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Goldman Sachs is spending $100M to shave milliseconds off stock trades

cnbc.com

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Re: Goldman Sachs is spending $100M to shave milliseconds off stock trades

#71

Post by tomp »

vannevar wrote: post #19
nickles wrote: post #12

Earlier quoted context omitted.

> pointless expenditure on an ultimately meaningless arms race What about price discovery is pointless? Would you prefer that prices update only once a day? Once a week? Once a month? Realtime pricing of securities and derivatives is critical for an efficiently functioning economy. > if we imposed reasonable limits on the time required to hold an equity in order for a trade to be legally recognized This would damage…

Most of these efforts are aimed at taking advantage of lags in information flow, often within the very trading systems on which the trades are occurring. They are exploits, not essential market-making. Noise, not signal. What's the right timeframe? Something based on the time it takes for humans to reason about a price. Not a day, but certainly not milliseconds, either.

By “taking advantage of lags in information flow” you’re actually disseminating information and reducing the lag.

Re: Goldman Sachs is spending $100M to shave milliseconds off stock trades

#73

Post by ramblerman »

codingslave wrote: post #17

People love to rail on HFT, but at this point, its really not that profitable. It's just a reality of trading in the markets. There was a blip of time between 2008 and 2014 when HFT was extremely profitable. Those inefficiencies have been gone from the market for years. People were whooped into anger about how much money was being made, at this point its a complete non issue and needs to be removed from the highlight…

As an outsider with admittedly limited knowledge. What would happen if you limited movement on a stock to be on the second?

Would that not prevent this never ending race for faster and closer access. Something that doesn’t really seem to be adding value to society or the market.

Re: Goldman Sachs is spending $100M to shave milliseconds off stock trades

#74

Post by esoterica »

ralph84 wrote: post #9

Most exchanges have an auction process that sets opening and closing prices. They let everyone get their orders in and then run an algorithm to find the price that will execute the most volume. They could do the same process every 5 minutes and only allow stocks to trade in the auction. Then all of the resources used on pointless HFT could be used on something economically productive.

Most exchange open/close auctions use time priority to deal with order imbalances. If there are buy orders for 300 shares and sell orders for 500 at the same price, then only first 300 shares on the sell side will be filled.

The speed incentive is a consequence of time priority, not the auction frequency. Switching from continuous auctions to open/close style auctions every 5 minutes would not remove the incentive to be fast.

Re: Goldman Sachs is spending $100M to shave milliseconds off stock trades

#75

Post by eecc »

nickles wrote: post #37
codingslave wrote: post #17

People love to rail on HFT, but at this point, its really not that profitable. It's just a reality of trading in the markets. There was a blip of time between 2008 and 2014 when HFT was extremely profitable. Those inefficiencies have been gone from the market for years. People were whooped into anger about how much money was being made, at this point its a complete non issue and needs to be removed from the highlight…

Adding to this, HFT is a product of rule 612 of Reg NMS (the sub-penny rule). Markets are not allowed to show quotes in increments of less than $0.01 for most names. Since traders cannot compete on price, they have been forced to compete exclusively on speed. The impact of such regulation was tested by the SEC recently with the 'tick size' program. Instead of reducing the minimum increment, some names saw it increase…

What’s the minimum lag for a packet to reach around the world?

Multiply x2 and add an extra 10%.

Make that the minimum order placement tick duration.

There would be 1 single global price and no arbitrage between markets possible.

Re: Goldman Sachs is spending $100M to shave milliseconds off stock trades

#76

Post by alkibiades »

ramblerman wrote: post #73
codingslave wrote: post #17

People love to rail on HFT, but at this point, its really not that profitable. It's just a reality of trading in the markets. There was a blip of time between 2008 and 2014 when HFT was extremely profitable. Those inefficiencies have been gone from the market for years. People were whooped into anger about how much money was being made, at this point its a complete non issue and needs to be removed from the highlight…

As an outsider with admittedly limited knowledge. What would happen if you limited movement on a stock to be on the second? Would that not prevent this never ending race for faster and closer access. Something that doesn’t really seem to be adding value to society or the market.

who gets the priority in order fulfillment placed in that second? otherwise you have the same issue. the brokerage might also be tempted to make money by front running those trades since that have all the trades in front of them for a second before needing to be fulfilled

Re: Goldman Sachs is spending $100M to shave milliseconds off stock trades

#77

Post by xvilka »

Would be nice to read more about technical sides of this transition. Also getting rid of Java code, that is so popular among financial institutions, will increase the speed. Something like Rust is a perfect fit[1] for such industries.

[1] https://internals.rust-lang.org/t/proposal-business-applicat...

Re: Goldman Sachs is spending $100M to shave milliseconds off stock trades

#78

Post by habnds »

codingslave wrote: post #17

People love to rail on HFT, but at this point, its really not that profitable. It's just a reality of trading in the markets. There was a blip of time between 2008 and 2014 when HFT was extremely profitable. Those inefficiencies have been gone from the market for years. People were whooped into anger about how much money was being made, at this point its a complete non issue and needs to be removed from the highlight…

people aren't mad only because tons of money is made on hft. It's also because money is _wasterd_ on hft. That's $100 million dollars spent on something that has 0 use to society. It's just rich people playing weird games.

Think about the social benefits of $100 million invested in nyc transit infrastructure.

The economy's incentive structure is broken and this is a prime example.

Re: Goldman Sachs is spending $100M to shave milliseconds off stock trades

#79

Post by codyb »

habnds wrote: post #78
codingslave wrote: post #17

People love to rail on HFT, but at this point, its really not that profitable. It's just a reality of trading in the markets. There was a blip of time between 2008 and 2014 when HFT was extremely profitable. Those inefficiencies have been gone from the market for years. People were whooped into anger about how much money was being made, at this point its a complete non issue and needs to be removed from the highlight…

people aren't mad only because tons of money is made on hft. It's also because money is _wasterd_ on hft. That's $100 million dollars spent on something that has 0 use to society. It's just rich people playing weird games. Think about the social benefits of $100 million invested in nyc transit infrastructure. The economy's incentive structure is broken and this is a prime example.

Who’s mad about HFT? 100m out of a what 40tn dollar world GDP?

I get it, just seems... unlikely. Who cares?

Re: Goldman Sachs is spending $100M to shave milliseconds off stock trades

#80

Post by MagnumOpus »

tomp wrote: post #71
vannevar wrote: post #19

Earlier quoted context omitted.

Most of these efforts are aimed at taking advantage of lags in information flow, often within the very trading systems on which the trades are occurring. They are exploits, not essential market-making. Noise, not signal. What's the right timeframe? Something based on the time it takes for humans to reason about a price. Not a day, but certainly not milliseconds, either.

By “taking advantage of lags in information flow” you’re actually disseminating information and reducing the lag.

The social value or reducing the price dissemination lag from a microsecond to 110 ns is zero. Hence why the billions of resources going into it are a greater waste than even bitcoin.
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