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How To Profit From Planetary-Scale Computing 178

Posted by samzenpus
from the min-maxing dept.
An anonymous reader writes "MIT physicist Alex Wissner-Gross and mathematician Cameron Freer have devised a technique for exploiting geographic location in high-frequency trading, reports FastCompany. From the article: 'We view this work as one of the first serious, credible justifications for covering the planet's surface with computers. [...] We've perhaps identified a new type of natural resources that sovereignties might take advantage of.' Physicist and hedge-fund manager Jean-Philippe Bouchaud says, 'This shows that the technological arms race to extract every penny from high-frequency mechanical arbitrage will soon reach its ultimate limits.'"
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How To Profit From Planetary-Scale Computing

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  • FIRST!!!!! (Score:3, Funny)

    by Anonymous Coward on Sunday November 07, 2010 @06:04PM (#34157108)

    Due to geographical locality!!!!!

  • 'This shows that the technological arms race to extract every penny from high-frequency mechanical arbitrage will soon reach its ultimate limits.'

    Limits? Only if we stack them one computer high. If we start piling them up - especially those little mac Mini's - we'll exceed these perceived limits in no time.

    Now if you'll excuse me I have to go invest in companies that sell outdoor extension cords for electronic trading workstations.

    • Re:Limits? (Score:5, Interesting)

      by camperslo (704715) on Sunday November 07, 2010 @07:02PM (#34157468)

      These guys go too far. One of these days we'll have botnets doing trading with funds from sniffed credit/debit info. They could even pay back what they took... then profits get dumped anonymously to campaign funds. Botnets do get free-speech rights don't they?? (they may have an opinion on capital gains taxes, or want to own broadcast stations)

      If it makes anyone feel better, call that pile of computers a bank and lend it some "government" money

      Trading in those strange mortgage death futures is too risky, botnet futures are the new thing.

      Cylons and Skynet Terminators will have their own electronic religion making them tax exempt.

      • Re: (Score:3, Insightful)

        by Anonymous Coward

        These guys go too far. One of these days we'll have botnets doing trading with funds from sniffed credit/debit info. They could even pay back what they took... then profits get dumped anonymously to campaign funds. Botnets do get free-speech rights don't they?? (they may have an opinion on capital gains taxes, or want to own broadcast stations)

        If it makes anyone feel better, call that pile of computers a bank and lend it some "government" money

        Trading in those strange mortgage death futures is too risky, botnet futures are the new thing.

        Cylons and Skynet Terminators will have their own electronic religion making them tax exempt.

        That people are doing this is a sign of a broken fiancial system (as if fiat currency based on debt didn't already establish that). They are not producing anything. They are buying low and selling high units of wealth that others have produced. They are not creating wealth, they are redistributing it.

        This is the kind of shit that has madmen and economists thinking you can forever grow an economy in a finite world with finite resources. It's also the kind of shit that encourages people to view stocks

        • Re:Limits? (Score:4, Insightful)

          by Merls the Sneaky (1031058) on Sunday November 07, 2010 @09:02PM (#34157996)

          You know how you can avoid ever having a huge national housing market crash? Easy. Limit the purchasing of non-commercial residential homes to people who actually intend to live in them. Do that and DON'T make "securities" out of them. Then you can't have a bubble in the first place -- no bubble, no burst.

          What do you do with all the people renting investment properties now because they are not in a position to buy a home? If it wasn't for people investing in property there would be no rental market. I agree with you in principle but adjusting one thing has an effect on others. Solving the next problem then becomes the issue.

          • Re: (Score:3, Informative)

            by foniksonik (573572)

            Without an arbitrary investment in rental properties housing prices would fall. Supply and demand. It's a fallacy to think that if you flood the market with homes prices will drop never mind the current bust scenario. It is the land that has value and by turning land into investment properties you make land more scarce for those who would buy a home to live in. This drives up prices for the land itself. Without rental properties the developers would be out as they need those investors to buy up the surplus

          • by Nursie (632944)

            Without the massive inflation of the last decade, how many of us do you think would have bothered with renting?

        • Re: (Score:3, Insightful)

          by Sean Hederman (870482)

          This is the kind of shit that has madmen and economists thinking you can forever grow an economy in a finite world with finite resources

          Umm, you can. Sure, there are far too many people getting paid well for completely non-productive work, but if I spend two weeks creating a compiler that makes me and my team twice as efficient I have not detracted from anyone else, but have grown the productive capacity of the world by a small amount. Economics is not a zero sum game.

          Additionally, those "finite resources

        • Re: (Score:3, Insightful)

          by utahjazz (177190)

          That people are doing this is a sign of a broken fiancial system (as if fiat currency based on debt didn't already establish that). They are not producing anything. They are buying low and selling high units of wealth that others have produced. They are not creating wealth, they are redistributing it.

          The are producing something, liquidity. Liquidity has value. It's like saying cab drivers don't do "real" work, they just redistribute people who do.

          • by SETIGuy (33768)

            The are producing something, liquidity. Liquidity has value. It's like saying cab drivers don't do "real" work, they just redistribute people who do.

            So if I steal the mail from several Realtors' mailboxes, hack their emails and bug their phones so I can undercut bids and resell at a profit, I'm not doing anything wrong. I'm creating liquidity! What a great business model.

        • by ultranova (717540)

          They are not producing anything. They are buying low and selling high units of wealth that others have produced. They are not creating wealth, they are redistributing it.

          They aren't redistributing wealth, they are stealing a few pennies from every trade. Which might create a market opening for a stock exchange with synchronized trading - that is, a stock exchange where all trades are processed once per minute at the same time, making it impossible to do "high-frequency" parasiting.

          This is the kind of shit

        • by SETIGuy (33768)

          They are not creating wealth, they are redistributing it.

          Redistribution is such a nice word for theft. Ah, who cares, it's getting redistributed to the rich, and that's OK. We'd better not see a botnet redistributing wealth to the poor. That would be communism.

    • by EdZ (755139)
      Not quite the ultimate limit. Latency between sites could be reduced by laying cables along the shortest path between remote sites: rather than over the surface of the earth, lay them straight through the core of the planet!
  • Wow! (Score:4, Funny)

    by Jah-Wren Ryel (80510) on Sunday November 07, 2010 @06:07PM (#34157126)

    So, just when you thought HFT couldn't get any worse of a rep, now its going to turn our world into a dystopian matrix/terminator/cleopatra2525 place.
    At least there's a chance of hot babes in leather and armored bikinis though! That's gotta count for something.

    • by siddesu (698447)

      there's a chance of hot babes in leather and armored bikinis

      Not unless they hire an eccentric Hollywood type for a manager. TFA didn't mention such thing.

  • by Anonymous Coward

    This doesn't create any value for anyone.

  • by Kupfernigk (1190345) on Sunday November 07, 2010 @06:10PM (#34157148)
    To what extent is so called high speed trading actually turning into electronic non-shooting warfare? Some of the techniques described are essentially variations on DDOS and spam. The recent Scandinavian case throws into question the point at which the techniques shade into illegality - is it just that if you or I do it, it is illegal, whereas if a bank does it, it's business as usual?

    And to what extent is this latest proposal, while apparently to do with the distance between exchanges, also actually about putting resources into jurisdictions which have perhaps more elastic definitions of what constitutes legal trading?

    On previous form, this will probably get moderated troll or flamebait. But it's actually two questions that I have never had adequately answered, except for the usual "you wouldn't understand" from the traders. If I, a graduate systems developer with further education in economics, can't understand them, what's the betting that our elected representatives can?

    • by entotre (1929174) on Sunday November 07, 2010 @07:01PM (#34157460)

      what's the betting that our elected representatives can?

      Don't worry, they have lobbyists to help them.

    • Re: (Score:3, Interesting)

      by turtleshadow (180842)

      Once long ago there was "a href="http://dssresources.com/history/sshistory.html"> vis-a-calc. Who would of thought today we'd be in the mess we are in.

      Once long ago there was real and imminent fear that mutual self destruction would occur, and almost did, because the Nuclear C&C systems act out commands fast. Humans were inserted to cool things off.

      Wow, now the Wall Street(s) have wired the financial & economic system together with less safeguards of global meltdown when the spreadsheets (now h

    • Re: (Score:3, Interesting)

      by TubeSteak (669689)

      And to what extent is this latest proposal, while apparently to do with the distance between exchanges, also actually about putting resources into jurisdictions which have perhaps more elastic definitions of what constitutes legal trading?

      Lolwut? Did you RTFA?
      I'm making an educated guess, but I'd say the answer to your question is "zero extent."
      If you want to trade on [exchange] you have to play by [exchange]'s rules.
      Basing yourself in another jurisdiction will not keep [exchange] from locking you out for bad behavior.

      If I, a graduate systems developer with further education in economics, can't understand them, what's the betting that our elected representatives can?

      Knowing how stock markets physically work isn't necessarily the kind of thing they teach you in economics.
      Maybe you should keep furthering your education and audit some relevant business classes.

  • by TubeSteak (669689) on Sunday November 07, 2010 @06:15PM (#34157186) Journal

    Some of the more involved trading strategies exploit price fluctuations between separate exchanges: traders construct complex automated financial instruments designed to seek out and exploit price differences between a range of different shares or commodities on these exchanges. The uncertainty of price movements means that individual transactions cannot guarantee a profit, but firms can make steady profits by making millions of transactions each day.

    Maybe we should be exploring cheaper ways to create market liquidity without allowing firms to siphon off profits through pure arbitrage.

    • by Nerdfest (867930)
      Artificially limiting speed, or delaying orders until fixed points for example. When people start gaming the system, yes, measures should be put in place.
      • by Lehk228 (705449)
        15 minute ticks, long enough for a human mind to react to and consider changes in strategy, even do a little bit of research
        • by Rich0 (548339) on Sunday November 07, 2010 @08:02PM (#34157752) Homepage

          I don't get why we can't even just have one-day ticks. Every day an order book accumulates, and at 5PM the exchange executes everything at the price that generates the most volume. Priority is given to sellers who offer the lowest price and buyers who offer the highest price. Within a price orders are executed in random order.

          The book is kept secret until after all trades are settled. So, you can't see if the price is trending towards a price you like and then put in a bunch of sells for 0.01 to get ahead of the line - if you put in that price you might just find your trades executing at that price.

          With such a system ordinary investors can compete with investing houses. Bad news means that everybody loses out at the same time, and the insiders don't have nearly the same advantage (getting news 15 minutes early can make a HUGE difference today). You could even make the trade settlement time midnight or something like that so that it is well after the business day so that last-minute news has more time to get around.

          You wouldn't need so many market-makers and other forms of arbitrage since the total daily volume of a stock will tend to guarantee that there will always be buyers and sellers. Market makers could still fill a niche in low-volume stocks making sure that there are always buy and sell orders in the book.

          You could even go a step further and execute trades once per week/month/etc - that would start to make investing more of a long-term thing and less of exploiting market psychology..

          • by turbidostato (878842) on Sunday November 07, 2010 @08:52PM (#34157934)

            "I don't get why we can't even just have one-day ticks."

            I used to think the same, but now I feel some things are still untied.

            "Every day an order book accumulates, and at 5PM the exchange executes everything at the price that generates the most volume."

            It still would make it worth waiting to 4PM to order in case there are interesting late news. And then waiting till 4:50, 4:59, 4:59:59...

            "Within a price orders are executed in random order."

            Then I'd make sure not to issue a 10 million dollars order but 10 million orders for one dollar (or a cent, or a millicent or whatever is the lowest order).

            "the insiders don't have nearly the same advantage (getting news 15 minutes early can make a HUGE difference today)"

            But insiders still could take advantage of news produced at 4:59 that, depending on the system other couldn't take advantage of.

            "You could even make the trade settlement time midnight or something like that so that it is well after the business day so that last-minute news has more time to get around."

            You know the world is round and economy is global, don't you?

            • by bertok (226922) on Monday November 08, 2010 @01:44AM (#34159288)

              All of the potential issues you have raised could be fixed using just two minor tweaks to the grandparent's suggestion:

              - Trade every hour, on the hour (this is unaffected by timezones)
              - Trade 24/7 (it's done by computers, after all, so it makes zero sense for an exchange to be "open" at only certain times of day)
              - Every trade is logically split into some small unit (share, dollar, whatever), and randomized, or an algorithm is used that effectively trades simultaneously in a completely fair way.

              Done.

              Problem solved.

              The current situation is not necessary and the alternative proposed by the gp has no real issues except that a bunch of HFT traders would lose their jobs. Boo-friggin-hoo.

        • Adding a tick rate is so obviously the solution that the only reasonable explanation for it not being mandated already is corruption.

    • by dpilot (134227) on Sunday November 07, 2010 @06:53PM (#34157424) Homepage Journal

      How about this as a backup...

      Investment doesn't, in and of itself, create wealth. Investment is putting money in the hands of people who CAN create wealth, but don't have enough money to do so on their own. The idea is that the investers should be rewarded for taking the financial gamble, and the people they invested in should be rewarded for having created something valuable.

      High Frequency Trading screws them both.
      High Frequency Trading is anathema to the very concept of investment - and the stock market.
      We'd all be better off if the HFT people simply went to the races, instead.

      • by Kosi (589267)

        Investment is putting money in the hands of people who CAN create wealth, but don't have enough money to do so on their own.

        Often it's little more complex: it is putting money in the hands of people who will give a little of that money to the people who do the actual work and/or own the resources needed to create that wealth and keep the rest for themselves.

        • Re: (Score:3, Insightful)

          by dpilot (134227)

          But that was really my point. If the goal is to create wealth, anything that "disrupts" the flow of money between the wealth creators and the investors is counter-productive. Any "inefficiency" in that flow impairs the creation of wealth.

    • by Archangel Michael (180766) on Sunday November 07, 2010 @07:34PM (#34157616) Journal

      A) Require 1/2 hour averaging for all trades. This will stop most arbitraging on two accounts: 1) it stops exploiting split second inefficiencies that can only be spotted by computers, 2) creates doubt to which price one is actually paying.

      B) Tax all automated computer trades at 1%. Takes the profit motive out of computerized trading.

      C) Charge all revocations of unused (non-expired) puts and calls a flat fee. This is to prevent flooding the market with option trades that people have no expectation of completing.

      D) Tax profits made by short term traders at a higher rate than long term holder. I propose having several rates for capital gains based on how long a person holds a stock. Example (illustrative only) Less than two weeks @ 50%, less than six months@35%, 1 year @ 33%, 5years @25%, 10 years @10%, greater than 10 years @0%.

      The problem isn't liquidity. Never was. Market is plenty liquid at 1/2 hour intervals. Low volume stocks need lower liquidity than high volume stock. The problem is exploitation of timing at split second intervals which can only be accomplished by computers, and has no basis in fundamental market principles. The goal should be to limit trades to people who actually hold stocks as investments, not in people making money off market fluctuations.

      • by sjbe (173966) on Sunday November 07, 2010 @09:39PM (#34158208)

        A) Require 1/2 hour averaging for all trades.

        B) Tax all automated computer trades at 1%.

        Result - trading moves to another exchange where this is not required. Your solutions depend on international cooperation between government and exchanges, all of which compete with each other. Good freaking luck getting policies like that instituted.

        • SEC regulates the markets already.

          If what you are saying is correct, you are saying that those regulations issued by law and the SEC are bogus and ineffective window dressing.

          If that is the case, then we should remove all the restrictions and let it be a free for all.

          However, if you're not right, then the SEC has all the power needed to carry market reforms I mentioned.

          The question is, does SEC have power to enforce market rules and regulations or not? If not, then it would be much better to quit pretending

  • by Anonymous Coward

    I would say anyone knowledgeable and not directly benefiting from HFT would rather take this as a serious, credible justification to ban this tax on serious, honest investors.
    But Wallstreet's buddies in Washington will make sure this won't happen until another flash crash takes the DOW pinning for the Fjords.
    Hope you voted for change and hope, lulz.

  • by goodmanj (234846) on Sunday November 07, 2010 @06:32PM (#34157306)

    You're thinking too two-dimensionally. Think carefully: what location minimizes the average distance to every spot on the Earth's surface? I'll tell you right now it's not in Siberia! But you should probably spend some extra money on the air conditioning system for your server farm if you want to set up shop there.

    • by zill (1690130)
      My position being relocated to Hell? Fine, but I expect a huge relocation bonus and a raise for all this trouble.

      Better brush up on Windows Server 2008 too, since that's probably all they're running down there.
    • by Tailhook (98486)

      Think carefully

      Your strategy is doomed! Surface light time from NY to London is 0.0186ms while it's 0.0212ms to the center of the Earth from either point. A tunnel bored directly between London and New York would be even faster and require less cooling. Only two points intersecting the center would be competitive with my Earth Chord Trading Tunnels!

      • by goodmanj (234846)

        Ah, but if you want to trade with New York, London, *and* Shanghai, your NY-London chord doesn't look so good. In the limit that you want your trading center to simultaneously minimize the distance to *every* point on the Earth's surface, the center of the Earth is the way to go. ...still not sure why my OP got modded "insightful", I was shooting for "funny". But I'll take what I can get.

      • Re: (Score:3, Interesting)

        by lennier (44736)

        A tunnel bored directly between London and New York would be even faster and require less cooling. Only two points intersecting the center would be competitive with my Earth Chord Trading Tunnels!

        Your idea intrigues me and I would like to subscribe to your burrito delivery service [idlewords.com].

  • Highly Amoral (Score:5, Interesting)

    by gweihir (88907) on Sunday November 07, 2010 @06:35PM (#34157316)

    HFT is done by the greediest scum of the earth. It is an approach that is highly instable and can do tremendous damage. It is high time this practice is outlawed. Considering that fast stock trading does not produce anything, but only serves to shuffle money around, tolerating such a destabilization risk is completely unacceptable.

    Personally, I would add a mandatory random delay in the 15-30 minute range to each stock transaction. Or maybe even a few hours. This would curb speculation, while at the same time beneficial effects, like a company getting money to invest from an IPO would still work.

    • Re:Highly Amoral (Score:5, Interesting)

      by peter hoffman (2017) on Sunday November 07, 2010 @07:38PM (#34157632) Homepage

      If HFT were to be legislatively controlled, it seems to me the most obvious way to do it would be by modifying the long and short term capital gains taxes to create a progressive system: the longer you hold the asset before taking the capital gain, the less tax you pay. If you had to pay 99% tax on a gain resulting from possessing an asset for less than 1 minute things would be a lot different.

      This is not to say that I favor that solution, it's just one that occurs to me. I think there's a solution that doesn't require the use of force. If I were the CEO of a publicly company, I would not want to be listed on an exchange that allows HFT. If I were an amateur investor in stocks, I would not want to invest in companies listed on an exchange that allows HFT. As a result, there's clearly a market for a 'natural' exchange as opposed to one that is 'on steroids'.

      • Isn't the problem that it's played as a volume game? If they're only making 1c in the dollar back after tax, they're still making money on it - and should they turn a loss they'd instead have 99% of the risk subsidised by the taxpayer in the form of deductible capital losses. I'd be very surprised if any of the companies involved traded through just one tax file, so with the (in)appropriate book-keeping the net outcome of your system may just be to make it a tax dodge as well.

    • It actually does produce something and that is a high deal of liquidity. Something that you have in the market right now that is nice is that you can buy or sell any stock any time you want. Because of all this day trading, HFT, there is always stock being shuffled around, and in rather substantial amounts, so you can always get in or out of a stock when you please. That is a benefit.

      However it is not a benefit that is worth the instability HFT causes. We need to fix the system, either with a time based tax

    • Bull*$#!
      ,br>Explain to me how it is immoral to trade frequently or infrequently What does HFT even mean ? What arbitrary frequency have you chosen to be the immoral one ?
  • by xquark (649804) on Sunday November 07, 2010 @06:36PM (#34157324) Homepage
    This technqiue wont work with orders processed in dark pools. And as the trends are showing larger and larger proportions of ADV are being done in dark pools. I would think gaming dark-pools would be the primary objective and not going after some boring 80s movie plot.... (Can anyone remember "Fair Game" with Cindy Crawford).
  • Accelerando (Score:3, Funny)

    by Guppy (12314) on Sunday November 07, 2010 @06:37PM (#34157328)

    This shows that the technological arms race to extract every penny from high-frequency mechanical arbitrage will soon reach its ultimate limits.

    Not yet, not until the Vile Offspring [wikipedia.org] are born, and consume their parents...

  • it got destroyed just 5 minutes before the question was computed.
  • Time for a rant... (Score:3, Insightful)

    by brxndxn (461473) on Sunday November 07, 2010 @06:49PM (#34157404)

    God dammit! I'm pissed off again.. I'm pissed off because everyone wants to 'study' HFT or 'discuss' HFT.. and no one seems to understand the big picture! HFT is ruining the fucking stock market. HFT is destroying the opportunities for the middle class.. destroying their retirements.. and ruining the confidence in the market. HFT is making the criminally rich even richer! Everyone likes to talk about HFT and bitch about it - and the people that benefit most from total stupidity that is HFT are the ones that get to enact the policy through lobbying and backroom revolving-door politics.

    HFT does one thing... It exploits the gaps in bid and ask price during execution to make money off the actual market orders. But, if the market is no longer correctly offering 'market' prices because of instantly-changing outside influences, how the fuck is it still a market and not a scam? The only people saying HFT is a good thing are the people benefiting from HFT.

    There's tons of easy ways to fix the problems created by HFT exploiting.. Here's a few ideas:

    1. random delay.. Issue an 'instantaneous' delay in ALL trade execution from all firms. In essence.. make the delay long enough to completely ruin HFT but short enough that no human executing a trade would ever be affected.

    2. trading tax.. Tax all trades by a negligible amount. Firms that actually invest will not be affected.

    IMO, this article is yet another example of solutions for a problem by exacerbating the problem.. So, fuck you, MIT physicist Alex Wissner-Gross and mathematician Cameron Freer.

    • by christoofar (451967) on Sunday November 07, 2010 @07:41PM (#34157652)

      Hear hear.

      I pulled out 100K out of the markets because I can't just put up with HFT anymore. So Buy and Hold was a bad idea. Now investing is a bad idea.

      You can't put in a stop-loss order anymore on anything you own because every day you have to worry if a mini-flash crash hit one of your issues and triggered it, then the SX won't unwind YOUR trade but they are glad to unwind the fuck-up trades the HFT guys caused.

      • Re: (Score:3, Insightful)

        by TooMuchToDo (882796)

        +1

        After interviewing with an HFT firm in Chicago and understanding how their business worked (I was to work with the CTO to help squeeze every last microsecond out of their trading infrastructure colo'd at markets around the world), I cashed my entire 401k/IRAs out of the stock market. I might as well go to a casino.

      • Re: (Score:2, Informative)

        by kaiser423 (828989)
        Damn straight. I don't think that everyone is seeing the total loss of confidence and how jaded the younger generations are becoming with the whole stock market fiasco.

        Lots of us just are refusing to play that game at this point.

        It's sad, when I can go on a microfinance site, give money to some random, nearly unverified person across the internet, and not only have better confidence that my money is being well-kept, taken care of and safe, but also providing a better return than putting that money in
        • Re: (Score:3, Informative)

          by Just Some Guy (3352)

          I presume you're talking about Kiva or something very similar. If so, I agree completely. I've lent my initial stake about 10 times, and each time it's an actual investment. I picked companies that I though could use effectively use the money, sent them the cash, then watched as they repaid it. It's a gratifying feeling, I tell you.

    • by Reteo Varala (743)
      Ruining the stock market =/= ruining the market. The stock market is simply a way to trade ownership in government-regulated organizations, big hulking behemoths that only want one thing... more money. They will make substandard products, cut corners like crazy, perform unconscionable acts to do so, and lobby to alter the laws to benefit them. It is because of this system that copyrights have gained an order of magnitude in length, software patents exist, the US has been waging wars for oil, and all mann
    • "2. trading tax.. Tax all trades by a negligible amount. Firms that actually invest will not be affected."

      I would agree but, I presume you are advocating such regulation in the U.S. Unless other countries share the same view and tax the heck out of HFTs the problem is not going to go away. I could see the EU and Canada joining in, but there are many other questionable countries that probably won't participate. In fact some might even *want* to participate if only to effect the American exchanges.

      I think a c

      • Unless other countries share the same view and tax the heck out of HFTs the problem is not going to go away. I could see the EU and Canada joining in, but there are many other questionable countries that probably won't participate.

        Driving the assholes to another exchange isn't a bug, it's a feature. Having the only exchange that everyone can trust is a pretty good position to be in.

    • You do realize that your sig says we need more Ron Paul, but you're advocating a rather significant intervention with the free market.

      I happen to agree with both sentiments, but just thought I'd point that out :-P
      • by brxndxn (461473)

        I believe that Ron Paul's belief would be the Libertarian idea that preservation of free markets should be enforced. HFT only inhibits the free market.. But even further, why does it even need to be government that makes the changes I suggested? Any of the current exchanges are free to make those changes..

    • Re: (Score:2, Interesting)

      by EdgeyEdgey (1172665)
      3. Disallow orders to be canceled unless open for x seconds.
  • by Anonymous Coward

    Step 1: get all the people responsible for HFT to move to a base at the bottom of the ocean.

    Step 2: turn off the oxygen.

    Step 3: Celebrate, then start thinking of how to get all the lawyers to move to Siberia as well.

  • by drolli (522659)

    So basically humankind does not have enough problem to solve? We really need to create incredible complicated games to keep our computer busy?

  • This is something that has a very high potential to cause a real problem in the markets... and already has several times, they just weren't high enough profile to get the publics attention. But if they really bring down the markets for a day, or cause some sort of crash that impacts the average persons 401k or pension, governments all over the world will be happy to jump on the "Rich people are the bad guys" bandwagon and outlaw this sort of thing outright. Simple laws like, you must own a stock for a minim
  • We view this work as one of the first serious, credible justifications for covering the planet's surface with computers.

    Uhh... it doesn't seem like a very good one. If there is any good reason to "cover[] the planet's surface with computers", it had better be doing something more useful than providing some fucking stock market liquidity.

  • I think the greatest advantage of planetary computing is in its ability to find questions for provided answers. For example, if you were to have a question regarding Life, The Universe, and Everything, then planetary computing might be useful.

  • by Anonymous Coward

    Let me begin by saying that I'm posting anonymously because I'm a professional in the financial industry.

    First, I'll explain the inter-exchange arbitrage being used here: it comes in a few forms. Imagine the Philadelphia exchange has orders on its book for a share of Apple Inc stock (ticker AAPL) as follows: 200 to buy for $308.12 and 300 to sell at $308.14. The New York exchange has 500 to buy for $308.13 and 100 to sell at $308.14 . There's nothing anyone can do to make a profit.

    Then things change.

  • by Animats (122034) on Monday November 08, 2010 @03:12AM (#34159532) Homepage

    I'd thought of this a few months ago, after reading the detailed report on the 2010 flash crash. [wikipedia.org] Speed of light lag wasn't quite an issue, but it was close. Stocks are mostly traded in New York, while options are traded in Chicago. Round trip time between the two is at least 7ms. That's exploitable. Lag isn't just for video gamers any more.

    Unfortunately, this isn't a joke. There is now special purpose hardware for high frequency trading. [stoneridgetechnology.com] General purpose computers aren't fast enough for high frequency trading. This 1U device contains FPGAs, and custom trading algorithms are written in Matlab, compiled into Verilog, and loaded into the FPGAs.

    Vendors are advertising "8 microsecond average latency, wire to application". [redlinetrading.com] Not milliseconds, microseconds.

    • the Quake kids have grown up and are now playing the stock market, and these are their 'gaming rigs'.

      Do they come with lots of blue neon and a front panel which looks like Optimus Prime?

  • http://www.pdfernhout.net/recognizing-irony-is-a-key-to-transcending-militarism.html [pdfernhout.net]
    This applies equally well to financial organizations: "Likewise, even United States three-letter agencies like the NSA and the CIA, as well as their foreign counterparts, are becoming ironic institutions in many ways. Despite probably having more computing power per square foot than any other place in the world, they seem not to have thought much about the implications of all that computer power and organized information to

"More software projects have gone awry for lack of calendar time than for all other causes combined." -- Fred Brooks, Jr., _The Mythical Man Month_

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