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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

#121

Post by visarga »

kasey_junk wrote: post #7
cmdrfred wrote: post #5

Earlier quoted context omitted.

> 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.

I assume the traders can't place orders with time of execution (to be executed at the specified time, kept secret until then).

If the market accepted the time of execution from traders and kept the trades secret until they were executed, then there would be no need for these patents.

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

#122

Post by lordnacho »

HFT / Fund guy here.

This is marketing spiel.

If you just want to trade on a bunch of exchanges so no information flows between them, you can easily (TM) write a program that either a) lines up the orders at each exchange to execute at a specific time or b) delays the orders from a central server by the line delay.

So say NYC is 13ms from Chicago. You want to hit both at once. As long as you're not 13 ms late, nobody can see your order in one place and react at the other. You don't need an atomic clock for that, NTP will do just fine.

They're doing this because they have a reputation as a technologically advanced firm, and they know it will impress institutional investors, most of whom are still living in a time warp where spreadsheets are an advanced means of getting an edge over the market. They meet these guys, who are basically from another dimension of investing, and they suddenly need an explanation to their bosses of why RT can generate the most impressive returns of any strategy ever. The answer is "we have loads of PhD math geniuses building the strategies and amazing execution technology".

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

#123

Post by Bromskloss »

Johnie wrote: post #88
tibbetts wrote: post #23

Earlier quoted context omitted.

Using ntp or whatever the new variant is is also standard, which as I recall can hit sub-microsecond consistency on a wide area network with good hardware. So yeah, not new.

Except that the state of art in HFT is sub-microseconds "London-based trading technology company Fixnetix said Tuesday it has the world’s fastest trading application, a microchip that prepares a trade in 740 billionths of a second, or nanoseconds." (WSJ, 2011) http://blogs.wsj.com/marketbeat/2011/06/14/wall-streets-need... http://stackoverflow.com/questions/17256040/how-fast-is-stat...

Isn't the relevant delay rather that of a signal traveling from one exchange to another?

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

#124

Post by Lazare »

darawk wrote: post #97
Lazare wrote: post #57

Earlier quoted context omitted.

Front running is a serious crime, with clear definitions. What you are describing isn't front running (or even illegal).

Well, it is not illegal, that is correct. Whether or not it is 'front running' is a matter of debate. It certainly seems to me that they are running out in front of the order. I'm not sure how exactly you might be contorting the meaning of 'front running' for this not to apply.

Front running is trading in front of an unexecuted order, which you have because of your fiduciary responsibility to a client.

You're discussing trading in response to an executed order, which you have as a member of the general public.

If that's front running, then what isn't? Is my purchasing wheat futures in response to news of an predicted drought "front running" the orders that bakeries will be making?

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

#125

Post by Lazare »

Dylan16807 wrote: post #95
Lazare wrote: post #89

Earlier quoted context omitted.

That argument is a bit like calling all sex rape, because someone having sex is doing the same thing as a rapist does, they just happen to have consent. The reason front running is illegal is because it is a violation of a fiduciary duty. Third parties do not have a fiduciary duty, therefore it's not illegal. "It's front running, but without the violation of the fiduciary duty" is like "murder, but without the killin…

> The reason front running is illegal is because it is a violation of a fiduciary duty. And nobody is calling this kind of "front running" illegal. > like "murder, but without the killing someone", or "fraud, but without the deception". In a murder analogy, you'd keep the killing but change something else, maybe it's properly manslaughter but people will still call you a murderer. For "fraud without deception", let's…

> The reason people dislike it is because it's not just 'reacting'. [...] Darawk defined this version for us. "front-running. Which is me seeing your order on exchange A and buying ahead of you on exchange B before your order arrives."

Seeing a completed order on exchange A, and speculatively purchasing stock on B in the hopes that the buyer might later buy stock on B sure sound reactive to me.

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

#126

Post by Bromskloss »

Johnie wrote: post #90
nsedlet wrote: post #10

A 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 spe…

Think about it this way. They are publicly advertising to their investors that they have a weapon to defeat HFT. Because of this, they will get better returns. When an investor decides to put their money in a fund, are they going to choose the one that has a patented defense against HFT or will that investor put their money into a fund that has a known vulnerability? >It's fairly general: send orders ahead to co-loca…

> They are publicly advertising to their investors that they have a weapon to defeat HFT.

I thought RenTech didn't have investors anymore.

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

#127

Post by dakr »

Johnie wrote: post #76

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 diffe…

It's also the method by which signals from radio telescopes thousands of miles apart have been correlated after the fact at a central location. This has been the case for a couple of decades now.

For instance, at the VLBA: https://en.wikipedia.org/wiki/Very_Long_Baseline_Array

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

#128

Post by Dylan16807 »

Lazare wrote: post #125
Dylan16807 wrote: post #95

Earlier quoted context omitted.

> The reason front running is illegal is because it is a violation of a fiduciary duty. And nobody is calling this kind of "front running" illegal. > like "murder, but without the killing someone", or "fraud, but without the deception". In a murder analogy, you'd keep the killing but change something else, maybe it's properly manslaughter but people will still call you a murderer. For "fraud without deception", let's…

> The reason people dislike it is because it's not just 'reacting'. [...] Darawk defined this version for us. "front-running. Which is me seeing your order on exchange A and buying ahead of you on exchange B before your order arrives." Seeing a completed order on exchange A, and speculatively purchasing stock on B in the hopes that the buyer might later buy stock on B sure sound reactive to me.

It's technically reacting but it's also interrupting. People dislike the interrupting.

(And it's not might when there are rules about doing things on multiple exchanges. But I'm not an expert on that part.)

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

#129

Post by Bromskloss »

lordnacho wrote: post #122

HFT / Fund guy here. This is marketing spiel. If you just want to trade on a bunch of exchanges so no information flows between them, you can easily (TM) write a program that either a) lines up the orders at each exchange to execute at a specific time or b) delays the orders from a central server by the line delay. So say NYC is 13ms from Chicago. You want to hit both at once. As long as you're not 13 ms late, nobody…

Does RenTech still have investors? I thought they worked for themselves now.

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

#130

Post by Bromskloss »

Johnie wrote: post #76

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 diffe…

> and still have some agreed upon ordering between them

Funnily, that works only if the two observers are in rest relative to each other, as relativity theory tells us. :-)

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