3 ms·

I recall seeing I think on 60 Minutes HFT that wanted worse latency but I can't recall why. They have massive spools of fiber optics using them as a "resistor"

I recall seeing I think on 60 Minutes HFT that wanted worse latency but I can't recall why. They have massive spools of fiber optics using them as a "resistor" (my term) to slow down the transmission. It seems to be the opposite of this but for the life of me I can't remember the advantage of doing it. Found it: https://www.theatlantic.com/business/archive/2016/06/iex-approved/487898/ https://www.theatlantic.com/business/archive/2016/06/iex-app...

Ftuuky 9y ago
I think you're referring to IEX, an exchange that adds a delay with those spools of fiber optics. According to wiki, "350 microsecond delay adds a round-trip delay of 0.0007 seconds and is designed to negate the certain speed advantages utilized by some high-frequency traders". https://en.wikipedia.org/wiki/IEX https://en.wikipedia.org/wiki/IEX Edit: didn't saw your edit.
- neomantra 9y ago
  Unrelated to the 60 Minutes piece, but fiber is also spooled at network aggregation points within an exchange colo environment (at least NYSE Mahwah and NASDAQ Carteret) so that access is fair (equal latency) for all the customer cabinets.
jandrese 9y ago
The reason is that "the market" is made up multiple exchanges and to make a trade you need to do it on a specific exchange, but stocks are spread across all of the exchanges so if you need to make a big trade you have to send the trade order to several exchanges at once. The problem is that HFT firms will see the trade hit the closest exchange (in terms of network latency), and then rush out to buy out all of the remaining shares of that stock at that price on the other exchanges (beating you because they HFT better) and relisting them at a higher price. HFT firms will tell you that this is perfectly acceptable behavior because if you then buy the stock from them that the original person simply wasn't charging enough for it. They will also tell you that it improves liquidity, but that doesn't make sense either. It's not like they're sitting on the shares keeping the markets moving. All it does is add a tax to trades. IEX delays the transactions just enough that the nanosecond advantages that HFT enjoys can't be used to front run trades.

Ftuuky 9y ago

I think you're referring to IEX, an exchange that adds a delay with those spools of fiber optics. According to wiki, "350 microsecond delay adds a round-trip delay of 0.0007 seconds and is designed to negate the certain speed advantages utilized by some high-frequency traders". https://en.wikipedia.org/wiki/IEX https://en.wikipedia.org/wiki/IEX Edit: didn't saw your edit.

neomantra 9y ago
Unrelated to the 60 Minutes piece, but fiber is also spooled at network aggregation points within an exchange colo environment (at least NYSE Mahwah and NASDAQ Carteret) so that access is fair (equal latency) for all the customer cabinets.

jandrese 9y ago

The reason is that "the market" is made up multiple exchanges and to make a trade you need to do it on a specific exchange, but stocks are spread across all of the exchanges so if you need to make a big trade you have to send the trade order to several exchanges at once. The problem is that HFT firms will see the trade hit the closest exchange (in terms of network latency), and then rush out to buy out all of the remaining shares of that stock at that price on the other exchanges (beating you because they HFT better) and relisting them at a higher price. HFT firms will tell you that this is perfectly acceptable behavior because if you then buy the stock from them that the original person simply wasn't charging enough for it. They will also tell you that it improves liquidity, but that doesn't make sense either. It's not like they're sitting on the shares keeping the markets moving. All it does is add a tax to trades. IEX delays the transactions just enough that the nanosecond advantages that HFT enjoys can't be used to front run trades.