19 ms·

Its invention, developed by the firm’s co-chief executive officers, Robert Mercer and Peter Brown, first sends an order to a central server, which breaks it up

by dahdum 10y ago

Its invention, developed by the firm’s co-chief executive officers, Robert Mercer and Peter Brown, first sends an order to a central server, which breaks it up into multiple smaller orders. Those are then routed to venues that offer the best prices and most liquidity, much the same as brokers do now. But before that happens, the smaller orders are sent to servers located as close to the exchanges as possible, along with instructions on the precise times they should be executed. The co-located servers sync their transactions so HFT firms won’t have enough time to identify an order on one exchange and then race to another to trade against it. A crucial part of the system is the optical, atomic or GPS clocks that will be used synchronize those orders. Renaissance says in its application that GPS clocks are accurate to within nanoseconds and any time differences between them are “too small to be perceived” by HFT firms. Maybe I'm missing something but sending orders ahead and releasing at a specific time is obvious is it not? If you add a really accurate clock suddenly it's patentable?

kasey_junk 10y ago
I havent read the patent but I can say this is an exceedingly common (I'd probably say standard) strategy. I can only assume the atomic clock bit is what's novel.
- tibbetts 10y ago
  Using ntp or whatever the new variant is is also standard, which as I recall can hit sub-microsecond consistency on a wide area network with good hardware. So yeah, not new.
  - sargun 10y ago
    PTP - Precision Time Protocol. https://en.wikipedia.org/wiki/Precision_Time_Protocol https://en.wikipedia.org/wiki/Precision_Time_Protocol. It requires hardware support, and a stable isolator inside of the machines.
    - Unklejoe 10y ago
      It doesn't require hardware, though it really improves the performance. I've implemented 1588 a few times and was able to achieve ~ <30ns accuracies when using hardware timestamping. Also note that there are more and more MACs and PHYs these days that offer HW timestamping. With software, it really depends on how deterministic your packet handling and timestamping routines are (or how deterministic the OS scheduler is). I was able to achieve accuracies of less than a microsecond on a Linux system, but it was "touchy". For reference, there's an open source implementation called "ptpd" and "ptpd2".
    - phyalow 10y ago
      Little know fact, you can use the GPS constellation to get atomic level precision time nearly anywhere on earth. Using an Atomic clock is purely to show off to investors/a red herring.
      - adwf 10y ago
        I would've thought that GPS is too unreliable due to the deliberate inaccuracy? Only the US military have the clean signal. Particularly if you're using it to sync between two different time zones that could well be looking at different satellites. However, I don't know how much inaccuracy is introduced and whether it would have too much of an effect for the purposes of Google, et al.
        efaref 10y ago
        Bill Clinton turned off the deliberate errors back in 2000: http://www.nytimes.com/2000/06/15/technology/pentagon-lets-civilians-use-the-best-gps-data.html?pagewanted=all http://www.nytimes.com/2000/06/15/technology/pentagon-lets-c... The errors you see in your mobile phone's positioning are due to signal problems (reflections, etc) and the relatively limited capabilities of the cheap GPS radio in your phone. A decent GPS receiver with a well-positioned antenna will get a highly accurate clock.
        Retric 10y ago
        That's been removed. But, just for fun. Speed of light is 299,792,458 m/s. So if GPS is off by more than 1/10,000,000 you can't get accurate within 30 meters. Having used a GPS they are better than that, thus the clock must also be at least that accurate. Of note, stationary stations can get into centimeter precision which imply's vastly higher accuracy.
  - Johnie 10y ago
    Except that the state of art in HFT is sub-microseconds "London-based trading technology company Fixnetix said Tuesday it has the world’s fastest trading application, a microchip that prepares a trade in 740 billionths of a second, or nanoseconds." (WSJ, 2011) http://blogs.wsj.com/marketbeat/2011/06/14/wall-streets-need-for-trading-speed-the-nanosecond-age/ http://blogs.wsj.com/marketbeat/2011/06/14/wall-streets-need... http://stackoverflow.com/questions/17256040/how-fast-is-state-of-the-art-hft-trading-systems-today http://stackoverflow.com/questions/17256040/how-fast-is-stat...
    - Bromskloss 10y ago
      Isn't the relevant delay rather that of a signal traveling from one exchange to another?
      - oarsinsync 10y ago
        That's one of the factors. Generally the optimisations that happen first are on network path length / network equipment induced delays, as there's relatively cheap and quick gains to be made. The bigger delays are invariably in your applications that are processing or generating data, which are more costly to optimise. That said, the Fixnetix stuff is only talking about one aspect of what's involved, and about as representative of reality as Cisco's published WARP speed figures in their Nexus 3500 range.
- homero 10y ago
  And with hft guarded so well, can't they just use the patent and not get caught?
  - reddytowns 10y ago
    The idea doesn't help the hft'ers. It takes an order, secretly transmits it to computers each as near to the major markets as possible, with instructions so that the computers submit the trade offer at precisely the same time. The hft'ers can't make money since they can't outrun trade offers that are synchronous across all markets.
    - lsaferite 10y ago
      As someone with zero domain knowledge, why aren't the exchanges already doing precision timed order processing? That just seems like it's should be a standard feature across the board. The broker sends buy/sell orders with planned execution times to all the required exchanges and the exchanges sit on the orders until the designated time.
      - kasey_junk 10y ago
        Exchanges do time ordered processing on their own exchange (with different levels of precision). I don't know of any exchanges that offer execution time as a constraint, but new order types can be created if they were deemed valuable (it takes SEC approval). That said, it wouldn't alleviate the issue necessarily. If firms detect problems in the clock sync between exchanges you are right back to the same problem, and now you've added a complex bit of tech that requires a bunch of competitors to agree on. This seems, to me at least, to be one of those problems that it is better to let the problem surface than to try to alleviate with an abstraction layer that is leaky and error prone.
        lsaferite 10y ago
        But this technology is patent is just implementing the exact same thing at one layer removed from the exchange. You still have to time the orders and you still have to keep the timed orders confidential. To me, using a 3rd party to do this instead of having it as part of the base system is... silly I guess.
- kirrent 10y ago
  Apparently the claimant doesn't believe so. The atomic clock isn't mentioned in all the independent claims.
- SEJeff 10y ago
  The atomic clock bit isn't novel at all. I've worked for HFT firms the past 9ish years and using hardware timesources is 101 level intro to electronic trading.
  - kasey_junk 10y ago
    But atomic ones? We used ptp or gps for this sort of work but I don't know that I've seen an atomic clock.
    - scottlocklin 10y ago
      The actual patent talks a lot about NIST GPS clocks, and not so much about atomic clocks. Never trust a headline. Gell Mann Amnesia Effect in full play here.
    - SEJeff 10y ago
      Sure. You can't get roof access (for a gps antenna) or a vendor ptp feed in every exchange. In those places, you get a rubidium decay stratum 0 timesource. Not all businesses can afford this, but it is only 4 or 5x the price of a normal GPS timesource, which is affordable for the right people.
cmdrfred 10y ago
> The co-located servers sync their transactions so HFT firms won’t have enough time to identify an order on one exchange and then race to another to trade against it. That sort of sounds like DDOS to me. They patented a DDOS botnet.
- kasey_junk 10y ago
  No its not at all like that. Its a synchronization strategy so that orders hit all exchanges at the same time.
  - visarga 10y ago
    I assume the traders can't place orders with time of execution (to be executed at the specified time, kept secret until then). If the market accepted the time of execution from traders and kept the trades secret until they were executed, then there would be no need for these patents.
    - kasey_junk 10y ago
      There may be some exchanges that accept some sort of specialized order type that allows for time of execution as a constraint. That said, this issue is about synchronizing between exchanges and there certainly aren't any exchanges that collaborate to do that.
rincebrain 10y ago
The way many patents are structured begins with "a method of..." So, in that sense, "a method of coordinating orders across exchanges to minimize analysis time available to other traders" seems perfectly in line. (I agree that from various computing-centric backgrounds, this might be trivial, but not all problem domains are well-saturated with computing expertise, and this might well be sufficiently novel to warrant a patent in the domain.)
downandout 10y ago
All they're saying is that with absolute synchronicity among all of the clocks at all of their co-located servers, all pieces of the order are executed at multiple exchanges at precisely the same time. Even very small differences among the clocks at each one can create opportunity for others to step in front of the trade, and this helps them avoid that. While this may sound obvious, they wouldn't be doing it if it hadn't been a problem for them in the past.
- dietrichepp 10y ago
  Nanosecond differences are too small to take advantage of, that's only 30cm. My guess is that you'd be at least in (or close to) the microsecond range before you'd worry about HFT stepping in front of your orders. If you're hitting multiple exchanges, then you can take milliseconds and still be fine.
  - dsl 10y ago
    One of the things HFT firms take advantage of is increasing a nanosecond lead into a microsecond (or more) lead by route optimization. If they can get information from one exchange to another faster than the original order, they can effectively trade by looking into the future. Many firms invest heavily in direct microwave links for paths normally served by fiber because of the speed advantage.
    - kasey_junk 10y ago
      Those microwave routes operate at tens of millisecond advantages over the competing fiber routes. [edit] Completely wrong comment. The microwave link I was thinking of had a 2 milli advantage over the fiber link.
      - chucksmash 10y ago
        Speaking from ignorance here but 10s of milliseconds sounds way too high. This Wikipedia article [1] shows the standard Chicago to NJ connection at 14.5ms roundtrip and the dark fiber line Michael Lewis talks about in Flash Boys at 13ms. [1]: https://en.wikipedia.org/wiki/Spread_Networks https://en.wikipedia.org/wiki/Spread_Networks
DigitalJack 10y ago
Novelty and obviousness are more related to whether something has been patented already or not.
ChuckMcM 10y ago
Unfortunately for the traders, two of the clocks were at altitude and so time passed more slowly for them, resulting in several femptoseconds of misalignment :-)
- Johnie 10y ago
  You joke, but Google actually uses GPS mounted on the roofs of their data centers for time synchronization.
  - eru 10y ago
    GPS plus atomic clocks. And, boy, do the off-the-shelf commercial offerings suck. The vendors are not really used to dealing with the stress that Google puts these things under.
    - pas 10y ago
      Could you elaborate on that?
      - eru 10y ago
        Sorry, not sure I am allowed. :( But, their drivers and APIs seem woeful judging by the complaints I heard.
    - SEJeff 10y ago
      And let me guess, you built your own rubidium decay device, as most do :)
toast0 10y ago
I don't know why you need a great clock either, if you have stable, symmetric network paths from a central location to all your servers colocated at exchanges, you can predict the delay between sending from the server and getting to the exchange, you can split your order and send it to the various exchanges with appropriate delays and know that everything will arrive at the same time. If you're wrong, it's going to still be close enough that nobody will be able to see it on one exchange and react to it on another before your order gets there. This was the first thing I thought of when hearing the flash boys story on the radio: The banker was complaining he couldn't capture the whole book across exchanges because resting orders were cancelled before his order got there -- he just needs to get his orders to arrive close enough in time (although expect a bigger tick, probably)
- mortehu 10y ago
  That exact strategy is also mentioned in Flash Boys, in the form of THOR. https://en.wikipedia.org/wiki/THOR_(trading_platform) https://en.wikipedia.org/wiki/THOR_(trading_platform)
  - eru 10y ago
    Keep in mind that Flash Boys is not worth the paper it's printed on. (See https://www.goodreads.com/book/show/23570025-flash-boys https://www.goodreads.com/book/show/23570025-flash-boys)
    - CelestialTeapot 10y ago
      In any argument there is your side, their side, and the truth.
      - syngrog66 10y ago
        beautifully said I've evolved to keep this rule in mind when I hear almost any story/portrayal/claim/news anymore. Especially anything that feels sensational or too-good-to-be-true-at-first. For example, people often lie about sex or money. National governments often lie about, well, pretty much anything that suits their best interests. When I say "lie" I don't mean completely wrong or totally false, merely, spun a certain way, sometimes a careful omission of critical modifiers, the use of weasel words, etc.
ryporter 10y ago
I agree. Atomic clocks are an implementation detail, and also overkill (at least during this decade). I've worked in HFT (albeit in forex, not stocks), and there are always internal delays within the exchange that you cannot predict with anywhere near the accuracy of an atomic clock. (Well, if you could, then that would be a true innovation.) Hedge Funds don't patent strategies. They keep them as trade secrets. It would make more sense to me if this filing was part of an attempt to build a patent portfolio for defensive purposes, as tech companies do.

by dahdum 10y ago

kasey_junk 10y ago

I havent read the patent but I can say this is an exceedingly common (I'd probably say standard) strategy. I can only assume the atomic clock bit is what's novel.

tibbetts 10y ago
Using ntp or whatever the new variant is is also standard, which as I recall can hit sub-microsecond consistency on a wide area network with good hardware. So yeah, not new.
- sargun 10y ago
  PTP - Precision Time Protocol. https://en.wikipedia.org/wiki/Precision_Time_Protocol https://en.wikipedia.org/wiki/Precision_Time_Protocol. It requires hardware support, and a stable isolator inside of the machines.
  - Unklejoe 10y ago
    It doesn't require hardware, though it really improves the performance. I've implemented 1588 a few times and was able to achieve ~ <30ns accuracies when using hardware timestamping. Also note that there are more and more MACs and PHYs these days that offer HW timestamping. With software, it really depends on how deterministic your packet handling and timestamping routines are (or how deterministic the OS scheduler is). I was able to achieve accuracies of less than a microsecond on a Linux system, but it was "touchy". For reference, there's an open source implementation called "ptpd" and "ptpd2".
  - phyalow 10y ago
    Little know fact, you can use the GPS constellation to get atomic level precision time nearly anywhere on earth. Using an Atomic clock is purely to show off to investors/a red herring.
    - adwf 10y ago
      I would've thought that GPS is too unreliable due to the deliberate inaccuracy? Only the US military have the clean signal. Particularly if you're using it to sync between two different time zones that could well be looking at different satellites. However, I don't know how much inaccuracy is introduced and whether it would have too much of an effect for the purposes of Google, et al.
      - efaref 10y ago
        Bill Clinton turned off the deliberate errors back in 2000: http://www.nytimes.com/2000/06/15/technology/pentagon-lets-civilians-use-the-best-gps-data.html?pagewanted=all http://www.nytimes.com/2000/06/15/technology/pentagon-lets-c... The errors you see in your mobile phone's positioning are due to signal problems (reflections, etc) and the relatively limited capabilities of the cheap GPS radio in your phone. A decent GPS receiver with a well-positioned antenna will get a highly accurate clock.
      - Retric 10y ago
        That's been removed. But, just for fun. Speed of light is 299,792,458 m/s. So if GPS is off by more than 1/10,000,000 you can't get accurate within 30 meters. Having used a GPS they are better than that, thus the clock must also be at least that accurate. Of note, stationary stations can get into centimeter precision which imply's vastly higher accuracy.
- Johnie 10y ago
  Except that the state of art in HFT is sub-microseconds "London-based trading technology company Fixnetix said Tuesday it has the world’s fastest trading application, a microchip that prepares a trade in 740 billionths of a second, or nanoseconds." (WSJ, 2011) http://blogs.wsj.com/marketbeat/2011/06/14/wall-streets-need-for-trading-speed-the-nanosecond-age/ http://blogs.wsj.com/marketbeat/2011/06/14/wall-streets-need... http://stackoverflow.com/questions/17256040/how-fast-is-state-of-the-art-hft-trading-systems-today http://stackoverflow.com/questions/17256040/how-fast-is-stat...
  - Bromskloss 10y ago
    Isn't the relevant delay rather that of a signal traveling from one exchange to another?
    - oarsinsync 10y ago
      That's one of the factors. Generally the optimisations that happen first are on network path length / network equipment induced delays, as there's relatively cheap and quick gains to be made. The bigger delays are invariably in your applications that are processing or generating data, which are more costly to optimise. That said, the Fixnetix stuff is only talking about one aspect of what's involved, and about as representative of reality as Cisco's published WARP speed figures in their Nexus 3500 range.
homero 10y ago
And with hft guarded so well, can't they just use the patent and not get caught?
- reddytowns 10y ago
  The idea doesn't help the hft'ers. It takes an order, secretly transmits it to computers each as near to the major markets as possible, with instructions so that the computers submit the trade offer at precisely the same time. The hft'ers can't make money since they can't outrun trade offers that are synchronous across all markets.
  - lsaferite 10y ago
    As someone with zero domain knowledge, why aren't the exchanges already doing precision timed order processing? That just seems like it's should be a standard feature across the board. The broker sends buy/sell orders with planned execution times to all the required exchanges and the exchanges sit on the orders until the designated time.
    - kasey_junk 10y ago
      Exchanges do time ordered processing on their own exchange (with different levels of precision). I don't know of any exchanges that offer execution time as a constraint, but new order types can be created if they were deemed valuable (it takes SEC approval). That said, it wouldn't alleviate the issue necessarily. If firms detect problems in the clock sync between exchanges you are right back to the same problem, and now you've added a complex bit of tech that requires a bunch of competitors to agree on. This seems, to me at least, to be one of those problems that it is better to let the problem surface than to try to alleviate with an abstraction layer that is leaky and error prone.
      - lsaferite 10y ago
        But this technology is patent is just implementing the exact same thing at one layer removed from the exchange. You still have to time the orders and you still have to keep the timed orders confidential. To me, using a 3rd party to do this instead of having it as part of the base system is... silly I guess.
kirrent 10y ago
Apparently the claimant doesn't believe so. The atomic clock isn't mentioned in all the independent claims.
SEJeff 10y ago
The atomic clock bit isn't novel at all. I've worked for HFT firms the past 9ish years and using hardware timesources is 101 level intro to electronic trading.
- kasey_junk 10y ago
  But atomic ones? We used ptp or gps for this sort of work but I don't know that I've seen an atomic clock.
  - scottlocklin 10y ago
    The actual patent talks a lot about NIST GPS clocks, and not so much about atomic clocks. Never trust a headline. Gell Mann Amnesia Effect in full play here.
  - SEJeff 10y ago
    Sure. You can't get roof access (for a gps antenna) or a vendor ptp feed in every exchange. In those places, you get a rubidium decay stratum 0 timesource. Not all businesses can afford this, but it is only 4 or 5x the price of a normal GPS timesource, which is affordable for the right people.

cmdrfred 10y ago

> The co-located servers sync their transactions so HFT firms won’t have enough time to identify an order on one exchange and then race to another to trade against it. That sort of sounds like DDOS to me. They patented a DDOS botnet.

kasey_junk 10y ago
No its not at all like that. Its a synchronization strategy so that orders hit all exchanges at the same time.
- visarga 10y ago
  I assume the traders can't place orders with time of execution (to be executed at the specified time, kept secret until then). If the market accepted the time of execution from traders and kept the trades secret until they were executed, then there would be no need for these patents.
  - kasey_junk 10y ago
    There may be some exchanges that accept some sort of specialized order type that allows for time of execution as a constraint. That said, this issue is about synchronizing between exchanges and there certainly aren't any exchanges that collaborate to do that.

rincebrain 10y ago

The way many patents are structured begins with "a method of..." So, in that sense, "a method of coordinating orders across exchanges to minimize analysis time available to other traders" seems perfectly in line. (I agree that from various computing-centric backgrounds, this might be trivial, but not all problem domains are well-saturated with computing expertise, and this might well be sufficiently novel to warrant a patent in the domain.)

downandout 10y ago

All they're saying is that with absolute synchronicity among all of the clocks at all of their co-located servers, all pieces of the order are executed at multiple exchanges at precisely the same time. Even very small differences among the clocks at each one can create opportunity for others to step in front of the trade, and this helps them avoid that. While this may sound obvious, they wouldn't be doing it if it hadn't been a problem for them in the past.

dietrichepp 10y ago
Nanosecond differences are too small to take advantage of, that's only 30cm. My guess is that you'd be at least in (or close to) the microsecond range before you'd worry about HFT stepping in front of your orders. If you're hitting multiple exchanges, then you can take milliseconds and still be fine.
- dsl 10y ago
  One of the things HFT firms take advantage of is increasing a nanosecond lead into a microsecond (or more) lead by route optimization. If they can get information from one exchange to another faster than the original order, they can effectively trade by looking into the future. Many firms invest heavily in direct microwave links for paths normally served by fiber because of the speed advantage.
  - kasey_junk 10y ago
    Those microwave routes operate at tens of millisecond advantages over the competing fiber routes. [edit] Completely wrong comment. The microwave link I was thinking of had a 2 milli advantage over the fiber link.
    - chucksmash 10y ago
      Speaking from ignorance here but 10s of milliseconds sounds way too high. This Wikipedia article [1] shows the standard Chicago to NJ connection at 14.5ms roundtrip and the dark fiber line Michael Lewis talks about in Flash Boys at 13ms. [1]: https://en.wikipedia.org/wiki/Spread_Networks https://en.wikipedia.org/wiki/Spread_Networks

DigitalJack 10y ago

Novelty and obviousness are more related to whether something has been patented already or not.

ChuckMcM 10y ago

Unfortunately for the traders, two of the clocks were at altitude and so time passed more slowly for them, resulting in several femptoseconds of misalignment :-)

Johnie 10y ago
You joke, but Google actually uses GPS mounted on the roofs of their data centers for time synchronization.
- eru 10y ago
  GPS plus atomic clocks. And, boy, do the off-the-shelf commercial offerings suck. The vendors are not really used to dealing with the stress that Google puts these things under.
  - pas 10y ago
    Could you elaborate on that?
    - eru 10y ago
      Sorry, not sure I am allowed. :( But, their drivers and APIs seem woeful judging by the complaints I heard.
  - SEJeff 10y ago
    And let me guess, you built your own rubidium decay device, as most do :)

toast0 10y ago

I don't know why you need a great clock either, if you have stable, symmetric network paths from a central location to all your servers colocated at exchanges, you can predict the delay between sending from the server and getting to the exchange, you can split your order and send it to the various exchanges with appropriate delays and know that everything will arrive at the same time. If you're wrong, it's going to still be close enough that nobody will be able to see it on one exchange and react to it on another before your order gets there. This was the first thing I thought of when hearing the flash boys story on the radio: The banker was complaining he couldn't capture the whole book across exchanges because resting orders were cancelled before his order got there -- he just needs to get his orders to arrive close enough in time (although expect a bigger tick, probably)

mortehu 10y ago
That exact strategy is also mentioned in Flash Boys, in the form of THOR. https://en.wikipedia.org/wiki/THOR_(trading_platform) https://en.wikipedia.org/wiki/THOR_(trading_platform)
- eru 10y ago
  Keep in mind that Flash Boys is not worth the paper it's printed on. (See https://www.goodreads.com/book/show/23570025-flash-boys https://www.goodreads.com/book/show/23570025-flash-boys)
  - CelestialTeapot 10y ago
    In any argument there is your side, their side, and the truth.
    - syngrog66 10y ago
      beautifully said I've evolved to keep this rule in mind when I hear almost any story/portrayal/claim/news anymore. Especially anything that feels sensational or too-good-to-be-true-at-first. For example, people often lie about sex or money. National governments often lie about, well, pretty much anything that suits their best interests. When I say "lie" I don't mean completely wrong or totally false, merely, spun a certain way, sometimes a careful omission of critical modifiers, the use of weasel words, etc.

ryporter 10y ago

I agree. Atomic clocks are an implementation detail, and also overkill (at least during this decade). I've worked in HFT (albeit in forex, not stocks), and there are always internal delays within the exchange that you cannot predict with anywhere near the accuracy of an atomic clock. (Well, if you could, then that would be a true innovation.) Hedge Funds don't patent strategies. They keep them as trade secrets. It would make more sense to me if this filing was part of an attempt to build a patent portfolio for defensive purposes, as tech companies do.