4 ms·

> As for the speed race, why not limit transactions so that they can only be executed on the dot, once every $TIME_STEP? You won't be able to see what orders ot

> As for the speed race, why not limit transactions so that they can only be executed on the dot, once every $TIME_STEP? You won't be able to see what orders others have been put out, so you don't gain that much of an advantage by sitting on a very low latency connection. Sure you do, you're still first in whatever line there is; latency still matters no matter how much you try and slow execution speed down. Latency isn't about the speed of trading, it's about being first in line regardless (speed to the sales counter) of what speed the trades are limited to.

tomjen3 11y ago
I should have been more clear here: all orders that come in in the time interval are resolved at the same time (or if that isn't possible, the order is randomized). It now doesn't matter if your order came in a minute or a second before the deadline.
- kbenson 11y ago
  Even if you randomize the order, you just open yourself up to gaming the system in other ways. Larger players with more resources can split large orders into many small orders and they be assured a certain percentage will happen earlier, and certain percentage will happen later, but if you have reason to believe that there isn't enough supply at the desired cost, you can use this to your advantage.
  - MichaelGG 11y ago
    Randomization usually doesn't work in solving such issues. But making trades execute simultaneously doesn't need to randomize. You can just give everyone a pro rated amount. A firm that submits large order gets more shares filled. This isn't really game able is it? If a firm quotes a price for 10x the shares, the run the risk of actually trading all the shares at that price! (There's also more complicated rules possibly, like trades only execute when there's a certain demand, or other liquidity based measures. Not sure they're good but it's an option.)
    - kbenson 11y ago
      I'm not sure how well a pro-rated amount would work. Just because I'm willing to pay X for Y quantity of Z, doesn't mean my order makes sense if the quantity is scaled up or down, so forcing this on all market participants might have some interesting effects. Do you have other markets where this is the case, I would be interested in looking at this in a slightly less theoretical context before I felt comfortable with how the behavior would settle (not that I'm all that knowledgeable about financial markets in general). > (There's also more complicated rules possibly, like trades only execute when there's a certain demand, or other liquidity based measures. Not sure they're good but it's an option.) Well, I'm not sure any set of rules isn't able to be gamed in some manner. Larger players will have an advantage as long as rules don't specifically penalize them, as they have all the capabilities of smaller players plus extra capabilities provided by economies of scale and dedicated resources. Even when you specifically penalize specific participants to reduce "unfair" advantages, I think what generally happens is that some participants move into the niche just outside those penalty definitions, to eke some of the prior advantage in the new grey area. This seems to be the norm in almost all regulation, IMO. Not that the regulation is always useless, but you can't game a system without rules, and regulation by it's nature provides more rules to look for specific ways to exploit.
      - MichaelGG 11y ago
        Just one example: http://www.itg.com/liquidity/posit/#POSIT http://www.itg.com/liquidity/posit/#POSIT Or even the NYSE: https://www.nyse.com/markets/amex-options/order-processing https://www.nyse.com/markets/amex-options/order-processing

tomjen3 11y ago

I should have been more clear here: all orders that come in in the time interval are resolved at the same time (or if that isn't possible, the order is randomized). It now doesn't matter if your order came in a minute or a second before the deadline.

kbenson 11y ago
Even if you randomize the order, you just open yourself up to gaming the system in other ways. Larger players with more resources can split large orders into many small orders and they be assured a certain percentage will happen earlier, and certain percentage will happen later, but if you have reason to believe that there isn't enough supply at the desired cost, you can use this to your advantage.
- MichaelGG 11y ago
  Randomization usually doesn't work in solving such issues. But making trades execute simultaneously doesn't need to randomize. You can just give everyone a pro rated amount. A firm that submits large order gets more shares filled. This isn't really game able is it? If a firm quotes a price for 10x the shares, the run the risk of actually trading all the shares at that price! (There's also more complicated rules possibly, like trades only execute when there's a certain demand, or other liquidity based measures. Not sure they're good but it's an option.)
  - kbenson 11y ago
    I'm not sure how well a pro-rated amount would work. Just because I'm willing to pay X for Y quantity of Z, doesn't mean my order makes sense if the quantity is scaled up or down, so forcing this on all market participants might have some interesting effects. Do you have other markets where this is the case, I would be interested in looking at this in a slightly less theoretical context before I felt comfortable with how the behavior would settle (not that I'm all that knowledgeable about financial markets in general). > (There's also more complicated rules possibly, like trades only execute when there's a certain demand, or other liquidity based measures. Not sure they're good but it's an option.) Well, I'm not sure any set of rules isn't able to be gamed in some manner. Larger players will have an advantage as long as rules don't specifically penalize them, as they have all the capabilities of smaller players plus extra capabilities provided by economies of scale and dedicated resources. Even when you specifically penalize specific participants to reduce "unfair" advantages, I think what generally happens is that some participants move into the niche just outside those penalty definitions, to eke some of the prior advantage in the new grey area. This seems to be the norm in almost all regulation, IMO. Not that the regulation is always useless, but you can't game a system without rules, and regulation by it's nature provides more rules to look for specific ways to exploit.
    - MichaelGG 11y ago
      Just one example: http://www.itg.com/liquidity/posit/#POSIT http://www.itg.com/liquidity/posit/#POSIT Or even the NYSE: https://www.nyse.com/markets/amex-options/order-processing https://www.nyse.com/markets/amex-options/order-processing