5 ms·

Agreed. I don't know much about finance, but it seems like insider trading taken to a whole new level -- real-time, automated, massive scale DPI to hijack strea

by Torn 17y ago

Agreed. I don't know much about finance, but it seems like insider trading taken to a whole new level -- real-time, automated, massive scale DPI to hijack streams and push actions through just before trades are publicly committed. Pretty much the grossest abuse of trust and position you could ever pull off at a stock exchange? If the sources behind the article are correct, then there's going to be massive fallout here.

jacquesm 17y ago
Given that large trading houses will scrap perfectly good dealing rooms in order to get a few milliseconds improvement in their real-time trading abilities what I fail to understand about all this is how they managed to overlook this for as long as it was the case. Even physical access to the cables running other peoples trades should have been impossible, let alone root access on machines that actually do the trades. All it took was some software in the right location, but they shouldn't have had access to that location to begin with. All they should have been able to see was their own traffic, on their own machines, hooked up to their switches, and beyond that you might have been in a position to do something evil. Whoever agreed to the fox guarding the henhouse is going to have a lot of explaining to do.
- yangyang 17y ago
  > Given that large trading houses will scrap perfectly good dealing rooms in order to get a few milliseconds improvement in their real-time trading abilities Who's done this?
  - jacquesm 17y ago
    ABN-AMRO, Amsterdam & London. They had a perfectly good dealing room and they scrapped it after only using it for a relatively short period of time. The replacement paid for itself in the first couple of months of operation... not a bad payback time on a $US 220 million capital investment.
    - yangyang 17y ago
      I don't see why they'd scrap a dealing room "in order to get a few milliseconds improvement in their real-time trading abilities". Automated real-time trading apps run on servers, in machine rooms, not in dealing rooms. Hence the mentions of trading firms putting their servers in various exchanges' data centres. Moving a trading floor / dealing room isn't really going to help, unless you think that human trader's mouse clicks or phone conversations are disadvantaged by a few milliseconds.
      - jacquesm 17y ago
        The latter is exactly the point, having access to information is the lifeblood of the stock exchange, if you can 'dump' on bad news a little bit earlier and 'buy' on good news a little bit earlier it really adds up. In the currency markets this is even more important. The trading firms putting their servers in the exchanges data centers is another attempt at reducing the latency, a server in the data center can react faster to a posted trade than one which is sitting at the other side of a bunch of wire or fibre. And it removes an extra layer of communications hardware that could fail. Plenty of the trading is fully automated but from my knowledge of this world - which is very much dated, the last time I worked in banking is over 20 years ago and the pace back then was a lot more leisurely than it is today - it's such a competitive arena that even the smallest differences can add up to a huge lead over enough trades. The trend is to try to get the human out of the loop as much as possible, and with every 'iteration' the deal rooms reflect this strategy more and more, where people are still nominally in charge but their role is relegated to oversight and data entry. In the long run I expect the stock exchanges to morph into nothing else but racks full of servers but we are still some time away from that.
        yangyang 17y ago
        I agree with most of the things you say. I've worked in finance for the last 9 years. But to nitpick, the latency issue has got nothing to do with dealing rooms, which are rooms where traders, salespeole, quants and support staff sit. A human trader sitting nearer to Bloomberg's servers isn't going to make more money because they see the news 1us faster than someone a bit further away. The fully automated stuff is where the milliseconds matter, and the data is analysed and the trades made on servers that are not on the floor / dealing room. They are, as we've both said, in a machine room or even an exchange's hosting facility, close to their own servers. My point was simply that you won't get an improvement in "real time trading abilities" by scrapping / moving / doing whatever you like with the place where the humans sit. It's all about where the machines that run the algorithms and execute the trades are located. And that is not a dealing room (for big players at least).
- pbhjpbhj 17y ago
  "Whoever agreed to the fox guarding the henhouse is going to have a lot of explaining to do." In an ideal world, in this one I suspect they'll just get a tanker load of money.
vijayr 17y ago
True, this has to be the grossest abuse of trust. This is actually worse than the Madoff scandal. There it was just one greedy individual, here its a well established and respected financial institution - worse, much much worse.

by Torn 17y ago

jacquesm 17y ago

Given that large trading houses will scrap perfectly good dealing rooms in order to get a few milliseconds improvement in their real-time trading abilities what I fail to understand about all this is how they managed to overlook this for as long as it was the case. Even physical access to the cables running other peoples trades should have been impossible, let alone root access on machines that actually do the trades. All it took was some software in the right location, but they shouldn't have had access to that location to begin with. All they should have been able to see was their own traffic, on their own machines, hooked up to their switches, and beyond that you might have been in a position to do something evil. Whoever agreed to the fox guarding the henhouse is going to have a lot of explaining to do.

yangyang 17y ago
> Given that large trading houses will scrap perfectly good dealing rooms in order to get a few milliseconds improvement in their real-time trading abilities Who's done this?
- jacquesm 17y ago
  ABN-AMRO, Amsterdam & London. They had a perfectly good dealing room and they scrapped it after only using it for a relatively short period of time. The replacement paid for itself in the first couple of months of operation... not a bad payback time on a $US 220 million capital investment.
  - yangyang 17y ago
    I don't see why they'd scrap a dealing room "in order to get a few milliseconds improvement in their real-time trading abilities". Automated real-time trading apps run on servers, in machine rooms, not in dealing rooms. Hence the mentions of trading firms putting their servers in various exchanges' data centres. Moving a trading floor / dealing room isn't really going to help, unless you think that human trader's mouse clicks or phone conversations are disadvantaged by a few milliseconds.
    - jacquesm 17y ago
      The latter is exactly the point, having access to information is the lifeblood of the stock exchange, if you can 'dump' on bad news a little bit earlier and 'buy' on good news a little bit earlier it really adds up. In the currency markets this is even more important. The trading firms putting their servers in the exchanges data centers is another attempt at reducing the latency, a server in the data center can react faster to a posted trade than one which is sitting at the other side of a bunch of wire or fibre. And it removes an extra layer of communications hardware that could fail. Plenty of the trading is fully automated but from my knowledge of this world - which is very much dated, the last time I worked in banking is over 20 years ago and the pace back then was a lot more leisurely than it is today - it's such a competitive arena that even the smallest differences can add up to a huge lead over enough trades. The trend is to try to get the human out of the loop as much as possible, and with every 'iteration' the deal rooms reflect this strategy more and more, where people are still nominally in charge but their role is relegated to oversight and data entry. In the long run I expect the stock exchanges to morph into nothing else but racks full of servers but we are still some time away from that.
      - yangyang 17y ago
        I agree with most of the things you say. I've worked in finance for the last 9 years. But to nitpick, the latency issue has got nothing to do with dealing rooms, which are rooms where traders, salespeole, quants and support staff sit. A human trader sitting nearer to Bloomberg's servers isn't going to make more money because they see the news 1us faster than someone a bit further away. The fully automated stuff is where the milliseconds matter, and the data is analysed and the trades made on servers that are not on the floor / dealing room. They are, as we've both said, in a machine room or even an exchange's hosting facility, close to their own servers. My point was simply that you won't get an improvement in "real time trading abilities" by scrapping / moving / doing whatever you like with the place where the humans sit. It's all about where the machines that run the algorithms and execute the trades are located. And that is not a dealing room (for big players at least).
pbhjpbhj 17y ago
"Whoever agreed to the fox guarding the henhouse is going to have a lot of explaining to do." In an ideal world, in this one I suspect they'll just get a tanker load of money.

vijayr 17y ago

True, this has to be the grossest abuse of trust. This is actually worse than the Madoff scandal. There it was just one greedy individual, here its a well established and respected financial institution - worse, much much worse.