RenTec's Medallion Fund has obviously done amazingly well - almost to the point where one wonders how it is even remotely possible. But their other funds have had more average performance. Maybe this move isn't about Medallion at all - maybe it about getting to better execution for their other funds in order to improve returns.
Hedge Fund Wants to Use Atomic Clocks to Beat High-Speed Traders
151–160 of 223 posts
Re: Hedge Fund Wants to Use Atomic Clocks to Beat High-Speed Traders
#152Earlier quoted context omitted.
But they're both in the software domain. Not to argue with you, but I don't see the problem any different from trying to synchronize two commits in a database. The same technique is not limited to Spanner or algorithmic trading, but other fields as well. It's not so much different from DHT or other algorithms, which have applications in multiple domains.
Isn't _software domain_ too broad ? You could argue ships and automobiles are in the same transportation-domain ?
In a sane world wiping liquids off of smooth, hard surfaces would be the same domain whether the material under whatever the wiper is attached to is in the liquid, solid or gaseous phase.
Re: Hedge Fund Wants to Use Atomic Clocks to Beat High-Speed Traders
#153Earlier quoted context omitted.
There are exchanges that operate with similar rules, like POSIT. http://www.itg.com/product/posit-3/ But the slowness is a lot more, executing a few times a day. And you can't change your order AFAIK (and there's large random timespans). There's also complications to avoid revealing how big the buy or sell side are. As far as your suggestion, that's what I was thinking for a while when I first read about them. I don'…
HFT is only a bad thing, because it's removes bright minds from working on other problems; not because it hurts other market participants (which it doesn't---apart from being competition to other market makers). I've read some interesting proposal that removing the subpenny rule would make speed less of a concern, since it would be possible to undercut on price instead. See https://www.chrisstucchio.com/blog/2012/hft…
a lot more bright minds are working on making you click on ads than hft
Re: Hedge Fund Wants to Use Atomic Clocks to Beat High-Speed Traders
#154Earlier quoted context omitted.
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?
If market makers (i.e. most HTF firms) weren't able react to large market moving trades very quickly, they would have to keep spreads wider to manage the risk of adverse selection. This increases the cost for everybody for the benefit of a few large investors.
Re: Hedge Fund Wants to Use Atomic Clocks to Beat High-Speed Traders
#155This 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…
Reminds me how Einstein derived special relativity. He was thinking about synchronizing clocks at railroad stations across the continent. The idea of simultaneity depends on the location of the observer. The traveltime of light crossing the globe in 1/14 a second matters little at train speeds. But thats an eternity for HFT and noticeable in a google search.
These issue crop up on integrated circuits where clock cycles are shrinking and die sizes are increasing. Defining simultaneity where the microinstruction cycle time is much shorter than the chip or board propagation time is tricky. Each design has their methods to deal with this.
Re: Hedge Fund Wants to Use Atomic Clocks to Beat High-Speed Traders
#156Earlier quoted context omitted.
And with hft guarded so well, can't they just use the patent and not get caught?
The idea doesn't help the hft'ers. It takes an order, secretly transmits it to computers each as near to the major markets as possible, with instructions so that the computers submit the trade offer at precisely the same time. The hft'ers can't make money since they can't outrun trade offers that are synchronous across all markets.
As someone with zero domain knowledge, why aren't the exchanges already doing precision timed order processing? That just seems like it's should be a standard feature across the board. The broker sends buy/sell orders with planned execution times to all the required exchanges and the exchanges sit on the orders until the designated time.
Re: Hedge Fund Wants to Use Atomic Clocks to Beat High-Speed Traders
#157Earlier quoted context omitted.
Little know fact, you can use the GPS constellation to get atomic level precision time nearly anywhere on earth. Using an Atomic clock is purely to show off to investors/a red herring.
I would've thought that GPS is too unreliable due to the deliberate inaccuracy? Only the US military have the clean signal. Particularly if you're using it to sync between two different time zones that could well be looking at different satellites. However, I don't know how much inaccuracy is introduced and whether it would have too much of an effect for the purposes of Google, et al.
That's been removed. But, just for fun.
Speed of light is 299,792,458 m/s. So if GPS is off by more than 1/10,000,000 you can't get accurate within 30 meters. Having used a GPS they are better than that, thus the clock must also be at least that accurate. Of note, stationary stations can get into centimeter precision which imply's vastly higher accuracy.
Re: Hedge Fund Wants to Use Atomic Clocks to Beat High-Speed Traders
#158Atomic clocks have been in use in capital markets for a while. I was at National Physical Laboratory recently and they were demonstrating how they pipe their atomic clock output to the traders / exchanges.
http://www.npl.co.uk/commercial-services/products-and-servic...
Re: Hedge Fund Wants to Use Atomic Clocks to Beat High-Speed Traders
#159Earlier quoted context omitted.
> 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. :-)
In this case both observers are continuously accelerating towards the center of the Earth (because the Earth is spinning). So the theory actually doesn't work!
Aren't we accelerating _away_ from the Earth to an even larger extent as we are held up by its surface, against the natural motion of falling downwards?
Re: Hedge Fund Wants to Use Atomic Clocks to Beat High-Speed Traders
#160Earlier quoted context omitted.
> 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.)
> also interrupting. People dislike the interrupting.
So your argument is...what?
Hypothetically: Let's say I have an inventory of stock A, which I think is worth X, and which try and sell whenever the market price climbs above X. Now there's some new public knowledge that materially impacts my estimation of the value of that stock (eg, a large hedge fund has started buying large blocks of this stock): I no longer think it's worth X, but actually Y, and I'd like to stop selling it whenever the price climbs above X, and instead wait until the price climbs above Y.
So you're saying that's okay, and I can price my inventory however I want, but only if I give the hedge fund a chance to buy a bunch of underpriced stock first? This raises some questions such as:
1) Why on earth is that a good rule?
2) How much time do I need to give the hedge fund? Do they only need a few seconds? Should they get a day? A week? At what point am I allowed to change the price I'm selling stock A for without it "interrupting" the hedge fund? Do they need to announce that they're done, or is their a timeout period after which I can just assume? Can I change the price I charge other people if I still let the hedge fund buy at the old price, or does everyone get the discount?
3) Or is it not about time, but about amount? Does the hedge fund have some divine right to buy as much stock as they want without it driving the price up? Why? And how come nobody else has that right? Do you have to be a hedge fund to get the right to name your own price, or do normal people get to do that too?
4) Or is it somehow okay if I'm selling, but not buying? Is it's okay for me to raise the price I'm willing to sell stock A for if I find out a hedge fund is investing, but not okay for me to raise the price I'm willing to buy stock A for? What happens if I find out a hedge fund is liquidating their position instead? Do I get to lower the price I'm willing to buy and sell it for, or just one of them? There's no laws or SEC regs about this; is there a list of rules somewhere? Is it in the bible?
5) Does this only count market actions? If the hedge fund gives a Bill Ackman style press release about how some company is terrible and should be prosecuted, can I change my prices immediately, or do I need to wait in case I'm interrupting some hedge fund strategy? I mean, maybe they were planning on giving the press conference and then buying a bunch of stock; if I think their arguments are bollocks and I buy a bunch first, is that interrupting them?
And so on. The entire argument seem awfully focused on why large hedge funds and investment banks should be able to ignore basic market rules. I'm sure they'd like to; I'm still waiting to hear why they should. (One of my favourite scenes for Lewis's Flash Boys was when a trader expresses outrage that his very large order in a thinly traded stock caused the price to move against him. How terrible; if only there was a law that required people to trade with him at the price he chose...)