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

181–190 of 223 posts

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

#181

Post by sseveran »

nycdatasci wrote: post #171
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…

They don't need to market; their returns speak for themselves. As obvious as the idea seems in hindsight, no one on the sell-side has a product like this right now. The closest thing is the Thor router, which is a crude attempt to accomplish the same feat because it doesn't address variation in latency. An algorithmic execution product like this would effectively end latency arbitrage, which is a source of RenTech's…

They do need to market. Medallion is closed to non-employees. REIF competes with other hedgefund strategies.

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

#183

Post by btilly »

Retric wrote: post #157
adwf wrote: post #145

Earlier quoted context omitted.

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.

Fun fact. GPS is so precise that they can detect the fact from GR that gravity makes clocks run slower closer to the ground.

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

#184

Post by SEJeff »

kasey_junk wrote: post #4
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…

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.

The atomic clock bit isn't novel at all. I've worked for HFT firms the past 9ish years and using hardware timesources is 101 level intro to electronic trading.

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

#185

Post by SEJeff »

sargun wrote: post #29
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.

PTP - Precision Time Protocol. https://en.wikipedia.org/wiki/Precision_Time_Protocol . It requires hardware support, and a stable isolator inside of the machines.

oscillator I think you mean? IEEE 1588 v2 is considerably better for financial applications.

Source: I work in finance as a techie.

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

#186

Post by SEJeff »

ktRolster wrote: post #178
lsaferite wrote: post #156

Earlier quoted context omitted.

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.

As someone with zero domain knowledge, why aren't the exchanges already doing precision timed order processing? HF traders give the exchanges a nice cut (colocation costs, etc). Not many corps can afford it.

What? It generally only costs a few thousand dollars per month to colocate servers next to exchanges.

Arguably, it is more fair now than it ever was in legacy "open outcry" markets where the size of the floor was fixed and if you didn't get a spot on it you weren't able to compete.

Disclaimer: I've worked in HFT 9ish years (10 soon)

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

#187

Post by SEJeff »

eru wrote: post #110
Johnie wrote: post #80

Earlier quoted context omitted.

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

GPS plus atomic clocks. And, boy, do the off-the-shelf commercial offerings suck. The vendors are not really used to dealing with the stress that Google puts these things under.

And let me guess, you built your own rubidium decay device, as most do :)

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

#188

Post by SEJeff »

kasey_junk wrote: post #25
dsl wrote: post #21

Earlier quoted context omitted.

They don't care about "target markets" or what anyone else thinks. This technology is to protect their own trades. The goal is to be able to execute buys across multiple exchanges (because the orders are so large) without other high frequency firms being able to see a trade on one exchange, then buy and resell stock to them at a higher price on another exchange.

> without other high frequency firms being able to see a trade on one exchange, then buy and resell stock to them at a higher price on another exchange This is a pretty common misconception of how latency arbitrage works. In reality the other HFT are not buying/selling new orders. Instead what they are doing is cancelling or modifying their existing orders so that they don't get hit by incoming orders. HFT firms can…

That 100% depends on the exchange actually. Not all exchanges have priority rules like that. It certainly is the case for a lot of futures markets, but definitely not for many places for Equities, Options, or even FX.

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

#189

Post by Lazare »

darawk wrote: post #98
andylei wrote: post #60

Earlier quoted context omitted.

this is what the term "front running" means: https://en.wikipedia.org/wiki/Front_running

I'm familiar with the legal definition. This behavior, however, is identical to it in spirit and moral character.

Actual front running requires your broker to violate the fiduciary responsibility they have to you, and violating fiduciary responsibilities is both immoral and illegal.

The behaviour your discussing does not involve any fiduciary responsibilities.

> This behavior, however, is identical to it in spirit and moral character.

That seems self-evidently false, but okay, I'll bite: What moral precept is being violated here, and why is it "identical" to the fairly serious sin of someone with a fiduciary responsibility to you violating your trust?

Let's play fill in the blanks: "Goldman Sachs wants to buy $400m stock in Apple, but after they buy $20m, a member of the public sees the strange pattern of executed orders, guesses that someone is buying a lot of Apple stock, and starts buying up stock too. This is highly immoral, because members of the public have a ______ duty to ______, and not allowing Goldman Sachs to manipulate the market in peace violates it."

What phrases can we put in the blanks that makes that not nonsense? I'm pretty sure it's not a fiduciary duty, and it seems quite clear it's not to Goldman. What duty is it, and to whom is it owed?

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

#190

Post by kasey_junk »

SEJeff wrote: post #188
kasey_junk wrote: post #25

Earlier quoted context omitted.

> without other high frequency firms being able to see a trade on one exchange, then buy and resell stock to them at a higher price on another exchange This is a pretty common misconception of how latency arbitrage works. In reality the other HFT are not buying/selling new orders. Instead what they are doing is cancelling or modifying their existing orders so that they don't get hit by incoming orders. HFT firms can…

That 100% depends on the exchange actually. Not all exchanges have priority rules like that. It certainly is the case for a lot of futures markets, but definitely not for many places for Equities, Options, or even FX.

Which major equities exchanges don't do price/time priority?
Post reply on HN