3 ms·
That's pretty close to a much better idea - trading through the day in blocks of one second. At a human-level scale, it makes basically zero difference whether
by ThrustVectoring 11y ago
That's pretty close to a much better idea - trading through the day in blocks of one second. At a human-level scale, it makes basically zero difference whether a market is continuous or updates every second, but it completely removes latency arbitrage.
- harmegido 11y agoI disagree. Let's say that over the course of 1 second, there accumulate 100 lots to buy at 10 and 80 lots to sell at 10. Of those 100, who gets filled? There are several different algorithms for determining this in practice today, of which pro-rata and fifo are the primary ones. Each has their own disadvantages and most give some preference to being there first, which reintroduces latency into the game. I've seen some people speculate about a random allocation. I think this essentially boils down to pro-rata though, as you could game this by sending n 1-lots instead of 1 n-lot.
- kasey_junk 11y agoBesides the fact that batch auctions don't say anything about matching algorithm (which you'd need to deal with to remove speed advantages), they don't do anything to address venue arbitrage (of which, this latency arb is just one form). The only way to remove venue arbitrage is to only have 1 venue for trading everything. This is both a) impossible and b) not desirable. We actively created the fragmentation in the US equities markets for a reason, which was that a single monopolistic exchange was bad for most everyone.