. You never interact with other traders, their software match traders internally
you only interact with the current price.

Trading through a broker is trading through a proxy.

If the broker barrier does not exist than you have real interactions.

Actually the way things are progressing in the future the broker will maybe work more as a clearing house for IM and chat trades
So, you think you have rights? LOL
  • #8
  • Jan 6, 2014 11:48pm Jan 6, 2014 11:48pm
The way I'm visualizing it in the future brokers will charge a fee for membership because the spread will be set real time by the pit.

Than after registering the trader will be able to enter a huge chaotic virtual pit, just like the real ones.

Each member will have an ID number and than we would have something like this:

karl_ ID#427433 10lotsEUR/USD sell 1.26247
Mark_ ID#327852 30lotsEUR/USD buy 1.26240
Linda_ID#327852 20lotsEUR/USD buy 1.26245
John_ ID#327852 30lotsEUR/USD sell 1.26243

When orders match they are instantaneously cleared by the clearing house, funds are transferred, and you have a ticket
number with both counter parties IDs amounts etc .

In this environment you interact directly with your counterpart and screening through the chat you have a real volume and market depth.

Gosh...think about the possibilities! A TRUE market made possible by virtualization.
So, you think you have rights? LOL
  • #9
  • Jan 7, 2014 12:39am Jan 7, 2014 12:39am
Quoting ForexOracle
The way I'm visualizing it in the future brokers will charge a fee for membership because the spread will be set real time by the pit. Than after registering the trader will be able to enter a huge chaotic virtual pit, just like the real ones. Each member will have an ID number and than we would have something like this: karl_ ID#427433 10lotsEUR/USD sell 1.26247 Mark_ ID#327852 30lotsEUR/USD buy 1.26240 Linda_ID#327852 20lotsEUR/USD buy 1.26245 John_ ID#327852 30lotsEUR/USD sell 1.26243 When orders match they are instantaneously cleared by the...
Do not be ridiculous. There are limit orders for what you are suggesting.
  • #10
  • Jan 7, 2014 1:17am Jan 7, 2014 1:17am
Quoting grin
{quote} Do not be ridiculous. There are limit orders for what you are suggesting.

it seems you are not getting it.

Maybe you don't understand how a broker works.

In the current way brokers operate your order is matched internally with other orders to offset orders against orders as much as possible

Orders that can't be offset by the process above are absorbed in the brokers books until a certain level. this takes care of pretty much 100% of the brokers trading volume.

In rare times where orders overflow those 2 mechanism ( volatile times) orders are hedge outside of the brokers books by their liquidity providers.

All that is based on the current price and the current price is the only link between you and the real market.

So in other words you never trade directly with a counter party. The brokers software does it for you, meaning that you trade against a price not against another trader.
So, you think you have rights? LOL
  • #11
  • Jan 7, 2014 1:36am Jan 7, 2014 1:36am
Quoting ForexOracle
{quote} it seems you are not getting it. Maybe you don't understand how a broker works. In the current way brokers operate your order is matched internally with other orders to offset orders against orders as much as possible Orders that can't be offset by the process above are absorbed in the brokers books until a certain level. this takes care of pretty much 100% of the brokers trading volume. In rare times where orders overflow those 2 mechanism ( volatile times) orders are hedge outside of the brokers books by their liquidity providers. All...
I am certainly missing something. I could not care less about counter party being Max, Moritz or Fat Cat Broker.
  • #12
  • Jan 7, 2014 1:43am Jan 7, 2014 1:43am
Quoting grin
{quote} I am certainly missing something. I could not care less about counter party being Max, Moritz or Fat Cat Broker.

Thats because you still don't see the possibilities. When you trade with actual counter parties you have access to real volume and market depth.

That's what the real market is supposed to be. Add to this almost in-existent spreads and more efficient price discovery.
So, you think you have rights? LOL
  • #13
  • Jan 7, 2014 3:00am Jan 7, 2014 3:00am
Quoting ForexOracle
The way I'm visualizing it in the future brokers will charge a fee for membership because the spread will be set real time by the pit. Than after registering the trader will be able to enter a huge chaotic virtual pit, just like the real ones. Each member will have an ID number and than we would have something like this: karl_ ID#427433 10lotsEUR/USD sell 1.26247 Mark_ ID#327852 30lotsEUR/USD buy 1.26240 Linda_ID#327852 20lotsEUR/USD buy 1.26245 John_ ID#327852 30lotsEUR/USD sell 1.26243 When orders match they are instantaneously cleared by the...
As grin said, this already exists. No, it's not your friendly neighbourhood fx bucketshop... it's called "any market that trades on a central exchange". Which is most of them. The spread is made by the limit orders posted by those who trade on the exchange. And if you want to make the market in currencies, you can already do so in currency futures. So yes, this all already exists.

But let's just imagine it your way for a moment... a bunch of retailers calling out bids and offers in a chat room. Whoever is first to first to type "mine" or whatever gets the trade. This would penalise those who type slowly. Liquidity would be very thin, as you'd expect with a bunch of retailers manually posting bids/offers, so anyone with size would transact elsewhere where they can get size on much more easily, rather than moving price 10 ticks to get a single lot filled. The underlying prices would move much more quickly than anyone could update their bids/offers by typing in new prices; this would provide great arbitrage opportunities (in very small amounts) between this chat-market and most other fx trading sources. To counter this, people would need to automate their "market making". This would (a) be far too much time and effort for the small volume traded in this exchange, and (b) put those who posted orders manually at a disadvantage, as those who automate would be first in the queue to get filled, would offer the best prices, and would be the first to take others' bids/offers if instructed to do so. And this isn't even considering the fact that it would be so hard to get filled, that you might as well pay a pip or two spread on a regular fx dealer and get a fill, rather than chasing the market 20 pips waiting for one of the 15 exchange members to fill your order... if ever.

So... terrible idea.
  • #14
  • Jan 7, 2014 3:20am Jan 7, 2014 3:20am
Quoting eurotrash
{quote} As grin said, this already exists. No, it's not your friendly neighbourhood fx bucketshop... it's called "any market that trades on a central exchange". Which is most of them. The spread is made by the limit orders posted by those who trade on the exchange. And if you want to make the market in currencies, you can already do so in currency futures. So yes, this all already exists. But let's just imagine it your way for a moment... a bunch of retailers calling out bids and offers in a chat room. Whoever is first to first to type "mine" or...

Based on your emulation I agree that slow typers will be in disadvantage. But hey, in the pits if the guy did not have a strong voice ( or a high pitch one) he would be in disadvantage also. So I don't see it as a actual problem. it is adapt or die.

Volatility would be high in the beginning due to liquidity issues but as more and more people join the pit it would stabilize. Take e look on how bitcoin is behaving

I can see how scalpers without automation would suffer in the beginning, but I guess they will adapt to this new pit environment. Meanwhile it would be
a position trading paradise.

My point is the ability to trade in a more "real" market against other humans not through a proxy generated by the brokers.
So, you think you have rights? LOL
  • #15
  • Jan 7, 2014 3:38am Jan 7, 2014 3:38am
Quoting ForexOracle
{quote} Based on your emulation I agree that slow typers will be in disadvantage. But hey, in the pits if the guy did not have a strong voice ( or a high pitch one) he would be in disadvantage also. So I don't see it as a actual problem. it is adapt or die. Volatility would be high in the beginning due to liquidity issues but as more and more people join the pit it would stabilize. Take e look on how bitcoin is behaving I can see how scalpers without automation would suffer in the beginning, but I guess they will adapt to this new pit environment....
But that's the problem, it's not a case of adapt or die, because you're not starting an exchange for a new product. People already have alternatives with retail dealers or futures on centralised exchanges to trade the same products. If they trade at worse prices here (which they will), or can't get filled (which will also be a real issue), there's no reason for them to stick around - they can go back to their dealers. You need scalpers (including market making algos) for liquidity, but they won't be around if they can't get filled due to lack of volume. But at the same time there's no reason for volume to show up, since there are already well established legitimate and liquid venues for volume to be exchanged.

Also I don't see how it would be a position trading paradise, since you can easily get a position on any time you want with any retail fx dealer. In fact getting the position on would be harder on your exchange, since you either need to wait for someone to sell into your e.g. bid - and if there's not much volume then you will likely either not get filled or have to chase price for an unknown length of time before someone decides to sell to you - or you'll have to lift someone else's offer, in which case you're almost guaranteed a tighter spread at any size by lifting the retail dealer's offer.
  • #16
  • Last Post: Jan 7, 2014 4:13am Jan 7, 2014 4:13am
Quoting eurotrash
{quote} But that's the problem, it's not a case of adapt or die, because you're not starting an exchange for a new product. People already have alternatives with retail dealers or futures on centralised exchanges to trade the same products. If they trade at worse prices here (which they will), or can't get filled (which will also be a real issue), there's no reason for them to stick around - they can go back to their dealers. You need scalpers (including market making algos) for liquidity, but they won't be around if they can't get filled due to...

You may be right in part because I'm looking to the future in a retail oriented full developed model.

I still think it can happen because in the first article above bloomberg says it is already creeping in. Some deals are getting closed via chat rooms and IM or twitter.

It may be only a matter of time before a broker decides to try a model were the software only validates trades and the money transaction is done through multiples third parties entities. That would reduce costs and legal issues making a fee only membership viable.

I will keep my eyes open , lets see where technology will bring trading
So, you think you have rights? LOL
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