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Thoughts on low latency trading if exchanges went full cloud

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

#121

Post by Kranar »

lucianbr wrote: post #118
Kranar wrote: post #109

Earlier quoted context omitted.

What do you think an Average Joe is going to do with that extra millisecond available to them?

I think Average Joe has quite a lot of disadvantages compared to some hedge fund or whatever it is that does HFT. Do you really think the only difference between them is a millisecond? That's only between HFT traders. My point was that other advantages/disadvantages are not being cared about, not that we should provide milisecond access to Average Joe.

Of course the Average Joe has disadvantages compared to a hedge fund or people who are experts in a field and spend the bulk of their life dedicated to some aspect that the Average Joe is not dedicated towards.

If Average Joe wants returns comparable to these hedge funds, then they should stop trying to time to market and instead stick to diversified ETFs and stop worrying about millisecond differences in the stock market.

Believe it or not, if Average Joe does that they can actually beat most hedge funds over a long time horizon [1].

https://www.cnbc.com/2018/02/16/warren-buffett-won-2-point-2...

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

#122

Post by aynyc »

netfortius wrote: post #106
aynyc wrote: post #55

Earlier quoted context omitted.

Outpost is literally a AWS branded server rack that is installed into a data center, I don't think it's considered "cloud" in modern stack.

The end-to-end infrastructure (and parts of PaaS delivered within Outpost, from within the set of AWServices) is in fact a cloud "extension", with an on-prem leg, NOT an on-prem solution connected to the cloud. There are a lot of constructs which force the AWS cloud products/services usage, not the traditional on-prem ones.

The outpost deployment in financial services that I've seen is the opposite in cloud extension. These companies want to say they are cloud-enabled, rather than push a full stack onto the AWS regions, they essentially buy AWS outpost rack as a way to extend their on-prem environment to the cloud (mainly S3).

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

#123

Post by kstrauser »

maerF0x0 wrote: post #116
munk-a wrote: post #115

Low latency/rapid trading seems to have added no value to the stock market and eroded a large portion of the fair market evaluation of companies. Whether it's technically possible or not it's likely we'll need to artificially add delay into the system - ideally that can be done in a way that makes it fair to traders that have a naturally high latency connection to even the playing field.

The claim is they play marketmaker (they hold stocks for short periods of time so your trades execute faster), they obviously want a profit incentive for doing so.

That begs the question by assuming that trades executing faster are a good thing to optimize for.

Is the stock market for investing in a company, or for extracting money from momentary fluctuations? Those seem to be mutually exclusive.

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

#124

Post by aftbit »

amluto wrote: post #85
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…

> Knowing you can saturate your entire network with 10G traffic and every participant will get the same market data packets at the same time[0] Hold on a second. Multicast is nifty, but it does not perform miracles. If you operate a 10G multicast network and actually saturate it, you will experience drops and buffering-induced delays. Perhaps you can play games with time-synchronous networking, but as far as I know t…

Are people still using 10G in PROD? I thought 40G and 100G had generally replaced that. I have 10G cards in my homelab that are a decade old and cost less than $100.

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

#125

Post by msarrel »

lucianbr wrote: post #71
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…

I find it sad that equal access between the entities doing HFT and regular Joes is not required for fairness, but god forbid one HFT having some milisecond advantage over another. That would be unfair. Can't have that.

I think it's just beautiful how you made this point and other people couldn't even understand the concept of equal access to data and trading platforms. Yes, that's your point exactly.

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

#127

Post by lucianbr »

Kranar wrote: post #121
lucianbr wrote: post #118

Earlier quoted context omitted.

I think Average Joe has quite a lot of disadvantages compared to some hedge fund or whatever it is that does HFT. Do you really think the only difference between them is a millisecond? That's only between HFT traders. My point was that other advantages/disadvantages are not being cared about, not that we should provide milisecond access to Average Joe.

Of course the Average Joe has disadvantages compared to a hedge fund or people who are experts in a field and spend the bulk of their life dedicated to some aspect that the Average Joe is not dedicated towards. If Average Joe wants returns comparable to these hedge funds, then they should stop trying to time to market and instead stick to diversified ETFs and stop worrying about millisecond differences in the stock m…

I mean, you could also write "of course whoever has servers closer to the exchange can do HFT better". "Of course companies that invested a lot in having servers closer will reap the advantages."

No, expertise is not the difference. If you're a private person with 100 years experience in trading, you still can't do HFT. You need to be an instutition, have lots of capital to invest in servers, software development maintainance etc. As a private person I think you don't even get access to the API.

"Of course whoever has more capital has advantages in the market"? Of course they do, but I don't think "of course they should".

For this discussion, that funds don't beat the market average over a long term is irrelevant. Why not say "who cares you get more latency than the other bank, if you want money just invest in S&P500 and long term you'll beat them". But you don't apply that to banks against banks, only to banks against Joe. Why?

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

#128

Post by latchkey »

aftbit wrote: post #124
amluto wrote: post #85

Earlier quoted context omitted.

> Knowing you can saturate your entire network with 10G traffic and every participant will get the same market data packets at the same time[0] Hold on a second. Multicast is nifty, but it does not perform miracles. If you operate a 10G multicast network and actually saturate it, you will experience drops and buffering-induced delays. Perhaps you can play games with time-synchronous networking, but as far as I know t…

Are people still using 10G in PROD? I thought 40G and 100G had generally replaced that. I have 10G cards in my homelab that are a decade old and cost less than $100.

We are 400G to the machines and 800G on the splines.

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

#129

Post by blitzar »

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 these people in tech optimising clicks, ads and engagment feels wasteful and bad for 'regular' humans.

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

#130

Post by jeffreyrogers »

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.

IIRC they have done trials of this on some exchanges. It didn't make a big difference either way. The opening and closing auctions are already sort of done the way you describe.
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