Contemplating Financial Trading At Picosecond Resolution 448
pbahra writes "One complaint made of the modern stock market is that it is concerned too much on the short term. A second is a long time in cash-equities trading. Four or five years ago, trading firms started to talk of trading speeds in terms of milliseconds. But in recent weeks trading geeks have started to talk about picoseconds, in what is a truly mind-boggling concept: a picosecond is one trillionth of a second. Put another way, a picosecond is to one second what one second is to 31,700 years."
Worthless (Score:4, Insightful)
These people are parasites. They provide nothing of value to the world; they just take. This crap should be illegal.
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I don't think it should be illegal, I just think one dimension of the assessed taxes should be length of time the asset is held. Set thresholds at, say
1 second -- 99.99% marginal tax
1 minute -- 99% marginal tax
1 hour -- 95% marginal tax
1 day -- 90% marginal tax
3 months -- 50% marginal tax
1 year -- 15% marginal tax (today's capital gains rate)
10 years -- 10% marginal tax
I actually know a local guy who implements trading algorithms in programmable-gate-array hardware for the purposes of instant trading.
Re:Worthless (Score:5, Interesting)
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No, the GP is correct, I think that the tax rates aren't right, but the idea is definitely sound, anybody that's trading on sub second intervals is definitely not engaged in otherwise legal behavior. The people that are doing that are trading based upon insider knowledge not available to the individual investor. And even the people trading in intervals of less than a minute are more likely to be scoundrels than people trying to correct a mistaken trade.
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Re:Worthless (Score:5, Insightful)
Nothing that crazy is needed just add a 10c per trade tax, the only problem is all the major trading countries would need to do it simultaneously or else the market would just move.
Everyone says that, but is it true? Look at who is saying it. Mostly the people we know for being in bed with the stock market exploiters. The same people who bailed out the big banks with our tax money, while before and after telling us that they need to cut this and cut that because they don't have enough money.
It's a strawman.
Here's a much more likely scenario:
Imagine one large country or region (the US, or the EU) starts to introduce a trade tax. Say, 0.01% - irrelevant to any real trades, destructive to margin trading. So real trade won't move, because moving would be more expensive. Some high-volume and all margin traders would move. Say the EU starts the tax. So they move to the US, to Asia, etc.
But now the US and Asia and everyone else are in an interesting position. Instead of elaborating on it, let's play it through: The US also introduces a trade tax, but at 0.005% - half of the EU, mostly same effect. Real traders couldn't care less and stay put. Some high-volume traders stay, most margin traders go out of business or move to Asia.
Now Asia's in the same position. A bit of quick thinking reveals that they can make billions in taxes by introducing a 0.001% trade tax. So they do. Real trades stay put, as before. High-volume trades move to Asia, though some move back to the US and EU since operating costs and other factors start being more important than the tax difference. Margin trading stops being profitable unless the margin is considerable enough to be worth it.
Saying that you can't be the first because everyone else doesn't do it ignores the fact that "everyone else" is not a static entity. There are many, many cases throughout history where "everyone else" was just waiting for someone to make the first move.
It's a strawman. Don't fall for it. Anyone saying "we would love to, but we can't, it needs to be introduced simultaneously world-wide." really means "I don't want to".
Worse than worthless (Score:3)
The UK already has such a tax. It is called Stamp Duty Reserve Tax, and is charged at 0.5%.
Not sure if you're trying for a funny mod or not. Anyway, you forgot that in the UK, the stamp duty has an explicit exemption for 'qualifying intermediaries' such as so-called market makers. In other words, the person who buys and holds the shares has to pay the tax, but all of the high-speed trading intermediaries who leeched some money out of the transaction do not.
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Can we move the 15% out to 4 months? I'm just Joe Average, but I make some decent cash selling covered calls 2 to 3 months out. No need to pick on little old me.
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A penny a share tax on any share traded will fix this problem immediately.
It will also dispose of all of the fraudulent "penny stocks" action.
It would also balance the US budget in about 8 hours.
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Yeah, all those disgusting parasite retirees, all those disgusting parasite public-employee pension systems, all those disgusting parasite small companies that want to take advantage of public markets to get the millions of dollars they need to bring their new ideas to the public. That's the only kind of disgusting parasite that will care that the stock market takes a nose-dive and triggers a recession or depression.
Worse than you think :P (Score:5, Informative)
And you also don't understand how deep this goes. This is not about trading fast. They are actually trading ahead of trade execution.
Flash trading is a practice in which some equity exchanges hold orders to buy and sell shares for a split second before making that information public (available to other exchanges). The exchanges' customers can view these prices ahead of other traders for a fee. High-speed computer software can take advantage of that brief period between when an order is placed and when it's executed to allow those members to potentially get better prices and profits by slipping in and making the trade themselves.
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aZwoslIGa5JQ
http://www.marketswiki.com/mwiki/Flash_trade
Now, the time window is about 50-300ms that the orders to be executed are posted and the automated systems can intervene. Basically, if you have orders like following coming in within 200ms (1/5 of a second),
PUT 1000@31
PUT 500@30
PUT 500@30.1
CALL 1000@market
CALL 100@29.5
the flash orders will come in, buy the two sell orders and sell it @ 31 to the market order and you end up with,
PUT 1000@31
CALL 100@29.5
This effectively stole $950 from the market order. But then they will pay 2x the trade fees to the exchange to split in their trades ahead of the others. This isn't about "testing" the market, but simply going right in the middle between transactions and milking them for the most they can. It is not trading - it is stealing.
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Yes, you can go buy straight from the farm (or hire someone to build your furniture); however, this is what people in the market are trying to do but can't.
The analogy would be similar to someone telling a farmer "hey, I like your prices I've seen right now so I'd like a few dozen eggs..." and the farmer puts the eggs on the truck for delivery; unfortunately the trucking company stops by the docks where men of dubious and flexible morals are standing around and they buy YOUR eggs off the truck driver but do
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These people are parasites. They provide nothing of value to the world; they just take. This crap should be illegal.
The computer you used to write that rant was made possible by many, many investors who never even met combining their capital through the stock market to hire the management, hire the engineers, hire the construction workers, buy land and material for the factories, hire people to work in the factories etc, etc.
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The people who put up the initial capital, and who sold when the company had achieved real value?
Sure.
The parasites that suck money out of the system by interposing themselves between other trades at the millisecond scale?
Not so much.
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Re:Worthless (Score:5, Insightful)
Re:Worthless (Score:5, Insightful)
Re:Worthless (Score:4, Funny)
Re:Worthless (Score:5, Insightful)
1) When stuff goes fine they pocket all the profits, but when stuff goes bad, they keep their profits and everyone else pays for it.
2) When they win the bet they keep the money, when they have bugs in their fancy programs and lose money, they rollback the transactions and/or even sue/jail the people who benefited from their bugs (yes this has happened). Note: I'm not talking about bugs in the "casino"'s software but bugs in the software the "gamblers" use to decide on what to bet on.
3) The well connected ones also get to "cheat" - they get to see and do stuff 30 milliseconds before everyone else does. This is a big advantage. Google for that if you don't believe me. This is unfair.
There is really no benefit to society from picosecond trading. All it produces is more fancy excuses the intelligent sociopaths can use to take money from us.
They can talk about liquidity and creating markets but it is all bullshit - just look at what has actually happened.
All that they've created are systems where gamblers can play fancy millisecond[1] games to gamble with OTHER people's money and collect big fees, salaries and bonuses for doing so. When they win big they keep the big profits. When they lose big, they keep their "normal profits" and we have to pay for the losses.
If I didn't have a conscience I'd be happy to do that too - it's free money.
[1] In fact to make the trading fair, transactions should be valid for a second or more otherwise the speed of light makes location matter. Currently they can issue transactions and cancel them within milliseconds before the other traders can act on them.
They steal the difference between buyer and seller (Score:3)
There is really no benefit to society from picosecond trading. All it produces is more fancy excuses the intelligent sociopaths can use to take money from us.
This.
"provide liquidity" is pretty words. They are inserting a middle man in every single trade to leech the difference between buyer and seller.
They are removing huge values from the system without providing any benefit. It should definitely be illegal.
Re:They steal the difference between buyer and sel (Score:5, Informative)
Man, there is so much misinformation in this thread, I could spend the whole day here.
HFT guys aren't stealing money from you- they are actually stealing money from the guys who have been ripping you off for decades- the exchanges, the market makers, the brokers, and everyone else in between.
Think about it- E-Trade and the like have brought down the cost of trading to about $9 a share (there is also the cost of the bid/ask spread, but we will leave that out for now, especially since these days its almost disappeared). How many other businesses do you know that can get away with a $9 transaction fee? Can you imagine going to a garage sale, buying a box of books, and having the seller say "ok that will be $5 + a $9 transaction fee?" That $9 fee is going to all the guys I mentioned above. Not too long ago, that fee was more like $50. But what's even worse is, and this is where HFT comes in, is that when you saw the stock ticker, and saw IBM trading at $80, you could neither buy nor sell that stock for $80. At best, you could buy that stock for $80.08 and sell it for $79.92, though it was just as likely to be 80.25 and 79.75. That "spread" went to a guy called the market maker. The market maker is the guy you actually buy and sell to, you don't directly buy and sell with other people (in our garage sale example, the seller would just bring his stuff to market, and the market maker would buy it off him, and then sell the stuff to you). When you watch movies showing the stock exchange, and everyone is yelling buy and sell, they are actually yelling at the guys in the middle of the floor- the market makers. The market maker collected that spread. In exchange for that privilege, he had some responsibilities- to always buy your stock, no matter if no one else wanted it.
Anyway, for decades this was a very lucrative business. Partially because market structure made the spreads so wide, and partially because it was so easy for these guys to front run, and also the chummy nature of these groups lead to a lot of gentleman's agreements where everyone kind of agreed to not step on each other's toes too often. Then came electronic trading, and subsequently decimalization. The HFT guys came in and just started spiking the volume in the markets, and also acting as market makers themselves to an extent. This has tightened spreads to the point where if you see an $80 print on IBM, you can almost certainly buy it for $80.01 and sell it for $79.99. The result of this means that any "manual" (not electronic) market maker has been wiped out or moved to automated quoting systems. They are tightening the spreads and taking money from the MM's and in some cases side stepping the brokers, and keeping the profit for themselves.
So no, they aren't stealing from Joe Retail trader in any way. If anything, they are helping you- you don't get ripped off when you sell your 50 shares of IBM anymore. Your broker and the market makers are the ones who are being stolen from- market making is now a highly competitive difficult business, and brokers are staying alive mostly by internalizing flow (and the smaller guys who can't do that are scrambling right now, and will have to consolidate).
Sure... keep telling yourself that. (Score:3)
Except taxes are collected post facto (there has to be a transaction in order for it to be taxable) while the middle-man he is talking about is increasing the cost of the transaction by inserting itself INTO the transaction so that you can't complete the transaction at all without paying the middle-man.
Also... besides the fact that taxes can be deducted, reduced, returned etc. etc. taxes are the blood that makes and keeps the civilization alive.
Middle-men are parasites. Nothing more, nothing else.
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Middle-men are parasites. Nothing more, nothing else.
Counterexample: grocery stores. We could go out to a bunch of places to buy the food we need. Or we can go to a single store, a middle man, who has assembled a bunch of stuff into one place. They provide tremendous value in that they save a lot of our time.
HFT does provide value, the before-mentioned liquidity and creation of new markets. You just chose not to recognize it.
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No, now we have somebody saying that basic stock literacy is a good thing if you don't want to lose money in the stock market by making stupid decisions.
Sort of like, if you want to fly a plane, basic aerodynamics & flight controls literacy is a good thing. Sort of like, if you want to drive a car, basic maneuvering and road sign literacy is a good thing.
If you want to participate in the investment system, and you don't educate yourself about basic principles for investing wisely, then you are simply g
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They are inserting a middle man in every single trade to leech the difference between buyer and seller.
Just like the tax man.
Except that the tax man in civilized countries gives back the money for your health care, education, law and order, roads and multiple other things.
Re:Worthless (Score:4, Insightful)
So the only options are 1 picosecond from now or next Thursday? There's no middle ground?
Let's be honest, the only reason picosecond trading is needed is so that as many manufactured trades can happen as possible between two legitimate trades in order to skim money off the only real transaction. Would you tolerate a line of 50 people standing at the grocery store checkout lane whose only function was to hand your loaf of bread along, taking a penny as a fee? It wouldn't bother you that you could have bought the loaf of bread for $0.50 less without them?
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Arbitrage is a good thing, because it DOES provide liquidity. Is 1 picosecond trading mind-boggling? well sure.
Who does this move to picosecond trading effect? The people already doing microsecond trading, which isnt
Re:Worthless (Score:4, Insightful)
Market makers and providing liquidity is important. However, high-frequency trading simply isn't necessary for that. To be more precise, the problem with your line of reasoning is that if you can change your prices only once per minute, then there will be no volatility during that minute, and hence there is no need to change the prices. So your argument regarding spreads is invalid.
The whole millisecond trading thing is just a way to raise the barrier of entry to the market: The people who are big enough that they can afford close proximity and fast connections to the trading system benefit, everybody else is left out. So competition is reduced, which makes the market less efficient.
What should happen is that all those trading systems operate on a heartbeat with a fixed frequency of e.g. one minute. Basically, everybody gets to make their offers, and once per minute all those offers are matched against each other and the outcome, i.e. the transactions that take place as a result, are computed using one of the standard auction mechanisms. After receiving the outcome, traders then have time until the next heartbeat to adjust their offers. This way, the insane barriers of entry are removed, and the functionality of the system remains essentially the same.
Re:Worthless (Score:5, Insightful)
Goldman Sachs has colocated at the NYSE, and is front running the stock market to the tune of 13.4 billion dollars in profit every year, simply because of their location. And they also sell self destructing financial instruments to their own clients while betting against them. Here, it's been in the news. [pbs.org] But I doubt you watch the news.
So, they're fucking cheating shits who do nothing but game algorithms and lie to people to steal their money, and you're a stupid cunt for having such blind faith in an opaque market.
Re:Worthless (Score:5, Insightful)
But then when they lose all their money, and ask me, through the federal government to bail them out, that's when I really get steamed. I want a lot of people to go to jail, both politicians and bankers. Or at a very minimum, rewrite banking law so they never get my money like that again. Is that too much to ask?
This should be the law (and I am quoting Paul Volcker on this, so it isn't economically unreasonable):
ANYTHING THAT IS TOO BIG TO FAIL, IS ALSO TOO BIG TO EXIST. Break them up and sell off the pieces. And sorry for the yelling. This gets me really upset.
The Federal Reserve was set up by banks (Score:3, Insightful)
"Or at a very minimum, rewrite banking law so they never get my money like that again. Is that too much to ask?"
LOL. Damn right it is. You still think the government works for you?
The Federal Reserve was set up specifically so they could pass the cost of their failures on to society. That's the purpose of a central bank. How big are the QEs so far?
Banks are fundamentally unstable organisations (which is why they keep insisting that you must have confidence in them). Without the Fed, no bank could grow large
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Who says it's easy?
For a start you need a huge amount of capital to get started in HFT and then you need to be one of the favoured few. Look what happens when the little people start to figure out how they can join in the fun and predict the behaviour of other actors - they get charged with fraud (happened recently in sweden).
Something doesn't have to be easy to be worthless. Nor does it have to be worthwhile to humanity for it to be of utility to those speculating on it.
Re:Worthless (Score:5, Informative)
That's one of the arguments used by HF traders to justify their trade: they claim to provide liquidity to the market. Yes, this is true; however, HF trading violates one fundamental precept of the stock market that makes it work: that market forces determines the actual value of stock, based on an assessment of the value a company provides. There is no such valuation in HF algorithms (the concept of "value" is meaningless to a computer), only arbitrage. HF trading can and often does distort true market values. They can also cause a huge mess very quickly (as witnessed in recent years i.e. the Dow dropping a 1000 points in a very short time due to a chain reaction caused by algorithmic trades).
The ideal function of a stock market in an economy is primarily to raise capital so that wealth creation activities can occur. But because of human greed, a part of it will always merely function as a wealth distribution scheme. This is okay so long as the wealth creation activities are not impeded by the wealth distribution activities. HF trading shifts the balance toward the latter, and at some point, it can actually become a detriment to the economy.
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Optimal to whom?
light travels .3mm in a picosecond (Score:5, Insightful)
Re:light travels .3mm in a picosecond (Score:4, Funny)
Moore's Law fixed that. Light can now travel 300 m in a picosecond. By the time this product is developed it should be able to travel a few km.
Re:light travels .3mm in a picosecond (Score:5, Funny)
You don't get it. The next step is Market On A Chip technology. The NASDAQ, NYSE, etc. will be condensed onto an integrated circuit in Lloyd Blankfein's office. But don't be concerned, the Market will still be FULLY FAIR AND TRANSPARENT for all...
Re:light travels .3mm in a picosecond (Score:4, Insightful)
I have a few friends in high finance. They're well-educated folk. So when they use certain terminology within the realm of finance, it makes them cringe because they know it's wrong, but the rest of the knuckle-draggers dont know the difference between a made-up Greek letter ("vega" ... no I'm being serious, look it up; it has to do with the volatility of options pricing) and a real one. When milliseconds are too slow, nanoseconds aren't a big enough improvement, they need to go one step beyond! No one with a brain is going to seriously consider speeding up by six orders of magnitude to the ludicrous level of picoseconds, but abuse of terminology is rife within the financial field.
Re:light travels .3mm in a picosecond (Score:5, Informative)
Nine orders of magnitude. 1ps is a billionth of a millisecond. (you forgot micro...). I know, brainfart, but 10^9 makes it that much more ridiculous.
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You missed nanosecond: http://en.wikipedia.org/wiki/Picosecond [wikipedia.org]
It is 1E-12
Your point remains however in the magnitude of the jump from nanoseconds to picoseconds.
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Re:light travels .3mm in a picosecond (Score:4, Funny)
It just means that the trading companies will be trying to co-locate.. to an adjacent core....
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The funny thing is, the fastest clocked processors these days take hundreds of picoseconds to execute a single instruction.
Yes, at 3GHz, each instruction is around 333ps. So unless we have a CPU architecture that does trades in a single instruction, it's going ot take many nanoseconds just to get the information, process it, then issue the trade order.
Re:light travels .3mm in a picosecond (Score:5, Interesting)
With multiple players, the aggregate dynamics are something akin to a dog-fight as each trading algorithm circles and dodges, trying to exploit weaknesses and failures in its adversaries so as to make fractional gains in the time available. If you can control on a tighter time-scale than your opponents, then you can achieve more finely-grained dynamic buy-sell strategies that maximise your profit.
The fixed time-lag between you and the actual market is actually largely irrelevant because of the way the fast dynamic control strategy is being employed. To extend the metaphor, think of them like a attack formation flying to the enemy. If your aircraft can make their attack and withdraw before the enemy can reposition defenses, you will be more successful. The fact that it took an hour for your formation to reach the enemy in the first place is irrelevant.
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Don't they call that "leading your target"?
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There are two lags involved in s
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But, to your point, the latency (actually, queuing delay) of a minimal Ethernet packet at 10 gbps is ~51 ns at a minimum. Double, when you consider the return time, so a minimal trade would be on the order of 0.1 us plus processing time (that overclocked 5 GHz PC takes 0.2 ns per instruction cycle) on both ends (and add another 51 ns for the NIC to receive the frame in order to send it up a layer). And that only if you're within a few feet (~1 ns/foot) and on the same switch as th
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How long does it take to transmit a single packet's worth of electrons onto the wire?
Onto the wire?
Two computers sitting back to back with a fiber channel between them could not exchange enough data in that amount of time
to complete even one trade.
The article is nebulous at best, spun from careless choice of words of someone trying to impress.
I suspect, given the vast numbers of computers involved, and the total transaction count over the course of the trading day, it seems possible you might be able to do some hocus pocus math and divide total trades world wide by the time available and co
Wonderful (Score:5, Insightful)
Thanks for fucking up the market for the rest of the world. This image comes to mind..
http://farm4.static.flickr.com/3014/2907411559_117ac480b5.jpg [flickr.com]
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This has been going on since the 30s, it's just that now the window has shrunk from about 12 hours to mere milliseconds. Ultimately what's going on is massive organized fraud, and the individual investor ends up paying the price for it. Some exchanges still allow for investment firms to buy with full knowledge of what the price of a stock will be in a fraction of a second, which is why those firms co-locate next to the exchange, it allows them to buy with perfect precision, in effect robbing the investor th
But... (Score:3)
Wouldn't it be faster to just add some zeros to a number in a bank account? In the end, that is all that the modern stock market (AKA one giant ponzi scheme) does. Wall St. does sod all as far as producing real goods, real jobs and any real value.
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There are stupid bubbles. It's true. But in the long run the stock market actually does result in investment in things like factories and oil pipelines and other useful goods and services, and it works more effectively than if you had to finance it one tycoon at a time. The real Ponzi scheme is Social Security.
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If I have over simplified it, please correct me.
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Nope, you're absolutely right. Unless the company makes an offering, none of the money on the market goes through their hands
impossible to process, utter rubbish (Score:3)
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Well I bet it is measured in the 10's of thousands. Reading your comment made me realize you have some insight there...found this one out:
[...]10^12 1 picosecond ps One trillionth of a one second 1 ps: half-life of a bottom quark
4 ps: Time to execute one machine cycle by an IBM Silicon-Germanium transistor 1 ps, 10 ps, 100 ps
10^9 1 nanosecond ns One billionth of one second 1 ns: Time to execute one machine cycle by a 1 GHz microprocessor
1 ns: Light travels 12 inches (30 cm) 1 ns, 10 ns, 100 ns
10^6 1 microsecond s One millionth of one second sometimes also abbreviated sec
1 s: Time to execute one machine cycle by an Intel 80186 microprocessor[...]
(source [wikipedia.org])
I suppose the reasons they use picoseconds is primarily:
---at the scale of a microchip, 3mm is quite the distance
---the jump for units of measurement goes from a picosecond to a nanosecond. We all know nanoseconds could definitely be a bit slow in today's world and real decimal values are messy, unfortunately this means a jump from 10^6 to 10^9. We all know that is qui
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This is market trade we're speaking of. It's global. They're speaking of transactional processes on the level of a picosecond, but just reaching the central server HAS to take them at least a few miliseconds (it's the law!), excluding any possible processing.
It's a load of bull, seriously. Any scale below what it takes for light to travel a few dozens of kilometers is physically unfeasible unless we suddenly invent time travel or FTL micro jumps
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any possible processing.
Yeah, that is the only possibility of what I was thinking that could ever be considered... I guess the best way to look at this, if we are looking for a hint of truth, would be for the programming of very efficient algorithms to still produce calculations... after all calculations can take millions of pico seconds and a certain block of code executed 1 million times might be 50 picoseconds better than another per iteration. It all adds up internally.
Efficiency of algorithms is a big deal even with some lat
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I suggest that we all make an honest effort to pack all high frequency traders into a sphere .15mm across.
It would create a sphere of evil so dense that not even light could escape. A singularity of evil.
Then we could launch it into deep space.
Sounds like a plan to me.
--
BMO
To put this in perspective (Score:4, Informative)
To put this in perspective:
---A picosecond is roughly "330 picoseconds (approximately) – the time it takes a common 3.0 GHz computer CPU to add two integers" (source [wikipedia.org])
---To put that in perspective, since obviously a large large amount of data must be inputted and then "processed" in real time, but then they are concerned with ~350 cpu cycles?
---Even if a processor can do tons of these operations a second, the amount of data they are receiving must be ghastly!
Makes me think of the patriot missile system and the round-off error tragedy that occurred. I am just hoping our market does not "experience the same fate". (I do understand it was all a fundamental bad programming situation before, but decisions that are made in picoseconds should be taken with some level of precaution.)
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1,000 CPUs each doing one operation in 330ns as basically equivalent (in terms of net work done) to 1 CPU doing all 1,000 of those operations in 330ps apiece?
Haha, I was just saying that in reply to the comment [slashdot.org] I had posted as a reply above. 10^6 to 10^9 is the next jump in the verbal scale so even if they have to use 10,000 picoseconds as the basis, that is still better than dealing with the possibility of a real decimal representation in a nano-second. All the little guys add [slashdot.org] up after a while...
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[...] decisions that are made in picoseconds should be taken with some level of precaution.)
That just amuses me.
Hocus Pocus (Score:5, Interesting)
In Kurt Vonnegut's 1997 novel Hocus Pocus, the United States is brought to its knees financially by a company called Microsecond Arbitrage. Everyone invests through them and makes lots of money until a glitch happens and someone else's computer is faster that day. Then the entire country loses its shirt.
Word to the wise.....
Not good for the market: need synchronous clocking (Score:5, Insightful)
Honestly, this is really a bad idea for overall market stability. What we really need is a much slower, yet fairer system.
What I'd suggest is something similar to synchronous clocking:
Every second, on the second, prices are published.
500 ms later, orders are placed and fulfilled.
500 ms later, the updated prices are published.
Benefit #1: fairness - those who are closest to the exchange or have stupidly fast hardware can't get in front of the rest.
Benefit #2: slower responses. If the clock can only "tick" 60 times a minute, there is a chance for human intervention before disasters happen.
Benefit #3: markets are more able to serve the rest of society, rather than being used purely for "gambling". imho, the existence of "high frequency trading" is a kind of tragedy of the commons: nobody really "wins", but if everyone else does it, and you don't, you lose.
Re:Not good for the market: need synchronous clock (Score:5, Insightful)
I'd suggest every minute and 30 seconds respectively so human beings can also participate.
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Re:Not good for the market: need synchronous clock (Score:4, Informative)
Actually, I think we can draw a line. It takes about 200ms for an electrical pulse to travel round the world (speed of light in glass is lower than c), and we have a bit of switching delay. So this should imply the minimum timing limit. Anyway, fortunately the exchange can set the rules here, if it wants to.
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It would be much better if the market solved this problem without government intervention and taxation. I doubt NYSE will or can. Goldman owns them. Another exchange could gain advantage by being trustworthy and level with all participants. It doesn't matter that the average investor doesn't play in day trading, much less anything shorter. Once you let the insiders openly tax the market nobody will ever trust them again.
The government already has too much money and still prints more at ever increasing ra
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It all depends on who's profit margins we're talking about. Traders trade, they generally don't buy or sell. Different participants etc.
It's not so much that Goldman Sachs can front load the day traders that bothers me (day traders are generally just gamblers/speculators, hence chumps). It's what else that access bought that brings the whole market into question. That can not be allowed to happen. All markets have skeletons in their closets and such snooping cannot be allowed. Even if it means Goldman ha
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I like that idea, and I've thought of things like that before, but wouldn't there still be in incentive to be first in line with putting in your order? If everyone gets the prices published at a server in NYC at a particular moment, then the knowledge of that publication still propagates away from NYC at the speed of light. It's an improvement for the markets in some ways, but I don't think in that way.
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Well, you could put your order in any time before deadline, but orders are only executed at the instant of the deadline. So, you get all the "thinking" time you need, and once the deadline is reached, orders are processed simultaneously (or in random order). This is similar to how concert tickets (or, for that matter, new issues of stock) are sold: you have a week to post in your cheque, and then all envelopes are opened at the same time - in the interests of fairness, the should be shuffled first if there
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This reminds me of the London gold price fixing [wikipedia.org] which seems irrelevant because gold is also electronicly traded, and probably HFT'd; but it looks like they still do it.
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Once a week. That's all you need?
And as a reference you give us the economy of an unnamed southern African Nation? South Africa is the class of the lot and is nothing to envy.
How would that even work for an exchange that carried thousands of stocks?
What happens if 'shit happened' during the week. All the retail trades in a stock are ether buys or sells. Huge volume of done deals coming into the session and everybody knows it. Counter party holds their price and gets rich. Now retail has to deal with
Trading latency (Score:4, Insightful)
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Unsolved Problems in Technological Society (Score:2, Interesting)
We still haven't solved the problem that was first noticed in the Industrial Revolution: How to occupy workers replaced by technology, and share the financial benefits of technology equitably.
Luddites and Communists attempted to supply answers early on.
Both answers have obvious flaws.
Later in the 20th century, it looked like Keynsian economics and moderate socialism might be the answer; but that's debatable because WW2 caused massive re-employment and reconstruction which occupied a generation.
Things seeme
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With today's advances in robotics, we are likely to see an even more efficient solution to the problems of displaced workers and productive capacity in excess of purchasing power: Humans who are replaced by robots can simply be massacred by robotic-ally manufactured robots. Sure, this will eventually result in the replacement of the human race by a d
Speed of light is not a problem (Score:2)
Noise (Score:2)
Thou shalt not process faster than your clock jitter will alloweth.
One thing MUST change (Score:5, Insightful)
Agree with those who say these guys are essentially parasites. But, it's worse.
The one thing that MUST change -- these high frequency trading systems have malfunctioned, so they end up dumping ~$30-40 a share stock for $1 a share. Did the company running it lose money (and, consequently, everyone else make a bit by getting stock at a substantial discount)? Oh no. The stock exchange *CANCELLED* their trades. If you, I, or some regular trader, accidentally put up stock for $1 instead of $41, would anyone "fix" it for us? Of course not. These true parasites benefit from their high frequency trades, but when that would lose them money at high frequency the exchange "fixes" it for them.
What am I missing? (Score:2)
Millisecond trades make sense, you can reliably anticipate how many ms your latency is and plan your trades accordingly. No one further than the next room away can have any chance of predicting picosecond latency.
This would introduce some randomness into the process and introduce more opportunities for shenanigans.
Or is there some obvious benefit that I'm missing?
LK
Pathetic (Score:2)
It's all about maths, you insensitive clod! (Score:3)
You can run a single instruction in a 1000 GHz CPU (please scale to your favourite multicore system) during 1 ps.
In 1 ps you can go as far as 0.03 cm at the speed of light in vacuum (wich is more than the speed of light in the fibers and the speed of electrons in a copper wire).
So are you insensitive clod designing such a system?
All this at zero latency along the full data path.
In the end there will only be random things happening. As random as the trading market.
It's microseconds now (Score:5, Interesting)
Although the picosecond thing is silly, the New York Stock Exchange now operates a co-location facility in which each trading platform gets a uniform 35 microsecond latency for the incoming trade data. Some systems can turn around that data and do a trade within 12 microseconds.
Computers aren't fast enough for this. The latest thing is writing trading algorithms in Verilog and compiling them into an FPGA. [stoneridgetechnology.com]
This worries me.
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The latest thing is writing trading algorithms in Verilog and compiling them into an FPGA. [stoneridgetechnology.com]
This worries me.
It worries me, too. They should be using VHDL. :)
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Femtoseconds are so last microsecond. This just in: Trading geeks have started to talk about attoseconds!
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My trading system divides Planck time by 2*pi.
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More than an exaggeration. I work with some of the fastest digital circuitry in the world (complex gate circuits operating at 10 GHz and up), and stuff at 1 ps is still lost down in the clock jitter.