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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

#101

Post by arnoooooo »

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.

What if you limited it to be on the day ? The week ?

What if stock markets where about the long term ?

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

#102

Post by reallydontask »

fooker wrote: post #98
reallydontask wrote: post #95

Earlier quoted context omitted.

> probably because it's difficult to see any actual value that this provides to society. Doesn't this apply to a majority of activities in the financial sector?

No, a large fraction of modern tech and companies would not exist without the 'activities in the financial sector'. Essentially any endeavor requiring capital beyond your means would have to be bootstrapped or required borrowing money at exorbitant rates. There is a reason the financial sector exists. It makes money by selling convenience and taking over quantified risk.

My point is not that the financial sector is unnecessary, it's that the majority of the activities are not of benefit to society, which admittedly is something hard to define.

Following on from that line of thought, it could be argued that a lot of companies don't provide any benefit to society, so the financial sector is just enabling these firms and thus of no benefit to society.

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

#103

Post by Rafuino »

While not related to high frequency trading, per se, the Google research on the gap between nanosecond and millisecond latencies (AKA "attack of the killer microseconds") springs to mind with this article. Typically the hardware bottleneck in HFT, I assume, is network latency, which leads to colocating trading servers near the exchanges themselves...so how do you improve on that? Smart NICs/FPGAs? Better non-volatile storage (there's hardware on the market today that's getting us to read latencies in the single digits on PCIe bus at least)...? ASICs for HFT specifically? This is obviously a marketing piece put out to attract quants to Goldman Sachs given the lack of detail, but I naturally wonder where that $100M is going to be invested.

https://cacm.acm.org/magazines/2017/4/215032-attack-of-the-k...

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

#104

Post by dna_polymerase »

snovv_crash wrote: post #99
saberdancer wrote: post #89

Earlier quoted context omitted.

Those 100m are not destroyed by burning them in an HFT furnace but rather used to pay developers, hardware, factory workers etc. Sure, it's not going directly into infrastructure but it is not lost. In fact, it's quite possible that if it wasn't invested into HFT it would be held as cash by the company or paid out as a dividend (which is fine as well).

That is false. The 100m could have been spent on something which increases the productivity of people. It would still go to devs, factories, etc but at the end there is something from which society benefits.

So paying hardware manufacturers and programmers for their work doesn't benefit society? It is not like firing these people would see more cancer research or other stuff you might regard as more beneficial for society.

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

#105

Post by esailija »

saberdancer wrote: post #89
habnds wrote: post #78

Earlier quoted context omitted.

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.

Those 100m are not destroyed by burning them in an HFT furnace but rather used to pay developers, hardware, factory workers etc. Sure, it's not going directly into infrastructure but it is not lost. In fact, it's quite possible that if it wasn't invested into HFT it would be held as cash by the company or paid out as a dividend (which is fine as well).

Actually he probably meant that 100 million are being used to redirect efforts and resources destructively. Your argument can be used just as well to defend an "investment" of 100m into efforts to dig up aluminium, turn it into dust and throw it into oceans.

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

#106

Post by dna_polymerase »

vannevar wrote: post #3

It seems like we could save a lot of pointless expenditure on an ultimately meaningless arms race in flash trading if we imposed reasonable limits on the time required to hold an equity in order for a trade to be legally recognized.

But why? Who is the victim here?

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

#107

Post by Arbalest »

saberdancer wrote: post #89
habnds wrote: post #78

Earlier quoted context omitted.

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.

Those 100m are not destroyed by burning them in an HFT furnace but rather used to pay developers, hardware, factory workers etc. Sure, it's not going directly into infrastructure but it is not lost. In fact, it's quite possible that if it wasn't invested into HFT it would be held as cash by the company or paid out as a dividend (which is fine as well).

This makes the assumption that time in and of itself has no relevance. Sure the money is reused, but ultimately what is valuable is labour output, and usually that has time relevance. Further, if we consider the activity as steady state, that now means a % of the labour force is semi-permanently unable to be used for something else.

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

#108

Post by pjc50 »

Rafuino wrote: post #103

While not related to high frequency trading, per se, the Google research on the gap between nanosecond and millisecond latencies (AKA "attack of the killer microseconds") springs to mind with this article. Typically the hardware bottleneck in HFT, I assume, is network latency, which leads to colocating trading servers near the exchanges themselves...so how do you improve on that? Smart NICs/FPGAs? Better non-volatile…

It's certainly possible to do it in FPGA, I was involved in this project a few years ago: http://www.argondesign.com/news/2014/jun/23/ultra-low-latenc...

Although it limits the complexity of the model and makes it harder to iterate on the development of the model.

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

#109

Post by stakhanov »

...actually it doesn't sound to me like this article is about HFT-based prop trading at all (prop trading would mean Goldman Sachs taking positions onto their own books), but about the business unit called GSAT (Goldman Sachs algorithmic trading) who execute trades on behalf of clients, so never taking any positions onto their own books.

The traditional market model used to be that at every point in time, a market maker would offer a price to buy/sell at. The bid would, of course, be lower than the ask, the difference being called the spread. When a pension fund wanted to execute a trade, they would have had to cross the spread, and, statistically speaking, half the spread would immediately accrue to the market maker as profit. ..so this is money that YOU, the holder of a pension, are losing, and that THEY, the rich folks acting as market makers that the public likes to get mad at, are taking away from you.

The business model of GSAT is that a pension fund can ask Goldman Sachs to use algorithms to do things on their behalf that are less naive than what I just described above and end up giving less money to the market maker. For example, GSAT can become a market maker on your behalf, but make a market on only one side, i.e. only offer a price to buy at or only offer a price to sell at, with the resulting trades being executed on your behalf, so it is now you who makes money off those trades, in the same way as it would traditionally be a market maker's privilege to do.

The public loves to get mad at Wall Street. But they should please get their facts straight about who the good guys are and who the bad guys are.

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

#110

Post by 1e-9 »

Markets around the world are determining prices on a massive variety of instruments that derive value from the current and future value of products such as currencies, interest rates, equities, grains, livestock, metals, oil, gasoline, natural gas, and electricity. These prices allow us to prioritize resources, make fair transactions, and manage risk (i.e. buy insurance on the value of critical products so that we can plan and invest more effectively). The value of all these instruments are related to one another, as well as to realtime world events, in complex ways that no one entity has a perfect view of. Consequently, markets work by polling the expertise of many different parties who all understand a piece of how things should be valued. This results in millions, if not billions, of interconnected price-discovery feedback loops. The markets are kind of like a massive, distributed, realtime, ensemble, recursive predictor that performs much better than any one of its individual component algorithms could. The reason why shaving a few milliseconds (or even microseconds) can be beneficial is because the price discovery feedback loops get faster, which allows the system to determine a giant pricing vector that is more self-consistent, stable, and beneficial to the economy. It's similar to how increasing the sample rate of a feedback control system improves performance and stability. Providers of such benefits to the markets get rewarded through profit.
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