10 ms·
HFT in my backyard – II
- sauere 12y agoAs someone who has little to no experience in trading the technical side is very interesting to me, but the overall concept of all this is just insane and frightening.
- callesgg 12y agoWould the problem that if causes be easily solveble by doing somthing like 50% of your trades bluffs.
- nbody 12y agoOn a poker game that would help.
- namecast 12y agoThere is evidence that this sort of thing is already happening. Google 'quote stuffing'. There are those who say quote stuffing in HFT is a bug; my personal opinion is that it is done by design....
- yummyfajitas 12y agoCan you explain the design concretely (i.e., the mechanics), or is this just a gut feeling?
- namecast 12y agoFor now I'm going to offer gut feeling. Take this or leave it - I wrote two paragraphs here that essentially came down to an argument to an authority re: my personal experience and the opinions people who know who trade. That's shitty logic, so let's go with gut feeling for now... I don't believe that the same specific bug has manifested itself across many many different HFT algorithms run by many different actors over a long period of time, in a way that loses money consistently for everyone involved whenever the bug is triggered, without ever being addressed by anyone. To argue otherwise is contrary to my current understanding of software engineering best practices - imagine another industry where every service provider has the same bug manifest in the same way, across all their different software stacks - some running Java, some Python, some even with their own proprietary languages - and no one ever catches it even though it's losing money and it's occurence is easily identifiable on a time-series graph (so very easy to be matched up with all available logging data)? No one has the resources to throw a team of devs at this for 6 months to identify the bug, or they do and they're just willing to lose money and not make every last nickel they can? Not a single person is trying to reach for that lost money with a bug fix or a novel tweak to their own existing algo? For years? I believe it's more likely that either the actors who are quote stuffing believe they are benefiting by tipping their hand early with false information, or they actually are benefiting. It's hard to imagine how these actors could be benefiting; perhaps they believe that someone is watching their quotes in transit or has visibility into their quotes before trades are executed, and the quote-stuffers are trying to fake these malicious actors out? The alternative scenario where quote-stuffers are not benefiting from their actions - or rather, that they aren't even operating under the irrational assumption that they are benefiting (because the quote stuffers could be stuffing intentionally but incorrectly) - seems much more implausible. It seems to involve a whole lot more things going wrong in a very specific very atypical way,from a software development standpoint, with no one every interested in picking up the money they're dropping on the floor due to this bug when things go wrong, over the course of years, even though all the data to pinpoint the source of the bug is public, charted, and discussed openly. The first scenario just requires a quote stuffer to hold a possibly incorrect belief about the other actors in the market. The second requires multiple specific distinct software development failures to line up like dominoes and stay lined up without anyone ever addressing their root causes. But who knows :) <shrug> Trading is chaos, after all.
- yummyfajitas 12y agoThe thing is, the bugs manifest in many different ways. Sometimes you get ramp&drop, sometimes you get on-off flicker, there are a wide variety of things that can happen. Take a look at the graphs from Nanex - lots of different things are happening. I realize that to an outsider they may all look like "graphs going wonky", but similarly all computer bugs look like "omfg I just want my email" to a marketer. It's not a programming language issue - it's a math issue that would happen in any programming language. Whether you use Python or Haskell, you'll run into problems if you call SOLVE(A,x) on an ill conditioned matrix A. So you cook up a special routine that works well for most of the inputs you expect to see and it screws up for the tiny fraction of cases where you get a bad matrix. Throwing money and a team of devs won't get around this. Similarly, you can't put together a team of crack devs (each earning $500k/year) and ask them to solve the CAP Theorem in 6 months. All you can do is choose your tradeoffs and hope that most of the time your network puts you on the good side of those tradeoffs.
- namecast 12y agoChris: you need to identify yourself if you're going to push your viewpoint here. You're the only author of a controversial blog post that's pushing what I'll gently describe as an interesting theory - not a casual HN observer just bringing up some talking points. If I hadn't caught your CAP theorem quote ("solve the CAP theorem", wha?) and the Nanex reference, I would have missed this and not drilled down to your user details. Next time, feel free to add a </disclaimer> of some sort. I'm not an outsider unless you've got one intense No True Scotsmen definition of the word, and I'll leave it at that. Let's just agree to disagree, and I'll say that you are certainly entitled to your opinion. Thank God, it's a free country and a free market :) Good luck.
- minimax 12y agoThe problem with every allegation of quote stuffing I have ever seen is that it always looks like this: 1) Blast quotes 2) ??? 3) Profit Same problem in this thread. It would be a much more convincing argument if you could spell out the actual trade.
- nanexllc 12y agoInternalizers (Citadel) are the beneficiaries - as well as those competing for the top of the queue on every price shift. It would disappear quickly if it were just a bug. Then of course, is that phone conversation I had where it was explained to me (see above)
- kasey_junk 12y agoTechnically that is against the law. It already happens though and enforcement is difficult.
- gd1 12y agoDo you care to explain why this is "insane and frightening"? Are you frequently terrified by telecommunications?
- furyg3 12y agoI can't speak for him, but it terrifies me that we expend so much energy and capital to completely remove any sort of human reflection from the operations of our global economy.
- gd1 12y agoSo you're on hacker news, but you're terrified about automation and telecommunications, because it "removes any sort of human reflection". But only in this one particular application no doubt. Fitting that the towers are in Holland, maybe you can go and throw some clogs at them.
- Bootvis 12y agoWell said, but Belgium isn't in Holland ;) For some reason a relatively large number of players in this space are Dutch though.
- gd1 12y agoOops, my mistake. I tend to lump the Flemish in with the Dutch without thinking.
- conradfr 12y agoI don't think reading some news and HFT have the same impact on the global economy. http://en.wikipedia.org/wiki/Knight_Capital_Group http://en.wikipedia.org/wiki/Knight_Capital_Group
- yummyfajitas 12y agoWhat do you believe was the impact of KCG on the global economy? Take these graphs into account when answering: http://www.chrisstucchio.com/blog/2012/flash_crash_flash_in_the_pan.html http://www.chrisstucchio.com/blog/2012/flash_crash_flash_in_...
- thix0tr0pic 12y agoI wish I had something more relevant to add but, hello from a former Mahwah resident
- MrBuddyCasino 12y agoHFT profits have fallen, and will probably continue to do so. If at one point some of the hardware becomes superfluous because it is too expensive to maintain, what is a good use of a low-latency 100MBit link? Tele-medicine? People are lamenting the ill-directed use of capital to build all this stuff, but maybe that becomes one day a valuable by-product.
- jzwinck 12y agoThe towers have been repurposed once and the same can be done again. Use them for BASE jumping as one in the article already is. But think of the network equipment--how many advancements in the Ethernet, TCP, and UDP that we all know and love have been partially funded or prompted by people willing to pay to ride the bleeding edge? Several years ago, UDP multicast in Linux suffered a very serious performance regression. Who pushed to get it fixed? An HFT firm. Now everyone has well-performing UDP multicast in Linux. Or how about Arista Networks? Back when they were called Arastra they got their start largely by selling US $25K switches to HFT folks. Now they're selling for "the cloud," and lots of people can benefit from higher performance networking.
- gretful 12y agoit's almost as if capitalism works...
- apilosov 12y agoIndeed. If you look at the advances in technology, HFT industry is one of very few that can afford to engage in long-payoff expensive projects. For example, things that we've worked on (balloons) are similar to what military has been trying to do for 20+ years, and what Google is doing with Project Loon. see our PR: http://www.prnewswire.com/news-releases/innovator-windy-apple-announces-transatlantic-plans-and-offers-promotional-pricing-for-new-york-to-chicago-microwave-network-276622811.html http://www.prnewswire.com/news-releases/innovator-windy-appl... Anything related to wireless modulation/demodulation also has implications for 5G networks and satellite broadcasting (most of 'delay' of satellite video signal actually is from encoding/decoding buffering, and is reducible).
- h0ba 12y agoI wonder if they take the extra time and latency to encrypt their traffic. Is it possible to intercept a message by flying a drone in the path of the microwaves?
- mmaldacker 12y agoLegal problems and technical problems aside, what are you going to gain by intercepting the traffic? Most of the traffic is going to be market data and order data which are public information (well, order data is public once it hits the exchange). You can take advantage of knowing about order data before it hits the exchange but then you'd have to transmit that information extremely fast, which using a drone (and against those huge radio tower) is going to be pretty much impossible.
- aaren 12y agoYou could intercept and then re-emit false market data, then trade against whatever position this puts the users of that data in. Whether you could do this, and do it without being noticed, I'm not so sure.
- scottlocklin 12y agoYou're going to use ... what ... to re-remit false market data? A model airplane, compared to a giant tower designed to send microwaves over vast distances. Sure, that sounds possible. As for intercepting the signal for profit ... what are you going to do with it? The microwaves are already the shortest path.
- aaren 12y agoI agree, it would be technically difficult. My point is that there is a mechanism by which you could profit: false market data. Whether you could remain undetected and whether this could actually be implemented technically, legally or logistically seems uncertain.
- frandroid 12y ago
- mattmanser 12y agoDoes anyone know why it makes sense to make the base of the tower diminish to a point? Seems like an odd thing to do unless there was a good reason for doing it!
- gsg001 12y agoThat is to allow the tower to be flexible to wind induced vibration. If it would have been a standard three legged foundation then the constant vibration would have introduced cracks leading to unnecessary stiffening.
- tfgg 12y agoI'm not an engineer, but it seems like having a single pivot at the bottom of a large mast would be favourable -- it'd allow the mast to freely flex in winds while being constrained by the support cables without causing damage, whereas a small base might just crumple if flexed too far. A rigid base would have to be extremely strong to supply the promised rigidity, small base means big force to supply the turning moment. You can think in terms of it being a Dirichlet (fixed but flexible) vs. Cauchy (fixed and unflexible) boundary condition. Not to mention it being unnecessary; the only advantage I can think of is that it might exclude some undesirable oscillation modes, which is probably easier to achieve by attaching support cables at various points along its length.
- shubhamjain 12y agoI know, HFT is insanely competitive in developed markets and there is no way an amateur can enter this segment but what about emerging markets like that of India. Is it possible to exploit HFT without expensive infrastructure, or million dollar code?
- lmm 12y agoIf you're not competing with anyone then sure. The algorithms can be found in economics textbooks, the implementation isn't hard if you don't need insanely low latency. The trouble is that if you get your bids in slower than everyone else (with penny spreads there is no way to compete on price) then no-one's going to trade with you.
- yummyfajitas 12y agoIn India the tick sizes tend to be 1-5 paise << 1 US penny. Over there it's actually a price competition game rather than a speed game. http://asiaetrading.com/resource/securities-tick-sizes/ http://asiaetrading.com/resource/securities-tick-sizes/ Incidentally, for anyone who wants to stop HFT, all you need to do is copy the Indian tick size. http://www.chrisstucchio.com/blog/2012/hft_whats_broken.html http://www.chrisstucchio.com/blog/2012/hft_whats_broken.html
- minimax 12y agoI think you are oversimplifying. In the US you can compete on price at a subpenny level by posting at an exchange with inverted (taker/maker) pricing. Shares posted at BYX are really $0.004/share cheaper than BZX, and most smart order routers will take at the inverted exchanges first. Also, changing the tick size won't eliminate the race to 0 (or c) because there are other advantages to low latency execution beyond just getting good queue priority at the inside price. One obvious example is quickly canceling or modifying your orders when the price of a related instrument moves.
- yummyfajitas 12y ago
- neuralk 12y agoFantastic article, even better than the first. This is exactly what I enjoy discovering on HN. I hope he suffers no repercussions with respect to his trespassing, although it seems the worker who left the tower open and unattended might have some explaining to do. You think since another tower had been attacked earlier this year they might have installed security cameras. I wonder why these towers seem to lack security given their importance to their owners.
- deleted 12y ago[deleted]
- lun4r 12y agoNew post: https://news.ycombinator.com/item?id=8374613 https://news.ycombinator.com/item?id=8374613
- quinndupont 12y agoDoes anyone know if the author's book was ever translated? http://www.lekti-ecriture.com/editeurs/Cinq-Six.html http://www.lekti-ecriture.com/editeurs/Cinq-Six.html Its odd title---"5+6"---makes Googling for it very difficult. In fact, does anyone know the author's name?
- shabble 12y agoI believe it's http://www.amazon.co.uk/6-5-Alexandre-Laumonier/dp/2930601108/ref=dp_ob_title_bk http://www.amazon.co.uk/6-5-Alexandre-Laumonier/dp/293060110... (although that's still the french version) And the author is https://twitter.com/SniperInMahwah https://twitter.com/SniperInMahwah I do hope there is an english version around, it's definitely something I'd like to read.