6 ms·

There’s also more straightforward reasons to want a microwave connection from NYC to Chicago. Say you want to trade off news signals: you want to relay the hea

There’s also more straightforward reasons to want a microwave connection from NYC to Chicago. Say you want to trade off news signals: you want to relay the headlines (from Bloomberg, DJ, etc.) to your colo sites as quickly as possible.

pgwhalen 8y ago
Can anyone in the industry comment on whether this kind of strategy really exists? Surely any automated, news-based strategy's bottleneck is not due to sub-microsecond latencies stemming from microwave tower placement. I've always assumed that the strategies that require microwave networks are using market data and only market data as a primary input.
- BonesJustice 8y ago
  I can confirm first-hand that this is a real thing, and that if there’s significant movement immediately following a headline, you likely won’t end up with more than table crumbs if you’re not one of the first two or three players to respond.
  - dmix 8y ago
    Interesting. I’m curious, can you give an example of what kind of news? Some earnings reports or acquisition or something? And are the reactions automated based on some NLP? Milliseconds wouldn’t matter if a human has to still parse it, correct?
    - darawk 8y ago
      Yes, NLP, and sometimes structured data released by special services that receive the news alerts early, process them into a structured form, and then make them available at the same moment that the normal services do.
      - ineedasername 8y ago
        Yep, NLP. As a grad student in comp linguistics, I was surprised to find out that financial news was an enourmous application space for NLP, for exactly this sort of reason. Including the automation of content creation. Much financial news isn't written by a human, and hasn't been for a long while. It's too slow. Faster content creation equals faster actionable data equals huge advantage.
    - BonesJustice 8y ago
      NLP is a possibility, but bear in mind that HFT is all about optimization. The confidence levels desired can vary significantly based on what you intend to do with the information. Acting on M&A news by taking a more aggressive position generally requires more confidence than, say, backing off based on ‘bad’ news. In the first case, you want to be pretty sure of the headline before taking action. In the latter, the mere presence of words like ‘fraud’ and ‘investigation’ might be enough to play it safe and say, “we’re going to back off trading this underlying until a human has a chance to look at this.”
    - deleted 8y ago
      [deleted]
  - shitgoose 8y ago
    or you misread the headline, price reverts and you end up with losing position. i am genuinely curious, how feasible this headline trading is.
    - BonesJustice 8y ago
      There’s two sides to it: you might decide to take a more aggressive position, but you might also use the headlines as a signal to back off (and stop or scale back trading of securities for the affected underlying, at least temporarily). One tends to carry more serious consequences when you’re wrong. Accordingly, the ‘take’ path generally has more checks, and more opportunities to abort.
    - TuringNYC 8y ago
      >> or you misread the headline, price reverts and you end up with losing position. Yes, you might misread here or there. But this is a game of statistics and the real win/loss is whether you read correctly more often this read incorrectly. You want your net wins to be positive.
    - pmart123 8y ago
      I used to be in this business. It’s a good practice to think of everything in terms of probabilities alongside capacity/liquidity. If an all cash merger hits the news, there’s a race lift prevailing offers on the one stock as there is a much better expectation of value due to the news. Now let’s say there’s negative news on the Chinese economy. Someone could be running an algorithm that sells down companies with Chinese exposure. But, inherently, there likely is a much lower probability that this news is uniform or material across companies with China exposure. A strategy like this likely would get put on small positions and get in and out quickly as it could get run over depending on how humans process the information and make bigger discretionary bets. There definitely is a risk too all of this. Roughly 10 years ago, somehow an old united Airlines bankruptcy article hit the wire and the stock sold off hard. Eventually, United released a statement saying the article was innacurate. This isn’t typically the type of strategy you would make large, single bets with, or hold the positions over a long period.
- integrate-this 8y ago
  Yes, this exists.
- raviolo 8y ago
  Quite a few players are trading on economic releases (eg non-farm payrolls, ADP, ISM, and so on) in this fashion. It’s often much easier to feed to algo because the release is a number (or set of numbers) vs some free-form-text thing. Competition is at a sub-micro latencies today.

pgwhalen 8y ago

Can anyone in the industry comment on whether this kind of strategy really exists? Surely any automated, news-based strategy's bottleneck is not due to sub-microsecond latencies stemming from microwave tower placement. I've always assumed that the strategies that require microwave networks are using market data and only market data as a primary input.

BonesJustice 8y ago
I can confirm first-hand that this is a real thing, and that if there’s significant movement immediately following a headline, you likely won’t end up with more than table crumbs if you’re not one of the first two or three players to respond.
- dmix 8y ago
  Interesting. I’m curious, can you give an example of what kind of news? Some earnings reports or acquisition or something? And are the reactions automated based on some NLP? Milliseconds wouldn’t matter if a human has to still parse it, correct?
  - darawk 8y ago
    Yes, NLP, and sometimes structured data released by special services that receive the news alerts early, process them into a structured form, and then make them available at the same moment that the normal services do.
    - ineedasername 8y ago
      Yep, NLP. As a grad student in comp linguistics, I was surprised to find out that financial news was an enourmous application space for NLP, for exactly this sort of reason. Including the automation of content creation. Much financial news isn't written by a human, and hasn't been for a long while. It's too slow. Faster content creation equals faster actionable data equals huge advantage.
  - BonesJustice 8y ago
    NLP is a possibility, but bear in mind that HFT is all about optimization. The confidence levels desired can vary significantly based on what you intend to do with the information. Acting on M&A news by taking a more aggressive position generally requires more confidence than, say, backing off based on ‘bad’ news. In the first case, you want to be pretty sure of the headline before taking action. In the latter, the mere presence of words like ‘fraud’ and ‘investigation’ might be enough to play it safe and say, “we’re going to back off trading this underlying until a human has a chance to look at this.”
  - deleted 8y ago
    [deleted]
- shitgoose 8y ago
  or you misread the headline, price reverts and you end up with losing position. i am genuinely curious, how feasible this headline trading is.
  - BonesJustice 8y ago
    There’s two sides to it: you might decide to take a more aggressive position, but you might also use the headlines as a signal to back off (and stop or scale back trading of securities for the affected underlying, at least temporarily). One tends to carry more serious consequences when you’re wrong. Accordingly, the ‘take’ path generally has more checks, and more opportunities to abort.
  - TuringNYC 8y ago
    >> or you misread the headline, price reverts and you end up with losing position. Yes, you might misread here or there. But this is a game of statistics and the real win/loss is whether you read correctly more often this read incorrectly. You want your net wins to be positive.
  - pmart123 8y ago
    I used to be in this business. It’s a good practice to think of everything in terms of probabilities alongside capacity/liquidity. If an all cash merger hits the news, there’s a race lift prevailing offers on the one stock as there is a much better expectation of value due to the news. Now let’s say there’s negative news on the Chinese economy. Someone could be running an algorithm that sells down companies with Chinese exposure. But, inherently, there likely is a much lower probability that this news is uniform or material across companies with China exposure. A strategy like this likely would get put on small positions and get in and out quickly as it could get run over depending on how humans process the information and make bigger discretionary bets. There definitely is a risk too all of this. Roughly 10 years ago, somehow an old united Airlines bankruptcy article hit the wire and the stock sold off hard. Eventually, United released a statement saying the article was innacurate. This isn’t typically the type of strategy you would make large, single bets with, or hold the positions over a long period.
integrate-this 8y ago
Yes, this exists.
raviolo 8y ago
Quite a few players are trading on economic releases (eg non-farm payrolls, ADP, ISM, and so on) in this fashion. It’s often much easier to feed to algo because the release is a number (or set of numbers) vs some free-form-text thing. Competition is at a sub-micro latencies today.