3 ms·

There's actually a stock market, IEX, that has a long physical wire to introduce a physical signal delay to counteract this. Here's an interesting podcast regar

There's actually a stock market, IEX, that has a long physical wire to introduce a physical signal delay to counteract this. Here's an interesting podcast regarding this exchange. http://investorfieldguide.com/katsuyama/ http://investorfieldguide.com/katsuyama/

n3k5 6y ago
Tom Scott made a short video about these cables: https://youtu.be/d8BcCLLX4N4 https://youtu.be/d8BcCLLX4N4 61 kilometres of fibre-optics for a 350 microsecond delay.
harryh 6y ago
It's important to understand the original business model of IEX (and IEX's hedge fund backers) and why they put in the speedbump. When large well informed funds want to trade large blocks of shares the price tends to quickly move against them so they make their trade at a slightly worse price. These funds would all like it if the market moved slower so that they got better prices so they made an exchange that moved slower. The trick is that other people don't want to trade on exchanges with less up to date prices. So IEX made up a bunch of false stories about how HFTs were bad for retail investors. They even tricked Michael Lewis into writing a book/advertisement for them. They also produced a slick video wrapping themselves in the flag/americana to try to trick people. You can watch it here: https://www.youtube.com/watch?v=v2OZkTesSx0 https://www.youtube.com/watch?v=v2OZkTesSx0
supernova87a 6y ago
Why do we need a long physical delay when the idea of batching / allowing only a certain frequency of trading does the same thing?
- myrandomcomment 6y ago
  So I think we have mixed questions here. Let me address the one I know. Each of the major exchanges has a DC in which they will rent space to a 3rd party that will want to trade on the exchange. That market data feed and order execution use BGP & multicast (market data info is in multicast). Order execution can sometimes be a different link outbound. Please note I am generalizing details here sticking to mostly common items. So let’s say you are in the DC and your cage is right next to the Exchanges router so you cross connect is only 10m. So that is 50ns of latency in the path (assuming 10G SR on MM fiber). Your next competitor down from you is 20m away. So they are 100ns of latency. If you are an HFT, well. These people pay to dig through mountains to have the shorter path. What happened was this became a major issue oh, 20 years ago maybe? So what the exchange does is run the exact same length of cable to every drop off. So if you are 10m away and the longest run in the DC is 100m away then every cable run is 100m.

n3k5 6y ago

Tom Scott made a short video about these cables: https://youtu.be/d8BcCLLX4N4 https://youtu.be/d8BcCLLX4N4 61 kilometres of fibre-optics for a 350 microsecond delay.

harryh 6y ago

It's important to understand the original business model of IEX (and IEX's hedge fund backers) and why they put in the speedbump. When large well informed funds want to trade large blocks of shares the price tends to quickly move against them so they make their trade at a slightly worse price. These funds would all like it if the market moved slower so that they got better prices so they made an exchange that moved slower. The trick is that other people don't want to trade on exchanges with less up to date prices. So IEX made up a bunch of false stories about how HFTs were bad for retail investors. They even tricked Michael Lewis into writing a book/advertisement for them. They also produced a slick video wrapping themselves in the flag/americana to try to trick people. You can watch it here: https://www.youtube.com/watch?v=v2OZkTesSx0 https://www.youtube.com/watch?v=v2OZkTesSx0

supernova87a 6y ago

Why do we need a long physical delay when the idea of batching / allowing only a certain frequency of trading does the same thing?

myrandomcomment 6y ago
So I think we have mixed questions here. Let me address the one I know. Each of the major exchanges has a DC in which they will rent space to a 3rd party that will want to trade on the exchange. That market data feed and order execution use BGP & multicast (market data info is in multicast). Order execution can sometimes be a different link outbound. Please note I am generalizing details here sticking to mostly common items. So let’s say you are in the DC and your cage is right next to the Exchanges router so you cross connect is only 10m. So that is 50ns of latency in the path (assuming 10G SR on MM fiber). Your next competitor down from you is 20m away. So they are 100ns of latency. If you are an HFT, well. These people pay to dig through mountains to have the shorter path. What happened was this became a major issue oh, 20 years ago maybe? So what the exchange does is run the exact same length of cable to every drop off. So if you are 10m away and the longest run in the DC is 100m away then every cable run is 100m.