3 ms·
I suppose by repeatable you mean that if you replayed the sequence of orders - both buy and sell - the matching algorithm would match them the exact same way as
by Aqueous 13y ago
I suppose by repeatable you mean that if you replayed the sequence of orders - both buy and sell - the matching algorithm would match them the exact same way as it did originally?
I understand the desire to have deterministic trading algorithms, but they're already in the unenviable position of having to explain why some traders get information faster than others, which seems like it's even harder to explain.
Plus, the algorithm could be repeatable if you just replay the sequence of random numbers that led to that order - i.e. if the sequence of numbers were made public along with the executed transactions.
You can measure the randomness of a random number generator, so it would be easy to demonstrate the the orders were picked in a perfectly or near-perfectly random way. You could even hook the random generator up to a quantum event like a decaying atom to get even more evenly distributed randomness. I'm sure for something as important as fair market conditions the institutions in question would spare no expense - neither to have the trades executed randomly but to prove to the public that they are generated randomly.
- kasey_junk 13y agoSo, A) you are making assumptions about fairness that no trader would ever make. There is literally no argument, mathematical or otherwise that you can create that would explain to them why the idiot in the desk next to them gets a bigger bonus than they do based on trade execution. B) You are making assumptions about market information "fairness" that no trader would ever make. The exchanges have no problem explaining why some folks have faster information than others because they always have. Pit traders had an advantage over phone brokers. Phone brokers had an advantage over which ever poor slobs they could get on the hook. No one on the exchange side of things thinks people all have the same information at the same time, if that was a requirement how would you time coffee breaks?
- dredmorbius 13y agoif that was a requirement how would you time coffee breaks? A fair lottery would solve that. You're using an interesting sense of bias, where a fair lottery is in fact perfectly unbiased. There are lots of things which can cause an arbitrary assignment of winnings to a given trader. Go back and re-read A Random Walk Down Wall Street if you've forgotten. The problem isn't the randomness, it's the bias, particularly to those with an inside advantage and edge.