Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

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

cnbc.com

Post reply on HN
Print view View original

181–190 of 328 posts

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

#181

Post by Traster »

stakhanov wrote: post #109

...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 ma…

> 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.

This is totally incorrect. Let's say a pension fund wants to sell 1000 shares of APPL. The bid is $99, the ask is $101. They sell to the bidders and get $99,000 (minus some fees to the exchange probably). Your pension scheme just successfully liquadated their position.

At this point, contrary to what you say, the market maker has made 0 profit. What they've done, is taken a position in APPL which they think theoretically is profitable, but they aren't in the business of speculating on APPL. So now they have to hedge that risk by buying negatively correlated products and slowly trying to offload that position either by letting the market fill their offers on the ask, or hoping the bid improves. Once they have paid for their hedging and closed out their position according to their strategy over a period of time, whatever they have left is their profit.

What you paid that market maker for was for taking on the risk of holding the product whilst spending time to offload it to the rest of the market.

What GSAT do is say "Hey, don't sell this to the market, let us take care of that for you"- which is exactly the same service a market maker provides except they don't quote publicly, and in fact they probably do this by working with market makers.

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

#182

Post by School-Cotton »

varshithr wrote: post #179
grenoire wrote: post #144

Earlier quoted context omitted.

We know, empirically, that a lack of liquidity increases trading costs, which in turn is directly channeled to the prices of goods and services that rely on this liquidity (more or less everything in the world, even more indirectly ones like education). It's difficult to say 'things would be X% more expensive' because of the interconnected complexity the GP was talking about, but there is definitely a very apparent b…

Forgive me for asking but what does GP here stand for?

Grandparent comment, i.e., two links up in the comment tree.

(It's a common term on internet forums -- I learned it from Slashdot years ago)

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

#183

Post by branchless »

1e-9 wrote: post #110

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 ca…

No, this is a pointless waste of time. Source: work in low latency tech.

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

#184

Post by toofy »

varshithr wrote: post #179
grenoire wrote: post #144

Earlier quoted context omitted.

We know, empirically, that a lack of liquidity increases trading costs, which in turn is directly channeled to the prices of goods and services that rely on this liquidity (more or less everything in the world, even more indirectly ones like education). It's difficult to say 'things would be X% more expensive' because of the interconnected complexity the GP was talking about, but there is definitely a very apparent b…

Forgive me for asking but what does GP here stand for?

GrandParent comment.

The comment directly above is the parent, and the comment above the parent is the grandparent—in this case the GP they’re referring to was 1e-9’s comment.

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

#185

Post by dcsan »

varshithr wrote: post #179
grenoire wrote: post #144

Earlier quoted context omitted.

We know, empirically, that a lack of liquidity increases trading costs, which in turn is directly channeled to the prices of goods and services that rely on this liquidity (more or less everything in the world, even more indirectly ones like education). It's difficult to say 'things would be X% more expensive' because of the interconnected complexity the GP was talking about, but there is definitely a very apparent b…

Forgive me for asking but what does GP here stand for?

GP grand parent https://news.ycombinator.com/item?id=8363625

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

#186

Post by dcsan »

Merrill wrote: post #150
antientropic wrote: post #133

Earlier quoted context omitted.

Is there any empirical evidence that these perceived benefits to society actually ever materialize? It's clear that there is a benefit to a trader from knowing something milliseconds before the rest of the market (otherwise Goldman wouldn't be doing this), but it's not clear at all to me that it helps the rest of us.

Business produces goods and services. Finance is an online multiplayer game. They are two weakly-connected systems.

finance is the meta-game. "All problems in computer science can be solved by another level of indirection"

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

#187

Post by pgwhalen »

Swenrekcah wrote: post #122
twic wrote: post #62

Earlier quoted context omitted.

> I'd like to hear a coherent argument how realtime or even sub-second pricing of securities and derivatives I won't touch equities, but surely it's obvious why derivatives have to be priced quickly? When the underlying moves, you have to re-price the derivative, otherwise you're giving away money!

Well, anything that limits the complexity of derivatives is probably a good thing! Obligatory caveat: I know derivatives aren’t evil, and are very useful to the world, but we all know what happens when they get so complex that almost nobody knows what they are.

Artificially stale derivative prices are unquestionably more complex than up to date ones.

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

#188

Post by KUcxrAVrtI »

antientropic wrote: post #133
1e-9 wrote: post #110

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 ca…

Is there any empirical evidence that these perceived benefits to society actually ever materialize? It's clear that there is a benefit to a trader from knowing something milliseconds before the rest of the market (otherwise Goldman wouldn't be doing this), but it's not clear at all to me that it helps the rest of us.

If a market can't be cleared using a spreadsheet with 2^16 rows and 2^8 columns then the market is not efficient.

Largely because most of the trade strategies live in ancient xls files no one dares edit.

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

#190

Post by stillworks »

mieseratte wrote: post #155
stillworks wrote: post #119

Earlier quoted context omitted.

Have to agree. Catering to HFT shops was already in 100 microsecond latency a few years ago using commodity hardware and software (cannot speak of Goldman Sachs but another one of similar ilk, can't imagine GS were much far away if not even better)

Worked in an HFT shop and we were down to optimizing nanoseconds. Lots of folks had war stories about spending months to shave off tens of nanoseconds off pieces used millions of times per day.

Yep, I have heard such stories. "Folks" were FPGA engineers and one of their primary target was to be able to cache "stuff" in SRAM as much as possible as that is the part which yields nanosecond latency.

My experience was more along the "man in the middle" setups which HFT shops used to hide their trading in the shorter term. The man in the middle got better prices at the exchange due to increased volumes and the HFT shop got a fairly good opportunity to hide it's activity for a short while.

At a later stage at some venues, the HFT shop did not even need to route their orders via MITM, the MITM simply got a firehose of HFT's execution reports to reverse build the order books !

Smoke and mirrors...(and nonsense)

Post reply on HN