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

Thoughts on low latency trading if exchanges went full cloud

blog.abctaylor.com

Post reply on HN
Print view View original

61–70 of 184 posts

Re: Thoughts on low latency trading if exchanges went full cloud

#61

Post by cosmic_quanta »

jstsch wrote: post #10

Nice article. Wondering though why trading is not done in discrete batches, e.g. 5 second intervals? Trades in the same interval get filled equally or stochastically? Info about trades with that same 5 second batch delay? Is there some (theoretical) market efficiency thing at play? All this HFT feels wasteful and bad for 'regular' human investors.

This is how wholesale electricity is traded, although for unrelated technical reasons.

Bids and offers are collected for auctions that happen at regular known intervals, for example every 15min.

Re: Thoughts on low latency trading if exchanges went full cloud

#62

Post by dusted »

cosmic_quanta wrote: post #60
dusted wrote: post #56

Showing that I don't understand economics while also telling that I don't understand economics: It would probably do the world more good to tweak the structures making ULL trading profitable anyway, it's not like the trading in and of itself brings any value to the broader world, while consuming enormous amounts of resources that could have been spent on actually improving systems that create real value.

> it's not like the trading in and of itself brings any value to the broader world This is a common sentiment, but the reality is that increasing market participation is good for everyone. Yes, even retirement funds benefit from the presence of market-makers. Liquid markets allow for better price discovery and cheaper transaction costs.

I specifically the high-speed trading. I definitely agree that actual investment and trading has some benefit.

Nobody was helped by the 200 nanosecond thing that the machines did when the marked opened (except the owners of said machines, of course)

Re: Thoughts on low latency trading if exchanges went full cloud

#63

Post by pclmulqdq »

posnet wrote: post #54

The biggest current limitation with cloud providers when it comes to exchange tech is the lack of real multicast support. It is rare outside of exchanges, but extremely low latency L1 multicast market data has become the backbone of exchanges, both for fairness and for scalability. Knowing you can saturate your entire network with 10G traffic and every participant will get the same market data packets at the same tim…

Unless you build your network for it, multicast is a huge pain in the ass to administer. None of the big cloud providers built for it at the scale that traders use it, and I think they prefer things that way. When customers want it, they all just fake it by doing fan-out unicast.

Re: Thoughts on low latency trading if exchanges went full cloud

#64

Post by xrd »

IshKebab wrote: post #24
jstsch wrote: post #10

Nice article. Wondering though why trading is not done in discrete batches, e.g. 5 second intervals? Trades in the same interval get filled equally or stochastically? Info about trades with that same 5 second batch delay? Is there some (theoretical) market efficiency thing at play? All this HFT feels wasteful and bad for 'regular' human investors.

If you think about it you can never eliminate the advantage of being faster. If you do 5 seconds batches it just means the edges of the batches become the time-sensitive points. If you want to kill HFT you can do it directly via very very small transaction fees. But guess how popular that is...

It's funny that you say that, with the crypto transaction fees still a big problem. Feels like HFT and crypto are on a convergence towards that concern.

Re: Thoughts on low latency trading if exchanges went full cloud

#66

Post by pclmulqdq »

secondcoming wrote: post #59
posnet wrote: post #54

The biggest current limitation with cloud providers when it comes to exchange tech is the lack of real multicast support. It is rare outside of exchanges, but extremely low latency L1 multicast market data has become the backbone of exchanges, both for fairness and for scalability. Knowing you can saturate your entire network with 10G traffic and every participant will get the same market data packets at the same tim…

> lack of real multicast support Yup, this is a problem for us in GCP today even outside of trading. I don't know how Pub/Sub works for them.

Pub/sub systems in unicast-only environments are very complex distributed systems to handle the load involved in fan-out routing while maintaining a global order. I had an interviewer once get annoyed with me for suggesting using multicast to solve the fan-out part of a pub/sub system, which made the global ordering part small and simple.

We lost a lot by thinking of HTTP as the one true level of network abstraction.

Re: Thoughts on low latency trading if exchanges went full cloud

#67

Post by aynyc »

KiranRao0 wrote: post #5

One key consideration is “provable fairness”. It’s my understanding that exchanges use techniques like long, same length fiber optic cables to all racks within the exchange datacenter to convince customers that everyone is on a fair playing field. This is a lot harder to do when a server is virtualized somewhere on some rack on EC2. Exactly as mentioned, people will try to optimize by spinning up/down instances as cl…

It's provable that it's not fair. AWS multicast is software based, not hardware based.

Re: Thoughts on low latency trading if exchanges went full cloud

#69

Post by posnet »

SamuelAdams wrote: post #34
onionisafruit wrote: post #25

If a big exchange goes to the cloud it won’t look like a regular company setting up an aws account and getting a bunch of ec2 instances in us-east-1. They would at least have dedicated racks. I suspect the provider would end up with a plan where traders can get servers that all have the same network distance from the exchange’s nics (down to the same length of fiber).

Honestly for something this niche I wonder if AWS would make a new region, like gov-cloud or secret. The goal would be to use tech that can accommodate ULL deployments.

This seems to the most likely, and it's not unheard of, they have 'local regions' like osaka in Japan.

Alternatively they could just stick a bunch of Outpost racks in the NYSE/NASDAQ data center and create an 'eXn.8xlarge' instance type and charge 100$ an hour.

Re: Thoughts on low latency trading if exchanges went full cloud

#70

Post by Shrezzing »

misja111 wrote: post #47
jstsch wrote: post #10

Nice article. Wondering though why trading is not done in discrete batches, e.g. 5 second intervals? Trades in the same interval get filled equally or stochastically? Info about trades with that same 5 second batch delay? Is there some (theoretical) market efficiency thing at play? All this HFT feels wasteful and bad for 'regular' human investors.

> All this HFT feels wasteful and bad for 'regular' human investors. Quite the opposite, thanks to the tough competition the market makers are setting the bid/asks spreads as minimal as possible. Which leads to less costs for human investors, pension funds, insurance companies etc. I used to be a market maker in the 90's before HFT took off. The margins we kept sometimes felt like a rip off but customers had no other…

>Quite the opposite, thanks to the tough competition the market makers are setting the bid/asks spreads as minimal as possible. Which leads to less costs for human investors, pension funds, insurance companies etc.

It's not automatically the case that the disappeared margins & thinning of bid/asks have been shared equitably between the trading firms and customers.

Take two exaggerated markets for example:

1) No HFTs: The customer wants 100 shares in Company A. The shares are available on two exchanges, one at $100, and another at $105. A market maker charges the customer $5 to access the 100 shares at $1 each. The customer pays $105. The market maker earns $5.

2) With HFTs: The customer wants 100 shares in Company A. The shares are available on two exchanges, one at $100, and another at $105. The customer clicks "buy" on their trading platform, the HFT races to the $100 shares, and purchases them, then fulfills the order at $105. The customer pays $105. The HFT firm earns $5.

For the end-customer, all that's happened is the margin goes to another firm. The consumer still has no other choice but to accept these transaction fees. There was arguably a need for HFTs to reduce the market-makers exorbitant fees in the 2000's, but that requirement has been served, and the technology now exists to remove both from the market entirely.

HFTs are a rent-seeking entity interjecting in a market which, at least in theory, exists to most efficiently allocate capital to the productive benefit of all.

Post reply on HN