Market Depth Should Not Be Reported Period

[Kazu]

Reasons:
1) Discourages putting in orders ahead of time:
If I am a big seller I can loose my potential to buy if I put in a buy/sell wall ahead of time, because people will outbid me by a couple of cents and I get screwed. It makes much more sense to put up many mini-walls every time a price hits a value. This rewards buyers with bots, and screws over normal users.
2) Encouragement of bots means greater lag since rather than one big order, many small orders are entered. This causes a harmful self-feeding cycle as bots pile in as lag increases and their buy/sell targets are hit, causing yet more lag.
3) Lack of market orders ahead of time increases instability because the buy/sell walls aren't there to support price if, for some reason, the bots cannot access the trading engine. This can happen for a variety of reasons.
4) Means that users with a huge amount of money in their brokerage accounts can put up huge buy/sell walls in an attempt to manipulate price. Along with the previous reasons, it essentially encourages people to put up fake buy/sell walls and discourages people to actually put up real ones.
5) If you are reporting data that is clearly fake, why report it at all? Take away the need for trading bots, take away the potential for fake bid/ask walls to scare noobs into panic/sells. Just don't report market depth, period.

It would be best if a market maker created a bitcoin "dark pool" and didn't report anything other than bid/ask and potentially volume. The market maker would take steps to reduce slippage on his own, potentially coming in to prevent slippage within one order at his own risk if needed, compensating the risk by taking spreads as profit.

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[xorglub]

Good points but I don't think anyone will use an exchange that does not report its order book.

[arepo]

doesn't making the information available make the market more efficient, in the EMH sense?

[Kazu]

Good points but I don't think anyone will use an exchange that does not report its order book.

Why? You think people will go "Hey, that looks like a cool exchange, oh wait, I can't view the fake walls that people put up, nvm I'm going back to gox?"

[Babylon]

Good points but I don't think anyone will use an exchange that does not report its order book.

Why? You think people will go "Hey, that looks like a cool exchange, oh wait, I can't view the fake walls that people put up, nvm I'm going back to gox?"

It's what has happened in the past...

[meowmeowbrowncow]

From a liberty purist point of view, my devil's advocate position, more info - the better.


From a game theory point of view.  Screw market depth.  


I would appreciate a market that operated on "In the money" scope.  No fake walls that are moved based on current "In the Money" levels.


It all comes back to "In the Money."  If you aren't there - you're gaming the system for some end.


Is this ok?  Maybe, but it definitely adds an unnecessary psychological element.  And I don't like head games.

[Kazu]

doesn't making the information available make the market more efficient, in the EMH sense?

Yes, except thats mostly wrong anyway. Trading, just like any other game, is all about knowing more than your opponent. By going on the orderbook, you display information to your opponent, and thus screw yourself over. Systems are only stable when they reward actions that benefit the system, rather than hurt it. MtGox has created an exceedingly unstable system because it rewards damaging the system. As long as the exchanger system is set up in this way, Bitcoin will fail whenever it gets too much attention. EMH is a terribad theory in any case, though.

[Kazu]

From a liberty purist point of view, my devil's advocate position, more info - the better.

Not necessarily. From a liberty purist point of view the exchanger should be free to do what makes its business the most profitable as that usually entails the maximum gain for the minimum amount of wasted resources. The gaming of the system market depth encourages is a MASSIVE waste of resources.

[ironstove]

This is the stupidest idea I've heard on here in a while.

[BitcoinAshley]

"Should?"

Albert Ellis calls that "musterbating."

Could should would must got to


MtGox "should" update its matching engine, stop lagging, enable circuit breakers like you know professional markets, and take other steps to encourage stability.

MtGox users "should" take its poor performance as an indicator that they should find another exchange to use, even if it's a minor inconvenience.

I could give you "shoulds" "coulds" and "woulds" all day, doesn't change a thing 

[TheKoziTwo]

Imagine services such as bitpay for instance. They will need to instantly sell bitcoins for users who convert btc to usd at time of purchase. If the depth is very thin, perhaps they need to calculate some slippage in the price/conversion ratio. If the market depth is hidden this is not possible to do and may be a disadvantage. If you ponder on this I'm sure you can think of many similar situations where this would be a very bad idea.

I wouldn't really mind seeing dark pools coming back though, I thought those where pretty neat.

[johnblaze]

doesn't making the information available make the market more efficient, in the EMH sense?

yes

This is the stupidest idea I've heard on here in a while.

yes

[bitleif]

Why? You think people will go "Hey, that looks like a cool exchange, oh wait, I can't view the fake walls that people put up, nvm I'm going back to gox?"

Because it's a free market. Why would you go to the exchange that gives you less information? Meanwhile the other exchanges would work exactly the same as before, meaning price volatility would happen the same anyway, so you're providing no benefit whatsoever.

[jl2012]

Reasons:
1) Discourages putting in orders ahead of time:
If I am a big seller I can loose my potential to buy if I put in a buy/sell wall ahead of time, because people will outbid me by a couple of cents and I get screwed. It makes much more sense to put up many mini-walls every time a price hits a value. This rewards buyers with bots, and screws over normal users.
2) Encouragement of bots means greater lag since rather than one big order, many small orders are entered. This causes a harmful self-feeding cycle as bots pile in as lag increases and their buy/sell targets are hit, causing yet more lag.
3) Lack of market orders ahead of time increases instability because the buy/sell walls aren't there to support price if, for some reason, the bots cannot access the trading engine. This can happen for a variety of reasons.
4) Means that users with a huge amount of money in their brokerage accounts can put up huge buy/sell walls in an attempt to manipulate price. Along with the previous reasons, it essentially encourages people to put up fake buy/sell walls and discourages people to actually put up real ones.
5) If you are reporting data that is clearly fake, why report it at all? Take away the need for trading bots, take away the potential for fake bid/ask walls to scare noobs into panic/sells. Just don't report market depth, period.

It would be best if a market maker created a bitcoin "dark pool" and didn't report anything other than bid/ask and potentially volume. The market maker would take steps to reduce slippage on his own, potentially coming in to prevent slippage within one order at his own risk if needed, compensating the risk by taking spreads as profit.

It's a free market. Just open a dark pool exchange yourself