Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Hedge Fund Wants to Use Atomic Clocks to Beat High-Speed Traders

bloomberg.com

Post reply on HN
Print view View original

71–80 of 223 posts

Re: Hedge Fund Wants to Use Atomic Clocks to Beat High-Speed Traders

#71

Post by vecter »

hourislate wrote: post #68
zouhair wrote: post #43

It seems I am the only one out here that thinks computer based trading should be illegal.

HFT systems scalp. They make their millions .001 at a time on front running and volume. A way to discourage this is by adding a very small fee to each trade. This eats/takes away their profits. The problem is their are too many folks making money that are connected to the right people in Government.There will always be talk about doing something about it but nothing will ever happen. The only positive outcome from al…

This comment is ignorant and wrong on every single point.

As another person commented elsewhere, front running is a specific term with a clear definition and is illegal. HFT firms do not do front running.

Re: Hedge Fund Wants to Use Atomic Clocks to Beat High-Speed Traders

#72

Post by djoldman »

hourislate wrote: post #68
zouhair wrote: post #43

It seems I am the only one out here that thinks computer based trading should be illegal.

HFT systems scalp. They make their millions .001 at a time on front running and volume. A way to discourage this is by adding a very small fee to each trade. This eats/takes away their profits. The problem is their are too many folks making money that are connected to the right people in Government.There will always be talk about doing something about it but nothing will ever happen. The only positive outcome from al…

If you wanted to kill HFT, it's actually pretty easy. Just make the minimum increment incredibly small. In other words, let people trade at $.0000000001 increments. No fees needed.

Re: Hedge Fund Wants to Use Atomic Clocks to Beat High-Speed Traders

#73

Post by hourislate »

vecter wrote: post #71
hourislate wrote: post #68

Earlier quoted context omitted.

HFT systems scalp. They make their millions .001 at a time on front running and volume. A way to discourage this is by adding a very small fee to each trade. This eats/takes away their profits. The problem is their are too many folks making money that are connected to the right people in Government.There will always be talk about doing something about it but nothing will ever happen. The only positive outcome from al…

This comment is ignorant and wrong on every single point. As another person commented elsewhere, front running is a specific term with a clear definition and is illegal. HFT firms do not do front running.

Says who? Insider trading is illegal, so are you saying it doesn't happen? I think your belief that the system works like it is defined in someones definition ignorant.

Just like to add Google HFT Firms Front Running and let me know if that is enough info to convince you.

Re: Hedge Fund Wants to Use Atomic Clocks to Beat High-Speed Traders

#74

Post by kasey_junk »

jwatte wrote: post #70
kasey_junk wrote: post #49

Earlier quoted context omitted.

And how would that exchange handle tie breakers? Also what about cross exchange arb? You'll probably be interested in reading Eric Budish.

Everybody would see the arbitrage within the next trading cycle. So, rather than try to eliminate the arbitrage opportunity, put reaction times into a human time scale and let every actor share. Tie breaks can be fair split with cryptographically random split for the last share, for example. Yes, "all or nothing" would complicate, of it's still a necessity, but all those things are solvable, if we believe in fairness…

Random split exchanges have been tried and are equally gamed. If your random split is based on order count companies stuff orders to gain an advantage. If it is based on qty its a pro rata market which are common.

Having windowed auctions is also common. They are still latency sensitive as the entry/exit information is still subject to races.

Budesh has a good paper outlining batch auctions and their advantages but it still doesn't account for the fact that cross exchange arb is still an issue.

Re: Hedge Fund Wants to Use Atomic Clocks to Beat High-Speed Traders

#76

Post by Johnie »

This reminds me of how Google uses atomic clock and GPS for Spanner [1]

Google: "“We can commit data at two different locations — say the West Coast [of the United States] and Europe — and still have some agreed upon ordering between them,” Fikes says, “So, if the West Coast write happens first and then the one in Europe happens, the whole system knows that — and there’s no possibility of them being viewed in a different order.”"

Renaissance Technology: "Replete with schematic drawings, the filing describes a novel way for “executing synchronized trades in multiple exchanges.” The invention consists of not only sophisticated algorithms and a host of computer servers, but atomic clocks -- precisely calibrated to vibrations of irradiated cesium atoms -- to sync orders to within a few billionths of a second."

To translate what Renaissance is doing in technical parallel, they are trying to do a synchronous commit at multiple locations/exchanges at the same time. Submitting a trade to an exchange can be viewed similarly to committing data to a data center. By using atomic clock, synchronize these writes across multiple locations in effect eliminating HFT from jumping in.

If anyone is looking into prior art on this, Spanner is probably the closest I can think of. (I am not a patent attorney and don't want to turn this into a patent debate).

[1] http://www.theverge.com/2012/11/26/3692392/google-spanner-at...

Re: Hedge Fund Wants to Use Atomic Clocks to Beat High-Speed Traders

#77

Post by Dylan16807 »

dsl wrote: post #24
dietrichepp wrote: post #12

Earlier quoted context omitted.

Nanosecond differences are too small to take advantage of, that's only 30cm. My guess is that you'd be at least in (or close to) the microsecond range before you'd worry about HFT stepping in front of your orders. If you're hitting multiple exchanges, then you can take milliseconds and still be fine.

One of the things HFT firms take advantage of is increasing a nanosecond lead into a microsecond (or more) lead by route optimization. If they can get information from one exchange to another faster than the original order, they can effectively trade by looking into the future. Many firms invest heavily in direct microwave links for paths normally served by fiber because of the speed advantage.

Which is irrelevant here because there is a timed relay server at each exchange.

Re: Hedge Fund Wants to Use Atomic Clocks to Beat High-Speed Traders

#78

Post by Dylan16807 »

harryh wrote: post #15
darawk wrote: post #14

Earlier quoted context omitted.

Renaissance is not that type of hft firm. Renaissance uses algorithms to predict price movements before they happen. The type of hft this system is designed to prevent is front-running. Which is me seeing your order on exchange A and buying ahead of you on exchange B before your order arrives. Those types of hft firms are surely eating into Renaissance's profits in a big way.

It's worth nothing that eating into Renaissance's profits in this way is good for everyone else because it means that accurate prices are reaching the market faster.

I don't understand your argument.

If a firm is able to consistently get to all the other exchanges first, they can shave pennies off of a large percent of orders. That's a pretty big downside for everyone that trades.

They get accurate prices to the market faster, but only by a millisecond or so. That's a miniscule upside.

How is the bad not a thousand times the good?

Re: Hedge Fund Wants to Use Atomic Clocks to Beat High-Speed Traders

#79

Post by vecter »

hourislate wrote: post #73
vecter wrote: post #71

Earlier quoted context omitted.

This comment is ignorant and wrong on every single point. As another person commented elsewhere, front running is a specific term with a clear definition and is illegal. HFT firms do not do front running.

Says who? Insider trading is illegal, so are you saying it doesn't happen? I think your belief that the system works like it is defined in someones definition ignorant. Just like to add Google HFT Firms Front Running and let me know if that is enough info to convince you.

I did [0].

The first result is an article explaining how HFT can't front run [1].

How about instead of making vague arguments about how HFT does front running, provide a specific example of how HFT actually does front running as you claim.

And no, one anecdote is not enough. You have to prove that there is a systemic fault in the way the HFT trades in the market that allow them to operate illegally at scale without any repercussions. To find one HFT firm guilty of front running and then claim that they all do would be tantamount to saying all hedge fund managers cook their books just because Bernie Madoff did. I'm sure you can see the absurdity of that accusation.

[0] https://www.google.com/webhp?sourceid=chrome-instant&ion=1&e...

[1] http://www.cnbc.com/2014/04/03/high-frequency-traders-cant-f...

Re: Hedge Fund Wants to Use Atomic Clocks to Beat High-Speed Traders

#80

Post by Johnie »

ChuckMcM wrote: post #40
dahdum wrote: post #3

Its 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…

Unfortunately for the traders, two of the clocks were at altitude and so time passed more slowly for them, resulting in several femptoseconds of misalignment :-)

You joke, but Google actually uses GPS mounted on the roofs of their data centers for time synchronization.
Post reply on HN