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Only processing transactions once a second doesn't make the race for time go away. Taking the same example brought up in the article, Chicago and New York stock
by Etheryte 6y ago
Only processing transactions once a second doesn't make the race for time go away. Taking the same example brought up in the article, Chicago and New York stock exchange, the two exchanges will never be perfectly in sync. Whosoever has the means to see a trade was made on one and then race to place a corresponding profitable order on the other before the clock ticks on that exchange, will make a profit over the others. The same will hold true no matter what granularity you make the exchange, until we reach physical limits to data transfer, which are already pretty close if you consider the orders of magnitude.
- jasonwatkinspdx 6y agoRight, the actual proposals to do this are obviously more sophisticated than that. The way that the bigger/better hedge funds and such avoid someone else doing latency arb on them is by having their own points of presence near global trading hubs. Their traders and algo systems decide on the trades to make, communicate them all to the POPs where they're held behind a release gate, then the POPs do a global drop of the gate based on gps/atomic time synchronization. It becomes impossible for any external system to get a latency arb advantage. An arbitrary number of exchanges could implement the same sort of ingress/egress system.