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Reminds me of the beginning of Arthur C. Clarke's "Childhood's End" (or was it "Fountains of Paradise"? It's been decades since I've read them), where he explai

Reminds me of the beginning of Arthur C. Clarke's "Childhood's End" (or was it "Fountains of Paradise"? It's been decades since I've read them), where he explains how, even in a networked, high-speed trading world, the stock trading system can get overloaded by orders and lag will cause the system to spiral out of control and collapse, repeating, in essence, the Crash of Black Tuesday. I found that interesting because it showed how, despite advances in technology which we'd expect to solve failures of previous systems, the same fundamental vulnerabilities remained, just at a different scale.

tedivm 13y ago
It definitely was not Childhood's End that you're thinking of, although that's a fantastic book. I haven't read Fountains of Paradise but will have to add that to the list.
- zem 13y ago
  strongly recommend it; it's probably my favourite of his novels. also won both the hugo and the nebula, so i'm not alone in thinking so.
  - e12e 13y ago
    Hm, and here I thought I'd read all the double-winners... thanks for the extra information :-) (Might have actually read it, just long ago -- but I don't think so -- haven't read that much by him).
this_user 13y ago
The overloading of exchanges with orders has actually become an intentional strategy in the real world. High frequency firms send large quantities of junk orders to create arbitrage possibilites or even as an offensive measure for the purpose of slowing down the competition by making them waste ressources processing useless orders.
- yummyfajitas 13y ago
  Um, no. This is a wild conspiracy "theory" [1] pushed by Nanex for publicity, but it's almost certainly false. If it were true, it would be trivially easy for any of the broker, exchange or SEC to trace and shut down. These parties already have countermeasures in place to prevent you from doing this accidentally - you need to make sure the rolling average of your fill rate is above 0.5% (approximate cutoff, it varies but it's in that neighborhood). Further, the risk of getting filled makes such a strategy insane. It's analogous to placing a bunch of bids on EBay in the hopes of slowing down their servers. Great plan, but it carries the risk that you win an auction and need to buy 1,500 copies of Dianetics @ $10.00 each. [1] I use the term "theory" loosely. Nanex's allegations more or less amount to the idea that HFT firms are DDOSing the markets by pushing an order volume that a 2008-era laptop could handle without hitting 100% cpu, and expect to profit via unexplained mechanisms.

tedivm 13y ago

It definitely was not Childhood's End that you're thinking of, although that's a fantastic book. I haven't read Fountains of Paradise but will have to add that to the list.

zem 13y ago
strongly recommend it; it's probably my favourite of his novels. also won both the hugo and the nebula, so i'm not alone in thinking so.
- e12e 13y ago
  Hm, and here I thought I'd read all the double-winners... thanks for the extra information :-) (Might have actually read it, just long ago -- but I don't think so -- haven't read that much by him).

this_user 13y ago

The overloading of exchanges with orders has actually become an intentional strategy in the real world. High frequency firms send large quantities of junk orders to create arbitrage possibilites or even as an offensive measure for the purpose of slowing down the competition by making them waste ressources processing useless orders.

yummyfajitas 13y ago
Um, no. This is a wild conspiracy "theory" [1] pushed by Nanex for publicity, but it's almost certainly false. If it were true, it would be trivially easy for any of the broker, exchange or SEC to trace and shut down. These parties already have countermeasures in place to prevent you from doing this accidentally - you need to make sure the rolling average of your fill rate is above 0.5% (approximate cutoff, it varies but it's in that neighborhood). Further, the risk of getting filled makes such a strategy insane. It's analogous to placing a bunch of bids on EBay in the hopes of slowing down their servers. Great plan, but it carries the risk that you win an auction and need to buy 1,500 copies of Dianetics @ $10.00 each. [1] I use the term "theory" loosely. Nanex's allegations more or less amount to the idea that HFT firms are DDOSing the markets by pushing an order volume that a 2008-era laptop could handle without hitting 100% cpu, and expect to profit via unexplained mechanisms.