Hedge Fund Wants to Use Atomic Clocks to Beat High-Speed Traders
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Re: Hedge Fund Wants to Use Atomic Clocks to Beat High-Speed Traders
#2Interesting but remember when high frequency trading was news like 8 years ago?
Re: Hedge Fund Wants to Use Atomic Clocks to Beat High-Speed Traders
#3Its invention, developed by the firm’s co-chief executive officers, Robert Mercer and Peter Brown, first sends an order to a central server, which breaks it up into multiple smaller orders. Those are then routed to venues that offer the best prices and most liquidity, much the same as brokers do now.
But before that happens, the smaller orders are sent to servers located as close to the exchanges as possible, along with instructions on the precise times they should be executed. The co-located servers sync their transactions so HFT firms won’t have enough time to identify an order on one exchange and then race to another to trade against it.
A crucial part of the system is the optical, atomic or GPS clocks that will be used synchronize those orders. Renaissance says in its application that GPS clocks are accurate to within nanoseconds and any time differences between them are “too small to be perceived” by HFT firms.
Maybe I'm missing something but sending orders ahead and releasing at a specific time is obvious is it not? If you add a really accurate clock suddenly it's patentable?
Re: Hedge Fund Wants to Use Atomic Clocks to Beat High-Speed Traders
#4Its invention, developed by the firm’s co-chief executive officers, Robert Mercer and Peter Brown, first sends an order to a central server, which breaks it up into multiple smaller orders. Those are then routed to venues that offer the best prices and most liquidity, much the same as brokers do now. But before that happens, the smaller orders are sent to servers located as close to the exchanges as possible, along w…
I havent read the patent but I can say this is an exceedingly common (I'd probably say standard) strategy. I can only assume the atomic clock bit is what's novel.
Re: Hedge Fund Wants to Use Atomic Clocks to Beat High-Speed Traders
#5Its invention, developed by the firm’s co-chief executive officers, Robert Mercer and Peter Brown, first sends an order to a central server, which breaks it up into multiple smaller orders. Those are then routed to venues that offer the best prices and most liquidity, much the same as brokers do now. But before that happens, the smaller orders are sent to servers located as close to the exchanges as possible, along w…
> The co-located servers sync their transactions so HFT firms won’t have enough time to identify an order on one exchange and then race to another to trade against it.
That sort of sounds like DDOS to me. They patented a DDOS botnet.
Re: Hedge Fund Wants to Use Atomic Clocks to Beat High-Speed Traders
#6Its invention, developed by the firm’s co-chief executive officers, Robert Mercer and Peter Brown, first sends an order to a central server, which breaks it up into multiple smaller orders. Those are then routed to venues that offer the best prices and most liquidity, much the same as brokers do now. But before that happens, the smaller orders are sent to servers located as close to the exchanges as possible, along w…
The way many patents are structured begins with "a method of..."
So, in that sense, "a method of coordinating orders across exchanges to minimize analysis time available to other traders" seems perfectly in line.
(I agree that from various computing-centric backgrounds, this might be trivial, but not all problem domains are well-saturated with computing expertise, and this might well be sufficiently novel to warrant a patent in the domain.)
Re: Hedge Fund Wants to Use Atomic Clocks to Beat High-Speed Traders
#7Its invention, developed by the firm’s co-chief executive officers, Robert Mercer and Peter Brown, first sends an order to a central server, which breaks it up into multiple smaller orders. Those are then routed to venues that offer the best prices and most liquidity, much the same as brokers do now. But before that happens, the smaller orders are sent to servers located as close to the exchanges as possible, along w…
> The co-located servers sync their transactions so HFT firms won’t have enough time to identify an order on one exchange and then race to another to trade against it. That sort of sounds like DDOS to me. They patented a DDOS botnet.
No its not at all like that. Its a synchronization strategy so that orders hit all exchanges at the same time.
Re: Hedge Fund Wants to Use Atomic Clocks to Beat High-Speed Traders
#8Its invention, developed by the firm’s co-chief executive officers, Robert Mercer and Peter Brown, first sends an order to a central server, which breaks it up into multiple smaller orders. Those are then routed to venues that offer the best prices and most liquidity, much the same as brokers do now. But before that happens, the smaller orders are sent to servers located as close to the exchanges as possible, along w…
All they're saying is that with absolute synchronicity among all of the clocks at all of their co-located servers, all pieces of the order are executed at multiple exchanges at precisely the same time. Even very small differences among the clocks at each one can create opportunity for others to step in front of the trade, and this helps them avoid that. While this may sound obvious, they wouldn't be doing it if it hadn't been a problem for them in the past.
Re: Hedge Fund Wants to Use Atomic Clocks to Beat High-Speed Traders
#9Its invention, developed by the firm’s co-chief executive officers, Robert Mercer and Peter Brown, first sends an order to a central server, which breaks it up into multiple smaller orders. Those are then routed to venues that offer the best prices and most liquidity, much the same as brokers do now. But before that happens, the smaller orders are sent to servers located as close to the exchanges as possible, along w…
Novelty and obviousness are more related to whether something has been patented already or not.
Re: Hedge Fund Wants to Use Atomic Clocks to Beat High-Speed Traders
#10A few weird things stand out to me: (1) Renaissance is super secretive. If they want to use this strategy to make money, a patent reveals to competitors what they're doing and creates more issues than it seems to resolve. (2) Renaissance is an HFT firm. Why are they interested in thwarting HFT? (3) This really isn't that fancy an idea. It's fairly general: send orders ahead to co-located servers to be executed at specific times.
I wonder if what they're really trying to do is prevent banks or others from creating anti-HFT infrastructure, and then providing it as a service to market participants that want to place large orders. The patent would perhaps provide some protection in that case.