10 ms·
Wall Street Is Sharpening Our Nanoseconds
- mwnivek 8y agoRelated discussion, from a week ago: https://news.ycombinator.com/item?id=17429625 https://news.ycombinator.com/item?id=17429625
- ggm 8y agoPersonally I think this adds no value to the social goodput of trading: its not market informing of real movement, its profit (rent?) seeking in dis-equal access to service. I understand the profit motive. I just don't think that for trades, informing community of value (prices, derivitives, futures) that moving to femto-seconds is adding value. "I made a lot of money because I have faster komputer than u"
- rb808 8y agoThe bots are much more efficient and replacing highly paid traders though. eg https://www.technologyreview.com/s/603431/as-goldman-embraces-automation-even-the-masters-of-the-universe-are-threatened/ https://www.technologyreview.com/s/603431/as-goldman-embrace...
- sincerely 8y agoI guess I don't see what that response has to do with the comment you're responding to
- joshu 8y agoYou know what would be more efficient than that? Regular crosses instead of continuous trading.
- throwawaymath 8y agoIn what ways would that proposal be more efficient than continuous trading?
- joshu 8y agoIt requires a great deal less work. No realtime, etc. And the interest on both sides is aggregated for the entire period, leading to fairer prices with less volatility.
- hermitdev 8y agoTheory is the faster the market is, less the room for arbitrage, and better for the day trader. HFT has certainly narrowed the spread. Big problem currently is moving large block (institutional) trades without affecting the market. Thats why a good chunk has moved to dark pools. (I work for a dark pool ATS).
- bjelkeman-again 8y agoAny good reading tips about dark pools?
- srtjstjsj 8y agoDay traders are a different form of arbitrage.
- perl4ever 8y agoIsn't it fundamentally impossible to order everything to an arbitrary precision? If the time between two events is less than the distance between them divided by the speed of light, then which one came first depends on the frame of reference. When you're talking about nanoseconds or less, you're inherently never going to be able to reconcile things that are miles apart, is my understanding.
- toast0 8y agoThe frame of reference is at the exchange. Having incredibly precise time synchronization among computers at the exchange would allow distribution of order acceptance for a given symbol without losing ordering. You could give each HFT a cabinet with your order acceptance port at the back and a processing computer exactly the same distance away from the port. Order processing could run asynchronously from order acceptance, and resort according to accpetance time in batches. This would eliminate complaints about such and such company being three fempto meters closer than me, so they get better execution.
- Dylan16807 8y ago> If the time between two events is less than the distance between them divided by the speed of light, then which one came first depends on the frame of reference. It's not hard to pick a location and use its reference frame. > When you're talking about nanoseconds or less, you're inherently never going to be able to reconcile things that are miles apart Let's say four miles, for 20 light-microseconds. To be even .2 nanoseconds off, you'd need a time dilation of at least ten parts per million. That's a huge amount. Even GPS satellites, with their very high speed and distance, measure time dilation in fractions of a part per billion. For things that are "miles" apart, you can completely ignore relativity at the nanosecond level. Or even between any two locations on the planet.
- perl4ever 8y ago"A natural and very old question in relativity is: can such a global and meaningful time coordinate be constructed for the observers sitting on a disk that rotates at, say, constant angular velocity? It turns out that it cannot. The observers sitting on such a disk cannot agree with each other on the simultaneity of events. In a real sense, this means that no matter how perfect the clocks might be that we use on our rotating Earth, they will still disagree on the simultaneity of events. In fact, this disagreement amounts to tens of nanoseconds, globally." http://math.ucr.edu/home/baez/physics/Relativity/SR/rotatingCoordinates.html http://math.ucr.edu/home/baez/physics/Relativity/SR/rotating...
- hakfoo 8y agoIt's the intersection of two different models of the financial universe. The long-term investor has an interest in liquidity and a reasonable response time to market moving news. He's making decisions about a company based on expectations of the future. Typically, if his trade clears in 1 minute-- or even 1 day-- instead of 1 millisecond, there isn't that much in it except in some corner case situations. The short-term investor is mostly interested in reacting to the noise in the signal-- getting a few nanoseconds ahead of other sellers and positioning accordingly. If you have enough of a "we got the info first" edge, you don't have to have any real opinion of the companies you're investing in, or even a preference of long or short, you can systematically ride the signals. The justifications for ever-faster trading tend to break down as "more liquidity" and "less arbitrage", but we're not asking if the marginal increases in performance there are worth the costs-- both in the arms-race for faster market and informaion access, and in the impacts on market behaviour caused by large numbers of super-short-term investors throwing their inertia around tiny swings in the market.
- deltateam 8y agoit is right at the intersection of things you are more familiar with in tech: aggregating user data and selling it. people with dis-equal access to service and collecting everyone else's orders midstream and selling it: the machine two racks away from the matching engine is selling information to the machine one rack away from the matching engine and this goes all the way out to your broker, your etrade or robinhood who is selling all of your profile and trade data to the machine two racks away from the matching engine it adds a lot of value for a lot of people. the actual femtosecond trade isn't what anybody cares about. regarding the equality, it wasn't that long ago where you had dis-equal access if you couldn't physically be at the stock exchange, in fact thats where you were supposed to be if you wanted to trade. so I can't buy that argument, in isolation. I do think it is a form of front-running, which is regulated in some capacity but very specifically worded such that your broker can't place a trade before you just because they found out you wanted to. what we have here is front-running but from different unrelated companies in the chain and all automated by machine.
- ggm 8y agoYes, good analysis. Whats the goodput (the net social benefit) and whats the badput? Do I (for instance) pay more? I suspect I do. I suspect the intermediary sniping in, forces prices up to their advantage. The dis-equality is being abused, to extract rent from me because I am slow. HURRY UP! Bidness waiting. Which means, overall, we all pay more. This is cost shifting to make money, by snatching goods in flight, and charging a minim to pass them on. The intermediary has no intention of doing anything except profiting. they aren't holding, they aren't helping. I'm not a free market person btw. So, I'd probably say that about a lot of behaviour in 'the market'
- vostok 8y agoI suspect that I (as an individual investor in my retirement account and personal investments, not as an HFT) pay less. My mental model is that pre-HFT, banks and other market makers made a lot more money per share traded. HFT outcompeted them and the HFTs make less money per share. I, as an individual investor, get to keep more of my money and less of it goes to various intermediaries.
- cup-of-tea 8y ago> Personally I think this adds no value to the social goodput of trading: We are long past trading adding any actual value to society.
- throwaway37585 8y ago> Personally I think... I recommend you first familiarize yourself with the subject. People are generally misinformed about this subject but feel obligated to opine on it before doing due dilligence, for some reason.
- ggm 8y agoSo what do you think about the subject?
- russellbeattie 8y agoEventually I have to believe even the financial institutions will decide that the current system is neverending, and they'll work out a system of simultaneous bidding. There's no reason why there can't be a tick-tock where trades queue until then next tick, and then are dealt with according to a fair algorithm of some sort.
- osrec 8y agoI know people may down vote you, however, a new kind of auction system to slow things down could potentially make the market fairer for all participants. The average guy will probably never be able to compete with the big boys that are collocated in the same data centre as the exchange with full access to the order book.
- olfactory 8y agoThat just changes the risk profile of deciding to execute a trade vs the predictable outcome. It may be more costly or less costly than existing approaches.
- deltateam 8y agoand I think I would just make an additional exchange where people have another queue they can get to the front of..... faster. everyone else would think of that too
- perl4ever 8y agoHas anyone considered the effect of general relativity on syncing clocks on a nanosecond level over large areas? I previously read about this topic and it didn't seem to occur to the author (who may have been Levine in fact) that basic physics (not that I'm that knowledgeable about it) puts a limit on how finely you can order physically separated events. https://en.wikipedia.org/wiki/Relativity_of_simultaneity https://en.wikipedia.org/wiki/Relativity_of_simultaneity
- hermitdev 8y agoI'm not an expert on this, but my understanding is that General Relativity is already taken into account for by the master time source. I'm not one of the ops guys, but as explained to me, each of our NJ & NY datacenters, our PTP masters are synced to the DC master which is synced to GPS. We also have processes that monitor if the SIP feed drifts from our time.
- dooglius 8y agoNo, there is only a limit on an order of events that holds across all possible reference frames. If you define a fixed reference frame, there is no problem. Presumably, they define the same reference frame as whatever UTC uses.
- 6nf 8y agoThe reference frame is the location of the server. Whoever is closer to the server has an advantage because someone half way around the world will take an extra 50ms or whatever to submit their order.
- perl4ever 8y agoSyncing clocks implies to me that you're not just executing trades in the order of arrival. You're trying to determine which trade "actually happened" first. Hence the doubt I had about the relativity of simultaneity. Incidentally, I think I was mistaken about "general" relativity being applicable. This is probably just a "special" relativity problem.
- vostok 8y agoSomething that confuses people is that trades don't happen that often. Batch auctions don't change this. You still need to decide who gets priority in the auction. If you do time priority then it's not that different from currently existing American exchanges. If you do size priority then it's not that different from currently existing American exchanges. If you do random priority then it's asymptotically equivalent to size priority. Batch auctions just make it harder to quote ETFs and other products whose prices depend on prices of other products. It's likely a net loss.
- allenz 8y agoYou claim that batch auctions are the same without addressing the arguments in the article, namely that (1) HFT is unfair to smaller traders, and (2) HFT is an arms race where the costs (materials, labor, and brainpower) exceed the benefits. Here's the fairness argument: a severe negative report comes out about stock X. In a fair world, after the price updates, every investor loses the same per share of X that they held. In the real world, HFT can sell or short X before others can react, resulting in a net transfer of wealth from investors to HFT firms.
- vostok 8y agoThat's not my argument at all. My claim is that technology is still a huge advantage with batch auctions. It might even be a bigger advantage with batch auctions. More complex market structure usually benefits those who understand it best. I also don't understand your argument about HFTs having an advantage over investors. Investors have advantages over HFTs too. Are those unfair? Why are you so concerned about the advantages that HFTs have over investors, but not advantages that investors have over HFTs? I also hope you understand how small the HFT industry is. There are single very large investors who make more than the entire HFT industry.
- allenz 8y agoHow are batch auctions more complex? You still use the same rules for resolving priority. How can the rules be gamed? Investors do not have any unfair advantages over technical traders. They take different approaches for price discovery, but both should be rewarded. HFTs have the unfair advantage of having faster access to information, including analyst reports.[1] [1] https://www.bloomberg.com/professional/product/news/ https://www.bloomberg.com/professional/product/news/
- millstone 8y agoIf stock exchanges were slowed down (say discretized to a second) would faster shadow exchanges just pop up?
- kgwgk 8y agoWhy would anyone but high-frequency traders want to use it? And in that case, HFT would be on aggregate a losing proposition.
- gpderetta 8y agobecause that's were most of the trading volume is going to be.
- kgwgk 8y agoI don't know. I think ~15% of the daily volume is traded at the opening/closing auctions. Why do you think the end-of-second (or end-of-tenth-of-second) auctions won't be popular?
- dllthomas 8y ago> Why would anyone but high-frequency traders want to use it? Substantially lower spreads, possibly.
- deleted 8y ago[deleted]
- alimw 8y ago> If people want to trade stocks every hundredth of a nanosecond, why not let them? > but if that meaningless-seeming competition between high-frequency trading firms helps subsidize basic research to improve our understanding of time itself, isn’t that kind of cool? Seems to me this guy is really struggling to reach the conclusion his editor wants..
- erdewit 8y agoIn one hundredth of a nanosecond, light travels 3 mm.
- srtjstjsj 8y agoa nanosecond is a foot; a picosecond is a grain of ground pepper. -- Grace Hopper. https://vimeo.com/214855845 https://vimeo.com/214855845