Conversation

SBF
@SBF_FTX
Replying to
@SBF_FTX
8) I dare you to tell me that you have a trading strategy in a messy industry where you feel confident about $100.25 vs $100.26 bids when the market is at $100.46.
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SBF
@SBF_FTX
9) 0.20% was, probably, just an approximation anyway, meant to say "idk, more than 0.05%, and way less than 1%". So, sure, you could cancel your 100.25 and place a 100.26. Or, you know, you could not. You could just keep your 100.25 bid out there.
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SBF
@SBF_FTX
10) But if it's all the same, why am I bothering to write about it? Because placing orders uses a scarce resource: matching engine capacity.
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SBF
@SBF_FTX
11) If an exchange can handle 5k orders/second, and it's already processed 4,999, then there's only one slot left. Alice wants to buy 1 BTC. Bob wants to update his 100.25 bid to 100.26. But there's only room for one. I sure hope Alice gets her trade!
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SBF
@SBF_FTX
12) _This_ is why ratelimits exist. Because no matter how many orders your exchange can handle, if 100 traders are updating 10 orders each on 50 markets on each side every 0.01% market move, that's 100,000 orders sent when BTC goes up 0.01%. 100,000 orders, and no actual trades
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SBF
@SBF_FTX
13) Bots can easily expand to fill whatever limits they're given. In doing so, they sometimes cannibalize all important orders, replacing them with unimportant jiggling of irrelevant orders.
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SBF
@SBF_FTX
14) Market makers often reach out to us, asking for higher ratelimits. I used to just grant them! Then I took a look at what was actually going on. And 90% of the time, they were flickering some orders once per second 25bps away from the market.
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SBF
@SBF_FTX
15) That's where the ratelimits were going. We might build a tool to let users see what their orders are doing. I think a lot would be pretty surprised: many FTX traders send 50x as many orders per trade as others, even if both are only providing and not taking!
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SBF
@SBF_FTX
16) And it's a shame, because in the end it's a public resource. FTX's ratelimits set a fairly constant orders/$ traded, and many of the top firms aren't close to hitting theirs. If you're blowing through yours, ask yourself: what are most of your orders actually doing?
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J◎n Galt☀️
@JonGalt14
Replying to
@SBF_FTX
and
@SBF_Alameda
You know more about your HFT customers than I do. (I'm just a retail schlub) But... Capacity is a scarce resource that has a cost to the system. It seems reasonable that the cost is reflected to the users to promote fairness in the overall system.