Argos RadioHalf a year ago I reported on the clash between DeGiro and Binck, with respect to the not-so-smart order router from TOM. See DeGiro trashes TOM and Flash Boy Binck ignores law of holes. Few months later TOM decided to shut down their stock trading venue. Assumed that would be the end of the story.

However, great news! Radio show Argos  (nl) got interested in the matter. Somebody read a book from Michael Lewis, and without prior knowledge about the stock market they started investigating. Had a coffee with both of them, and to be honest the result looks good. They managed to get a story about HFT trading even my mum will understand. See below for the radio show with “visuals” on youtube. It’s still only in Dutch, understood the English subtitles will arrive next friday. (update : arrived, see below)

So, whodunnit?

The stock market is a strictly anonymous game. Still I’m pretty certain to know which HFT shop managed to jump ahead of Binck’s retail flow. First of all, you need to have raw speed to be able to do this kind of arbitrage. Second, my friends at IMC and Optiver confirmed me they weren’t involved in this. Someone else also suggests both of them are lacking experience and manpower to do this game. It’s mainly an American game. That reduces the number of suspects.

Marginal business

There a many US high frequency trading shops active in Europe. Tower, LaTour, Spire, Hudson River, Citadel to name but a few. Only one is active in Europe with a real significant trading team with a group profit and loss. Other firms with smaller outfits in Europe aren’t active in this kind of marginal business. We’re not talking about a cash cow here. Also looking at TOM’s member list at the time, one suspect remains. Though the member list isn’t saying everything, sponsored market acces is possible.

Everything points at Virtu

Everything points at Virtu. Yes, the very same firm who did an IPO in the meantime, after postponing it earlier due Michael Lewis’ book “Flash Boys”. The controverse coming from the book about the HFT firms blocked the first IPO attempt. However, Virtu would never comment on this and nobody will be able prove it. In the meantime reliable sources are confident it was Virtu.

Latency arbitrage is fine

No matter what politicians said on the radio, latency arbitrage by firms like Virtu is perfectly legal. Selling on TOM and rapidly scalping on Euronext is fine. Or other way around. Every trader would do exactly the same. If you can sell a stock on venue A and buy it back at a lower price on venue B ; money in the pocket. Just the speed makes it different to grasp.

The problem has always been TOM’s order router which couldn’t handle large orders. And they made a promise they couldn’t keep. There’s nothing in it for them to do it on purpose.

Back to Argos

The journalists, Hansje van de Beek and Stefan Heijdendael, managed to have some high profile US experts look at the discussion. Eric Hunsader and Brad Katsuyama himself checked the trading tickets and confirmed it looked exactly like Michael Lewis’s book Flash Boys. Nothing new here, except for the fact they managed to get other people react.

TOM stock venue is gone

Binck responded in a classical silly way (nl – something like ‘we are not HFT, DeGiro is because HiQ is HFT!“). Anyway, the TOM stock market is closed so everything is a little bit an academic discussion. A thing of the past. The TOM option market is still alive and kicking, and as far as I can see it works as precise as a Swiss clockwork. No HFT is taking advantage of option orders on TOM.

Radio with visuals (with English subtitles)