3 ms·
This mechanism ("batch auctions") are not immune to rewarding low-latency connections. The details depend on the exact auction mechanism but the general idea is
by zodiac 6y ago
This mechanism ("batch auctions") are not immune to rewarding low-latency connections. The details depend on the exact auction mechanism but the general idea is that you want to join the batch as late as possible (at any moment in time when you make a decision to join the batch, you are never worse off if you wait a while before joining) and low-latency connections can afford to join later.
In fact with your exact proposal, assuming everyone has a connection with at most (say) 50ms latency, no one will join the batch in the first 50ms, which (I think) magnifies the low-latency advantage.
- magicalhippo 6y agoSo randomize the batch window length as well then, say 10-100ms.
- zodiac 6y agoIf you make a decision to join in the (say) the 5th ms of the batch auction and you have a latency of 1ms, you are still no worse off if you decide to wait 4ms before joining the batch.
- teempai 6y agoYou can solve for this with a commit and reveal scheme, where trades with hidden price and size are committed in the first period and revealed and settled in the second period. The advantage of speed or waiting until the end is mitigated as you can receive no additional information either way.