Mt.Gox drawing public trade orders from dark pool? WTF!?

[Macho]

So, the public depth table lists very few trade orders in the $20 range but I've seen transactions reported through websocket (http://mtgoxlive.com/orders) that are in hundreds of bitcoins and the market doesn't get moved. So I'm asking, what the hell!? Are there "phantom" orders possible in the public trading section? Could it be drawn from dark pool even that the trade is placed in public market or do just dark pool trades reported through websockets?

It's really confusing and if "phantom" orders are possible then also just wrong IMO, any experience with this kind of thing?

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[Nesetalis]

as far as i'm aware, there is darkpool->darkpool trading, darkpool->public trading, and public->public trading

[Macho]

as far as i'm aware, there is darkpool->darkpool trading, darkpool->public trading, and public->public trading

So darkpool orders get fulfilled through public orders then, right?

Am I the only one who thinks this is wrong? The depth table is totally useless in that case, you can never know where are invisible "walls" ... the darkpool is such a bad idea, good thing TradeHill doesn't have it, nobody else is bothered by this or do you think it's cool this way? I think it really screwes over a little guy and gives advantage to the big boys ... this is very bad for trading IMO

[Nesetalis]

no, only darkpool->public does, darkpool->darkpool doesnt.

and theres nothing 'wrong' with it, its how they want to do buisness. As there is no regulation here, its perfectly valid. If you dont like it, take your bitcoins elsewhere :p

[AyeYo]

as far as i'm aware, there is darkpool->darkpool trading, darkpool->public trading, and public->public trading

So darkpool orders get fulfilled through public orders then, right?

Am I the only one who thinks this is wrong? The depth table is totally useless in that case, you can never know where are invisible "walls" ... the darkpool is such a bad idea, good thing TradeHill doesn't have it, nobody else is bothered by this or do you think it's cool this way? I think it really screwes over a little guy and gives advantage to the big boys ... this is very bad for trading IMO

This is because Mt.Gox is falsely advertising dark liquidity as a dark pool.  A dark pool is an exchange separate from the public market where participants can trade without revealing trade size or identify.  What Mt.Gox is actually doing is allowing dark liquidity, that is hidden orders traded through the public exchange.  So, yes, this makes the market depth absolutely worthless and actually harmful if you're trading by it.

[Macho]

and theres nothing 'wrong' with it, its how they want to do buisness. As there is no regulation here, its perfectly valid. If you dont like it, take your bitcoins elsewhere :p

That's irrelevant ... I'm not judging whether it should be regulated or something, of course not - it's Bitcoin, duh! I'm judging whether it is right or wrong thing to do ... if they are unregulated and decide to just pack up and take all the money, would you similarly just wave your hands and say that they're not regulated and that's how they choose to do their business so it' ok? I think not ...

The issue is that this is most likely a bad thing for Bitcoin market, it's adoption and reputation and if that's the case we should persuade Mt.Gox to change their darkpool service to remedy that, no? It's screwing up the market when you see an order for 10BTC, you buy 100BTC and it gets sucked up by an invisible black hole instead of fulfilling the orders as listed in the depth table ... what good is such a depth table then?

This is because Mt.Gox is falsely advertising dark liquidity as a dark pool.  A dark pool is an exchange separate from the public market where participants can trade without revealing trade size or identify.  What Mt.Gox is actually doing is allowing dark liquidity, that is hidden orders traded through the public exchange.  So, yes, this makes the market depth absolutely worthless and actually harmful if you're trading by it.

Exactly! So shouldn't we ask Mt.Gox as users to fix this? It gives unfair advantage to big traders - I hope that's not what Mt.Gox want to happen or to be known to facilitate ... otherwise small traders shouldn't be surprised when they get screwed over, it really is too risky to trade when there are such a hidden orders.

[AyeYo]

Exactly! So shouldn't we ask Mt.Gox as users to fix this? It gives unfair advantage to big traders - I hope that's not what Mt.Gox want to happen or to be known to facilitate ... otherwise small traders shouldn't be surprised when they get screwed over, it really is too risky to trade when there are such a hidden orders.

Honestly man, there are a half-million reasons to stay away from Mt.Gox and all these completely unregulated "exchanges".  Of all those reasons, this one would be low on my list.  Why worry about dark liquidity if you can't even first guarantee that your orders are being filled honestly or that your data feed is true?

[finack]

I agree. I've seen these trades happen without corresponding public market action, especially notable are orders that sidestep the most favorable bid or ask for a higher volume trade outside the spread. These seem to (obviously) be trades coming out of the non-public order book (the so called "dark pool"). Mixing these public and non-public order books is a very non-transparent way to run an exchange and will clearly only benefit those who can post to the private book. Certainly traditional financial regulators would regard this behavior as inviting abusive trading at the very best.

Honestly man, there are a half-million reasons to stay away from Mt.Gox and all these completely unregulated "exchanges".  Of all those reasons, this one would be low on my list.  Why worry about dark liquidity if you can't even first guarantee that your orders are being filled honestly or that your data feed is true?

This is a pretty good point. You can't really tell what if anything you're presented with is real, and there would be obvious benefits to forging some data if a person that owned an exchange was conducting prop trading as well.

[kicir]

I don't think there's anything wrong with MtGox's hybrid dark-public setup

if you watch the live orders you can clearly see when there's a dark pool order happening, it really isn't such a big mistery

as a matter of fact having this hybrid mode actually adds transparency to the market because if you spot big selling or buying through the dark pool that should be telling you something about what the guys with the big bucks are planning to do next

if all dark pool orders were invisible you would not get any such warning signs

besides, the order book still provides a rough idea of people's pricing psychology even if it's not 100% accurate

no dark pool on TradeHill btw, just head over there if that's more your cup of tea

[Macho]

Honestly man, there are a half-million reasons to stay away from Mt.Gox and all these completely unregulated "exchanges".  Of all those reasons, this one would be low on my list.  Why worry about dark liquidity if you can't even first guarantee that your orders are being filled honestly or that your data feed is true?

The difference is, this we actually CAN change ... it's configurable and Mt.Gox can change it whenever they see that that's what its user base desires as opposed to the other things that you mention. So the only relevant thing is the will of the user base, does anybody actually believe having a dark liquidity is a good idea? I do not think so ... in true free market transparency and good information that stems from it is paramount so facilitate good decisions by traders. If you're in the dark, you're going to get burned sooner or later ...

[AyeYo]

Honestly man, there are a half-million reasons to stay away from Mt.Gox and all these completely unregulated "exchanges".  Of all those reasons, this one would be low on my list.  Why worry about dark liquidity if you can't even first guarantee that your orders are being filled honestly or that your data feed is true?

The difference is, this we actually CAN change ... it's configurable and Mt.Gox can change it whenever they see that that's what its user base desires as opposed to the other things that you mention. So the only relevant thing is the will of the user base, does anybody actually believe having a dark liquidity is a good idea? I do not think so ... in true free market transparency and good information that stems from it is paramount so facilitate good decisions by traders. If you're in the dark, you're going to get burned sooner or later ...

I understand where you're coming from.  My point is that even if you eliminate the dark liquidity or confine it to a true dark pool, you've still got a mountain of much bigger issues to deal with.  These exchanges are not safe to trade in their current form, even without dark liquidity.

Furthermore, if you're concerned about the questionable ethics of this hybrid dark pool... then what else do you think they're doing?  Do you really want to trade on an exchange where your broker that's probably trading against you is also your data feed provider?  Come on man.  People need to open up their eyes and start demanding more transparency where it matters.

[Macho]

Furthermore, if you're concerned about the questionable ethics of this hybrid dark pool... then what else do you think they're doing?  Do you really want to trade on an exchange where your broker that's probably trading against you is also your data feed provider?  Come on man.  People need to open up their eyes and start demanding more transparency where it matters.

Precisely! For that reason I started a poll and if the results are favorable to get this changed, we're going to ask Mt'Gox to make the dark pool separate as it is in the interest of their community of traders. If people do not support that then I'll probably leave Mt.Gox as you say I should ... and if they refuse to change it even in the case of user base desiring that change then I would advice others to leave too as it says something about the owners ethics as you say - if they refuse to change even in the face of community wanting that change then what else would they be capable of doing? It's an issue of trust ... allowing preferential treatment for more money to be able to screw over the little guy doesn't seem to reinforce that trust too much

The Poll: http://forum.bitcoin.org/index.php?topic=16622.0

[AtomicTrader]

What the developers of Bitcoin needed to do was incorporate an exchange  (usd/btc) into the bitcoin client along with the market depth and time & sales. That would be ideal transparency and the "commissions" that MtGox generates would go to the miners instead as transaction fees.

[wizzard0]

What the developers of Bitcoin needed to do was incorporate an exchange  (usd/btc) into the bitcoin client along with the market depth and time & sales. That would be ideal transparency and the "commissions" that MtGox generates would go to the miners instead as transaction fees.

Even if Satoshi did that, it would probably be BTC/JPY exchange then

[FooDSt4mP]

What the developers of Bitcoin needed to do was incorporate an exchange  (usd/btc) into the bitcoin client along with the market depth and time & sales. That would be ideal transparency and the "commissions" that MtGox generates would go to the miners instead as transaction fees.

How do you handle USD transfers?  That's why we have exchanges, so if you can solve that, let me know.

[FreeMoney]

What the developers of Bitcoin needed to do was incorporate an exchange  (usd/btc) into the bitcoin client along with the market depth and time & sales. That would be ideal transparency and the "commissions" that MtGox generates would go to the miners instead as transaction fees.

I'm imagining that Zoolander scene where he's trying to get the files out of the computer, but instead AtomicTrader is trying to get dollars from his Bitcoin client.

[jaybny]

dark pools are hidden liquidity... there are dark pool only and dark pool + normal type orders.

A dark pool + normal order will macth normal orders. so yes there is hidden depth. It may not be fair to the small guys, but i guess they get this advantage for adding liquidity.

Example1:

--normal bid at 20
--dark+normal bid at 21

now the public bid is 20

--sell order comes in at 20
--match happes at 21 against the dark+normal

seller is happy (better fill)
normal buyer @ 20 loses out. this is similar to flash orders in US equities markets, which are now banned.

Example2:

-- normal bid at 21
-- dark-only bid at 20

now public bid is 21

--dark-only sell order comes in at 20
--match happens at 20 between dark-only seller and dark-only buyer

public bid is still 21!! 

now I believe this is wrong. the 21 bid should get his fill at 20 as well. match should never occur below public bid. this is also banned in us equities with NBBO

.02
 

[davout]

match should never occur below public bid

Now that is an argument that makes lots of sense.