16 ms·

> In order to do it, they bored through mountains in Pennsylvania in order to make the path of the wire as straight as possible, reducing the distance informati

> In order to do it, they bored through mountains in Pennsylvania in order to make the path of the wire as straight as possible, reducing the distance information had to travel. In total, the project cost \$300 million. The result? They can send information in 13.3 milliseconds round trip, 3 milliseconds faster than the competition at the time. So we can see that a 3 millisecond edge is worth at least \$300 million. I understand the motivation and rationale and that my take here is subjective, but I take a pause at how sad it is that we're literally boring holes through our natural mountains in order to flip bits 3ms faster in the name of high frequency trading.

deleted 6y ago
[deleted]
1123581321 6y ago
Try not to think about the infrastructure dug and bored so we can make comments here. :)
iancmceachern 6y ago
Exactly. Because it doesn't generate real value. Lets compare to alternatives like dam and flood control infrastructure, better roads, rail, etc. I understand the real pragmatic benefits and return on investment from these. A farm field is irrigated, a home not destroyed, less fuel used in trucking, on and on. These investments generate real value because they increase the total of societal output, not just that particular factions slice of the pie. Meaning, you are finding new gold to mine, not just taking over part of your neighbors gold mine and saying you are adding value. Its not adding value to the overall economy. Please help me, what real value does an investment like this yield for the economy as a whole? As i understand it an investment like taking part of your neighbors gold mine, not mining new ground. Effectively they have increased their slice of the pie, in this case it is time not land, but not made the overall pie bigger. It is interesting to think about things this way, in terms of investments that increase the carrying capacity of our economy, and those that don't. Advertising comes to mind. The cola wars, while expensive, dont yield a net increase in cola drinking, just a relative difference between the brands. Same with beer, on and on.
- lucaspauker 6y ago
  >Please help me, what real value does an investment like this yield for the economy as a whole? The argument usually goes like this: HFT firms provide liquidity for the market; they are usually the people on the other side of the trade when a retail investor buys stock/bonds/etc. So without the HFT firms, you wouldn't be able to trade at a good/fair price according to market conditions. Furthermore, if you buy stock from NASDAQ or NYSE or London stock exchange, you should get the same price. This idea that you should pay the same price for an asset regardless of where you buy it is enforced by HFT firms, as outlined in the article. Clearly, HFT firms need to get paid for this service, so retail investors typically pay the bid/ask spread.
  - MereInterest 6y ago
    Isn't the liquidity only worthwhile at times of low liquidity? The ability to quickly exchange shares only matters at times when you want to exchange shares quickly. The only time when you care about exchanging shares quickly is if the price is changing quickly. Those are exactly the times when HFT is the riskiest, and the most likely to be shut off to avoid losses. (For example, shutting off HFT as a response to the 2010 flash crash[0].) I get the argument, but it feels like the societal benefit is taken away whenever it is needed, and paid for only when it isn't needed. [0] https://en.wikipedia.org/wiki/2010_flash_crash https://en.wikipedia.org/wiki/2010_flash_crash
    - lucaspauker 6y ago
      Good point. Here is an in-depth analysis from the NY Fed: https://libertystreeteconomics.newyorkfed.org/2015/08/liquidity-during-flash-events.html https://libertystreeteconomics.newyorkfed.org/2015/08/liquid...
    - derriz 6y ago
      I don't think I get your point. Correct me if I'm wrong but it seems to be that you're suggesting that if I want to sell some of my shares, for example, that I should wait until volatility is low? If I had a way of knowing when the market would have low volatility, I'd throw away the shares and become a billionaire trading options. Saying you should wait for low volatility before trading is equivalent to saying you should wait until the price is high before selling. Both statements seem to reflect common sense but neither piece of advice can be translated into an actual strategy. The impact of HFT market making isn't that difficult to observe - all markets which have attracted such participants have seen huge falls in spreads. The spread is a tax on everyone who buys and sells in the market so lower spreads are good for everyone. (For example the cost of buying and selling a DAX future before fees was about 70 euro just 15 years ago while the spread is now typically less than a euro.)
FPGAhacker 6y ago
This is the way of the world. How much cpu and gpu advancement is directly attributable to the simulation of shooting each other in the face?
- colechristensen 6y ago
  On the flip side, how much more science is possible because entertainment dollars drive GPU development?
dhskdhkshdsk 6y ago
It's also a sloppy way to put it. $300M is a fixed amount and should really be compared with the rate of profit resulting from this integrated over how long it lasts. It's a question of stocks and flows. An "edge" which is there every day (for a while) results in a rate of profit, not a fixed sum.
- lucaspauker 6y ago
  The edge is difficult to quantify, so I went with the 300M as a lower bound. IIRC, the company that made this line sold contracts for 300k/month to use it to around 30 companies. Source: Flash Boys book
oceanplexian 6y ago
The technology trickles down to other spaces as a result of that investment. You could make the same argument about ARPANET only being funded because the government saw military command and control applications it (They weren’t funding it out of charity). Being able to move bits around 3ms faster is a VERY big deal for scientific research, medical technology, video delivery, defense, weather forecasting, and in so many other spaces that benefit humanity.
- rjkennedy98 6y ago
  What technological advancement? Is boring holes through a mountain somehow revolutionary technology?
- capableweb 6y ago
  It would be a big deal if they had a wire you usually transmit at 6ms with, but they found a way of doing the same distance but 3ms. But no, they literally brute forced their way through a mountain to make the distance shorter, because they had the money to do it and want more. Being able to spend money on a operation to make the cable distance shorter is hardly a very big deal for anyone else but nature and the company doing it.
no_wizard 6y ago
My question is, how big is the hole? If it’s a trench style run of the fiber, this can managed in a very environmentally friendly fashion with little impact on existing environments as it were On the other hand, if not managed correctly, I completely agree with you
barrenko 6y ago
When there is stuff that limits the path of price info there are wars and hunger and people die.
lordnacho 6y ago
The modern economic concept of value is also largely subjective, so I don't think you need to caveat your thoughts with that. As someone who used to write HFT code, I've vascillated between "it adds liquidity" and "it's a video game played between HFT firms". Neither is entirely satisfactory. When I meet up with my old engineering friends, almost nobody is an engineer in the sense you might have thought when applying during the last year of high school. Incentives are messed up. I remember getting offered £12K for a half year internship as an actual engineer. I took a marketing internship instead for a few grand more. My friend took an internship at Goldmans and was on £39K. When we got back, everyone applied to work in finance and consulting. According to the market, making powerpoints is more valuable than making bridges, aircraft, medical equipment, etc. We do somewhat envy the lady who took up an actual engineering job at a startup space launch company run by an eccentric South African guy.
jbaudanza 6y ago
This particular incident happened in 2009, when HFT was still relatively new and very profitable. These days, it's much more competitive and I doubt you could justify such an investment.
gnopgnip 6y ago
This is partly the cost of liquidity. Look at bitcoin for another example, On the order of $10 billion a year is spent on electricity to keep transactions secure.
deleted 6y ago
[deleted]

deleted 6y ago

[deleted]

1123581321 6y ago

Try not to think about the infrastructure dug and bored so we can make comments here. :)

iancmceachern 6y ago

Exactly. Because it doesn't generate real value. Lets compare to alternatives like dam and flood control infrastructure, better roads, rail, etc. I understand the real pragmatic benefits and return on investment from these. A farm field is irrigated, a home not destroyed, less fuel used in trucking, on and on. These investments generate real value because they increase the total of societal output, not just that particular factions slice of the pie. Meaning, you are finding new gold to mine, not just taking over part of your neighbors gold mine and saying you are adding value. Its not adding value to the overall economy. Please help me, what real value does an investment like this yield for the economy as a whole? As i understand it an investment like taking part of your neighbors gold mine, not mining new ground. Effectively they have increased their slice of the pie, in this case it is time not land, but not made the overall pie bigger. It is interesting to think about things this way, in terms of investments that increase the carrying capacity of our economy, and those that don't. Advertising comes to mind. The cola wars, while expensive, dont yield a net increase in cola drinking, just a relative difference between the brands. Same with beer, on and on.

lucaspauker 6y ago
>Please help me, what real value does an investment like this yield for the economy as a whole? The argument usually goes like this: HFT firms provide liquidity for the market; they are usually the people on the other side of the trade when a retail investor buys stock/bonds/etc. So without the HFT firms, you wouldn't be able to trade at a good/fair price according to market conditions. Furthermore, if you buy stock from NASDAQ or NYSE or London stock exchange, you should get the same price. This idea that you should pay the same price for an asset regardless of where you buy it is enforced by HFT firms, as outlined in the article. Clearly, HFT firms need to get paid for this service, so retail investors typically pay the bid/ask spread.
- MereInterest 6y ago
  Isn't the liquidity only worthwhile at times of low liquidity? The ability to quickly exchange shares only matters at times when you want to exchange shares quickly. The only time when you care about exchanging shares quickly is if the price is changing quickly. Those are exactly the times when HFT is the riskiest, and the most likely to be shut off to avoid losses. (For example, shutting off HFT as a response to the 2010 flash crash[0].) I get the argument, but it feels like the societal benefit is taken away whenever it is needed, and paid for only when it isn't needed. [0] https://en.wikipedia.org/wiki/2010_flash_crash https://en.wikipedia.org/wiki/2010_flash_crash
  - lucaspauker 6y ago
    Good point. Here is an in-depth analysis from the NY Fed: https://libertystreeteconomics.newyorkfed.org/2015/08/liquidity-during-flash-events.html https://libertystreeteconomics.newyorkfed.org/2015/08/liquid...
  - derriz 6y ago
    I don't think I get your point. Correct me if I'm wrong but it seems to be that you're suggesting that if I want to sell some of my shares, for example, that I should wait until volatility is low? If I had a way of knowing when the market would have low volatility, I'd throw away the shares and become a billionaire trading options. Saying you should wait for low volatility before trading is equivalent to saying you should wait until the price is high before selling. Both statements seem to reflect common sense but neither piece of advice can be translated into an actual strategy. The impact of HFT market making isn't that difficult to observe - all markets which have attracted such participants have seen huge falls in spreads. The spread is a tax on everyone who buys and sells in the market so lower spreads are good for everyone. (For example the cost of buying and selling a DAX future before fees was about 70 euro just 15 years ago while the spread is now typically less than a euro.)

FPGAhacker 6y ago

This is the way of the world. How much cpu and gpu advancement is directly attributable to the simulation of shooting each other in the face?

colechristensen 6y ago
On the flip side, how much more science is possible because entertainment dollars drive GPU development?

dhskdhkshdsk 6y ago

It's also a sloppy way to put it. $300M is a fixed amount and should really be compared with the rate of profit resulting from this integrated over how long it lasts. It's a question of stocks and flows. An "edge" which is there every day (for a while) results in a rate of profit, not a fixed sum.

lucaspauker 6y ago
The edge is difficult to quantify, so I went with the 300M as a lower bound. IIRC, the company that made this line sold contracts for 300k/month to use it to around 30 companies. Source: Flash Boys book

oceanplexian 6y ago

The technology trickles down to other spaces as a result of that investment. You could make the same argument about ARPANET only being funded because the government saw military command and control applications it (They weren’t funding it out of charity). Being able to move bits around 3ms faster is a VERY big deal for scientific research, medical technology, video delivery, defense, weather forecasting, and in so many other spaces that benefit humanity.

rjkennedy98 6y ago
What technological advancement? Is boring holes through a mountain somehow revolutionary technology?
capableweb 6y ago
It would be a big deal if they had a wire you usually transmit at 6ms with, but they found a way of doing the same distance but 3ms. But no, they literally brute forced their way through a mountain to make the distance shorter, because they had the money to do it and want more. Being able to spend money on a operation to make the cable distance shorter is hardly a very big deal for anyone else but nature and the company doing it.

no_wizard 6y ago

My question is, how big is the hole? If it’s a trench style run of the fiber, this can managed in a very environmentally friendly fashion with little impact on existing environments as it were On the other hand, if not managed correctly, I completely agree with you

barrenko 6y ago

When there is stuff that limits the path of price info there are wars and hunger and people die.

lordnacho 6y ago

The modern economic concept of value is also largely subjective, so I don't think you need to caveat your thoughts with that. As someone who used to write HFT code, I've vascillated between "it adds liquidity" and "it's a video game played between HFT firms". Neither is entirely satisfactory. When I meet up with my old engineering friends, almost nobody is an engineer in the sense you might have thought when applying during the last year of high school. Incentives are messed up. I remember getting offered £12K for a half year internship as an actual engineer. I took a marketing internship instead for a few grand more. My friend took an internship at Goldmans and was on £39K. When we got back, everyone applied to work in finance and consulting. According to the market, making powerpoints is more valuable than making bridges, aircraft, medical equipment, etc. We do somewhat envy the lady who took up an actual engineering job at a startup space launch company run by an eccentric South African guy.

jbaudanza 6y ago

This particular incident happened in 2009, when HFT was still relatively new and very profitable. These days, it's much more competitive and I doubt you could justify such an investment.

gnopgnip 6y ago

This is partly the cost of liquidity. Look at bitcoin for another example, On the order of $10 billion a year is spent on electricity to keep transactions secure.

deleted 6y ago

[deleted]