7 ms·

How is microwave dish based communication a 'scam'?

by Bootvis 12y ago

spacefight 12y ago
The scam is what you use the microwave communication for. If you have access to fast lines or even faster radio comms means, that you can rig the market more efficiently. It's called front running. http://en.wikipedia.org/wiki/Flash_Boys http://en.wikipedia.org/wiki/Flash_Boys
- Bootvis 12y ago
  Being faster is rigging the market? How does that work? Also, it isn't called front running, at least not legally. It can't be, HFT don't have any customers. Maybe Michael Lewis has a different definition of front running but for the rest of us: words have a meaning. http://en.wikipedia.org/wiki/Front_running http://en.wikipedia.org/wiki/Front_running
  - spacefight 12y ago
    HFT might not have direct customers per se, but if an order matches, they have a counterpart on each trade they make. If you have an unfair advantage for that trade, what would you call that system? Rigged? That's what the big players in the HFT field are doing by using the various tools available (near-location, co-location, fast networks, fast custom hardware and lately microwave networks). On the term, you're right - front running might not have been the correct therm.
    - wdewind 12y ago
      > Rigged? That's what the big players in the HFT field are doing by using the various tools available (near-location, co-location, fast networks, fast custom hardware and lately microwave networks). I can't personally afford to have a Bloomberg feed in my living room to trade off of. Why is this any different?
      - spacefight 12y ago
        Neither can I. Do you feel having the same fair market access without the BB terminal at your disposal?
        tptacek 12y ago
        Does it upset you when you go to buy a car to think that Avis can buy that car at a gigantic discount because they buy in bulk?
        spacefight 12y ago
        I like where this is going :) I know, I have a choice of buying a car or participating with my own money on the stock market. I have no choice if the pension fund where I work at is investing in blue chips.
        tptacek 12y ago
        Once again, this time with feeling: HFT firms don't prey on pension funds, mutual funds, or value investors. They improve things for those kinds of investors. HFT firms prey on other sell-side firms.
        ldng 12y ago
        But it does if I have to buy it at higher price just because Avis knew a that I and a few fellows where to buy the car 2 min in advance because he saw us asking about that car, bought the available stock of car we were interested in to the car dealer, propose them at a slight premium to the the car dealer who then finally sell it to me and my fellow 1 minute later at another premium because, you know, it has to make its own margin. The whole thing happening just under my nose. That's how I (unobjectively I concede) feel about HFT.
        tptacek 12y ago
        Ok, now let's take that thought experiment and make it closer to the real world: Imagine that Avis is buying cars in bulk and getting better deals as a result, and then imagine that the knock-on effect of them doing that is that you get better deals on cars because of how they change the way the car market works. Car dealerships are, for obvious reasons, really fucking upset about this. And they are noisy and well-funded. Normal people start getting angry at the giant rental car companies and the unfair advantage they get, unaware of the fact that without those companies, they'd be getting screwed even worse by the dealerships. That's what HFT does to normal investors. You don't have to take my word for it; the Chief Investment Officer at Vanguard, among many other people, has said exactly this.
    - kasey_junk 12y ago
      Every trade that happens in every market in the world can be viewed from a game theory perspective as adversarial. In the absence of other outside factors each trade in isolation is a zero sum game, that is 1 counter party will make money on the trade while another loses (at least in the form of opportunity cost). In this adversarial encounter it is expected and encouraged for all counter parties to strive for unfair advantages. Some do this by using vast swaths of overworked and underpaid ivy league grads to do market research for them. Some do this by using massive amounts of leverage others do it by being fast, some use illegally obtained proprietary information and still others do it via mobbed up boiler rooms. Some of that unfair advantage we have deemed illegal and others we have deemed legal. The point is, the existence of an advantage in a trade is a necessary condition for the market to operate correctly, not evidence of it being rigged. You will notice that the "big" players in HFT are much smaller than the people they are taking advantage of, the giant hedge funds. The HFT competitors have access to the same technology, technologists, exchange access and microwave networks. Further, they have better access to capital and legislative power, not to mention access to best selling authors.
- spindritf 12y ago
  The book has been discussed here at length[1]. I never worked in finance but it doesn't seem to hold up very well under scrutiny from experts. Comments by 'kasey_junk and 'yummyfajitas were particularly informative. The latter even wrote a couple of blog posts, including "A Fervent Defense of Front-running HFTs"[2]. [1] https://news.ycombinator.com/item?id=7531429 https://news.ycombinator.com/item?id=7531429 [2] http://www.chrisstucchio.com/blog/2014/fervent_defense_of_frontrunning_hfts.html http://www.chrisstucchio.com/blog/2014/fervent_defense_of_fr...
- mmaldacker 12y ago
  Front running is something else, http://en.wikipedia.org/wiki/Front_running http://en.wikipedia.org/wiki/Front_running
praptak 12y ago
It introduces asymmetry of information. Some forms of such asymmetry are obviously unethical and illegal - the good old insider trading. Some are legal and ethical(#) - just having better research on public information is ok. Buying extra {milli, micro}seconds to get ahead of the competition is just too new to have a general consensus on its ethical status. (#) In the mainstream. Obviously you can find contrarians to any position.
- joosters 12y ago
  People have been using technology to discover news sooner for centuries. Your ethical compass is too slow!
- kasey_junk 12y ago
  A) these microwave towers are mainly on routes to/from commodities exchanges that have equities derivatives and the equities exchanges where the underlying equities are traded, or between 2 different commodities exchanges. Insider trading, you will find, is much less regulated in commodities trading as there is all manner of information asymmetry built into the market, in fact one of the purposes of the market is to discover a valid price in the face of this information asymmetry. B) Buying extra time via technology is as old as trading. If you read the article, or taken an architectural tour of the CBOT building in Chicago you will have noticed that one of its main design requirements was to house telecommunications gear.
  - spacefight 12y ago
    Only because B) has been there for ages doesn't mean, it has to stay that way, does it?
    - kasey_junk 12y ago
      I was specifically replying to the idea that we haven't had time to judge the ethics of communication technology in trading, when it is in fact a basic market force. I'm not an ethicist so I'm hesitant to speak on the ethics of market forces, but I will say: A) How do you prevent some actors from getting information before others? Do all actors have to wait for the slowest participant? Why should we prevent it? B) In general, faster dissemination of information leads to a more efficient market, we should encourage this, not discourage it.

How is microwave dish based communication a 'scam'?

by Bootvis 12y ago

How is microwave dish based communication a 'scam'?

The scam is what you use the microwave communication for. If you have access to fast lines or even faster radio comms means, that you can rig the market more efficiently. It's called front running. http://en.wikipedia.org/wiki/Flash_Boys http://en.wikipedia.org/wiki/Flash_Boys

Bootvis 12y ago
Being faster is rigging the market? How does that work? Also, it isn't called front running, at least not legally. It can't be, HFT don't have any customers. Maybe Michael Lewis has a different definition of front running but for the rest of us: words have a meaning. http://en.wikipedia.org/wiki/Front_running http://en.wikipedia.org/wiki/Front_running
- spacefight 12y ago
  HFT might not have direct customers per se, but if an order matches, they have a counterpart on each trade they make. If you have an unfair advantage for that trade, what would you call that system? Rigged? That's what the big players in the HFT field are doing by using the various tools available (near-location, co-location, fast networks, fast custom hardware and lately microwave networks). On the term, you're right - front running might not have been the correct therm.
  - wdewind 12y ago
    > Rigged? That's what the big players in the HFT field are doing by using the various tools available (near-location, co-location, fast networks, fast custom hardware and lately microwave networks). I can't personally afford to have a Bloomberg feed in my living room to trade off of. Why is this any different?
    - spacefight 12y ago
      Neither can I. Do you feel having the same fair market access without the BB terminal at your disposal?
      - tptacek 12y ago
        Does it upset you when you go to buy a car to think that Avis can buy that car at a gigantic discount because they buy in bulk?
        spacefight 12y ago
        I like where this is going :) I know, I have a choice of buying a car or participating with my own money on the stock market. I have no choice if the pension fund where I work at is investing in blue chips.
        tptacek 12y ago
        Once again, this time with feeling: HFT firms don't prey on pension funds, mutual funds, or value investors. They improve things for those kinds of investors. HFT firms prey on other sell-side firms.
        ldng 12y ago
        But it does if I have to buy it at higher price just because Avis knew a that I and a few fellows where to buy the car 2 min in advance because he saw us asking about that car, bought the available stock of car we were interested in to the car dealer, propose them at a slight premium to the the car dealer who then finally sell it to me and my fellow 1 minute later at another premium because, you know, it has to make its own margin. The whole thing happening just under my nose. That's how I (unobjectively I concede) feel about HFT.
        tptacek 12y ago
        Ok, now let's take that thought experiment and make it closer to the real world: Imagine that Avis is buying cars in bulk and getting better deals as a result, and then imagine that the knock-on effect of them doing that is that you get better deals on cars because of how they change the way the car market works. Car dealerships are, for obvious reasons, really fucking upset about this. And they are noisy and well-funded. Normal people start getting angry at the giant rental car companies and the unfair advantage they get, unaware of the fact that without those companies, they'd be getting screwed even worse by the dealerships. That's what HFT does to normal investors. You don't have to take my word for it; the Chief Investment Officer at Vanguard, among many other people, has said exactly this.
  - kasey_junk 12y ago
    Every trade that happens in every market in the world can be viewed from a game theory perspective as adversarial. In the absence of other outside factors each trade in isolation is a zero sum game, that is 1 counter party will make money on the trade while another loses (at least in the form of opportunity cost). In this adversarial encounter it is expected and encouraged for all counter parties to strive for unfair advantages. Some do this by using vast swaths of overworked and underpaid ivy league grads to do market research for them. Some do this by using massive amounts of leverage others do it by being fast, some use illegally obtained proprietary information and still others do it via mobbed up boiler rooms. Some of that unfair advantage we have deemed illegal and others we have deemed legal. The point is, the existence of an advantage in a trade is a necessary condition for the market to operate correctly, not evidence of it being rigged. You will notice that the "big" players in HFT are much smaller than the people they are taking advantage of, the giant hedge funds. The HFT competitors have access to the same technology, technologists, exchange access and microwave networks. Further, they have better access to capital and legislative power, not to mention access to best selling authors.
spindritf 12y ago
The book has been discussed here at length[1]. I never worked in finance but it doesn't seem to hold up very well under scrutiny from experts. Comments by 'kasey_junk and 'yummyfajitas were particularly informative. The latter even wrote a couple of blog posts, including "A Fervent Defense of Front-running HFTs"[2]. [1] https://news.ycombinator.com/item?id=7531429 https://news.ycombinator.com/item?id=7531429 [2] http://www.chrisstucchio.com/blog/2014/fervent_defense_of_frontrunning_hfts.html http://www.chrisstucchio.com/blog/2014/fervent_defense_of_fr...
mmaldacker 12y ago
Front running is something else, http://en.wikipedia.org/wiki/Front_running http://en.wikipedia.org/wiki/Front_running

praptak 12y ago

It introduces asymmetry of information. Some forms of such asymmetry are obviously unethical and illegal - the good old insider trading. Some are legal and ethical(#) - just having better research on public information is ok. Buying extra {milli, micro}seconds to get ahead of the competition is just too new to have a general consensus on its ethical status. (#) In the mainstream. Obviously you can find contrarians to any position.

joosters 12y ago
People have been using technology to discover news sooner for centuries. Your ethical compass is too slow!
kasey_junk 12y ago
A) these microwave towers are mainly on routes to/from commodities exchanges that have equities derivatives and the equities exchanges where the underlying equities are traded, or between 2 different commodities exchanges. Insider trading, you will find, is much less regulated in commodities trading as there is all manner of information asymmetry built into the market, in fact one of the purposes of the market is to discover a valid price in the face of this information asymmetry. B) Buying extra time via technology is as old as trading. If you read the article, or taken an architectural tour of the CBOT building in Chicago you will have noticed that one of its main design requirements was to house telecommunications gear.
- spacefight 12y ago
  Only because B) has been there for ages doesn't mean, it has to stay that way, does it?
  - kasey_junk 12y ago
    I was specifically replying to the idea that we haven't had time to judge the ethics of communication technology in trading, when it is in fact a basic market force. I'm not an ethicist so I'm hesitant to speak on the ethics of market forces, but I will say: A) How do you prevent some actors from getting information before others? Do all actors have to wait for the slowest participant? Why should we prevent it? B) In general, faster dissemination of information leads to a more efficient market, we should encourage this, not discourage it.