In no particular order, their solution doesn't seem to deal with:
- It doesn't account for the arbitrage types that seem to bother people the most: cross-exchange arb, locality arb, regnms arb or payment for order flow.
- If the discrete time chunks are very short, it doesn't seem to solve latency arb much.
- If the discrete time chunks are very long, it defaults to pro-rata matching. We have pro-rata products already, they are not kind to the little guy.
- Most of the really weird edge cases in exchanges happen due to so called 'exotic' order types, which are really just ways to get the exchange to atomically do something for you. In the discrete auction world I'd imagine you'd have more need for complex instructions not less.
Finally, I think that the problem they are attempting to solve is fairly low priority to solve. We are operating in the lowest cost trading environment of all time. It could hardly be more fair when it comes to order execution. To throw all that out seems dumb, when there are much bigger fish to fry (such as our government bailing out one set of traders but not others).
Just wanted to say, I really like the design of your blog and your writing style. Also, there is a minor typo in the last paragraph of the IOC/DI article.
- It doesn't account for the arbitrage types that seem to bother people the most: cross-exchange arb, locality arb, regnms arb or payment for order flow.
- If the discrete time chunks are very short, it doesn't seem to solve latency arb much.
- If the discrete time chunks are very long, it defaults to pro-rata matching. We have pro-rata products already, they are not kind to the little guy.
- Most of the really weird edge cases in exchanges happen due to so called 'exotic' order types, which are really just ways to get the exchange to atomically do something for you. In the discrete auction world I'd imagine you'd have more need for complex instructions not less.
Finally, I think that the problem they are attempting to solve is fairly low priority to solve. We are operating in the lowest cost trading environment of all time. It could hardly be more fair when it comes to order execution. To throw all that out seems dumb, when there are much bigger fish to fry (such as our government bailing out one set of traders but not others).