3 ms·

You can only use other criteria, when the others differ. For the same size and same price order, what possible argument can be made to fill the last arriving o

You can only use other criteria, when the others differ. For the same size and same price order, what possible argument can be made to fill the last arriving order first and still claim a fair market? At some point, latency always matters. If you randomize so latency doesn't matter, you just create a system where those with more capital get more orders. However you want to "fix" it, you're still going to be making a system that isn't fair to someone. Most people would agree that waiting in line is the most fair option IMHO, and that's proven out by normal human behavior in the day to day world.

MichaelGG 11y ago
What possible argument? Simple: This exchange works on a 5-second quanta. All orders arriving within a quanta are treated equally. How is that unfair at all? Like I said, there are systems that do exactly this.
- harmegido 11y ago
  It doesn't work though. Lets say there are 500 lots bid at a price and 700 lots offered at the same price. Which of those 700 lots on the offer gets filled once the 5-second call occurs?
  - MichaelGG 11y ago
    Like any other pro-rata system? How is this difficult to make work? "Call markets" do exactly this. POSIT does this. Even NYSE does this in some cases to give priority to specialists.
- gnaritas 11y ago
  > This exchange works on a 5-second quanta. All orders arriving within a quanta are treated equally. How is that unfair at all? It's unfair to the trader who put his order in first just as it'd be unfair to walk up to a sales desk and cut in front of people who there before you. All this does is slow down trading, it doesn't make it any more fair and now you can play the latency game for putting your orders in at the last second while allowing more time to analyse the data. 5 seconds is a long time to a computer. That such systems exist is beside the point, they are less fair than simply allowing the fastest trader to trade first.
  - eru 11y ago
    You have a weird notion of fairness. Why reward investment in low latency above all other investment? In any case, quantising to eg 1s, allowing arbitrary sub-penny bids, and fulfilling by prize and using time as a tiebreaker would be `most fair' in some sense: The counterparty gets the best price. And people are only able to `cut in line' if they make a better price. (I don't think the fairness of waiting in line is a fundamental thing. It's just one way for humans to allocate scarce resources, and it's not very economically efficient---it just works well with human psyche and social norms.)
    - gnaritas 11y ago
      > You have a weird notion of fairness. Why reward investment in low latency above all other investment? I didn't make that claim, best price should be ahead of place in line. But place in line is the next most fair thing. > In any case, quantising to eg 1s, allowing arbitrary sub-penny bids, and fulfilling by prize and using time as a tiebreaker would be `most fair' in some sense: Remove quantising to 1s and I agree. Quantising makes it in no way more fair and removes the ability to use time as a tiebreaker. If time is the tie breaker, you don't need to quantisize as it adds nothing. > (I don't think the fairness of waiting in line is a fundamental thing. It's just one way for humans to allocate scarce resources, and it's not very economically efficient---it just works well with human psyche and social norms.) It works well with the human psyche and social norms precisely because it fits our innate ideas of fairness, and thus fairness is a fundamental thing. It's so fundamental in fact that it's evolved into us as experiments with monkeys and fairness show it to be innate.

MichaelGG 11y ago

What possible argument? Simple: This exchange works on a 5-second quanta. All orders arriving within a quanta are treated equally. How is that unfair at all? Like I said, there are systems that do exactly this.

harmegido 11y ago
It doesn't work though. Lets say there are 500 lots bid at a price and 700 lots offered at the same price. Which of those 700 lots on the offer gets filled once the 5-second call occurs?
- MichaelGG 11y ago
  Like any other pro-rata system? How is this difficult to make work? "Call markets" do exactly this. POSIT does this. Even NYSE does this in some cases to give priority to specialists.
gnaritas 11y ago
> This exchange works on a 5-second quanta. All orders arriving within a quanta are treated equally. How is that unfair at all? It's unfair to the trader who put his order in first just as it'd be unfair to walk up to a sales desk and cut in front of people who there before you. All this does is slow down trading, it doesn't make it any more fair and now you can play the latency game for putting your orders in at the last second while allowing more time to analyse the data. 5 seconds is a long time to a computer. That such systems exist is beside the point, they are less fair than simply allowing the fastest trader to trade first.
- eru 11y ago
  You have a weird notion of fairness. Why reward investment in low latency above all other investment? In any case, quantising to eg 1s, allowing arbitrary sub-penny bids, and fulfilling by prize and using time as a tiebreaker would be `most fair' in some sense: The counterparty gets the best price. And people are only able to `cut in line' if they make a better price. (I don't think the fairness of waiting in line is a fundamental thing. It's just one way for humans to allocate scarce resources, and it's not very economically efficient---it just works well with human psyche and social norms.)
  - gnaritas 11y ago
    > You have a weird notion of fairness. Why reward investment in low latency above all other investment? I didn't make that claim, best price should be ahead of place in line. But place in line is the next most fair thing. > In any case, quantising to eg 1s, allowing arbitrary sub-penny bids, and fulfilling by prize and using time as a tiebreaker would be `most fair' in some sense: Remove quantising to 1s and I agree. Quantising makes it in no way more fair and removes the ability to use time as a tiebreaker. If time is the tie breaker, you don't need to quantisize as it adds nothing. > (I don't think the fairness of waiting in line is a fundamental thing. It's just one way for humans to allocate scarce resources, and it's not very economically efficient---it just works well with human psyche and social norms.) It works well with the human psyche and social norms precisely because it fits our innate ideas of fairness, and thus fairness is a fundamental thing. It's so fundamental in fact that it's evolved into us as experiments with monkeys and fairness show it to be innate.