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Launch HN: OneChronos (YC S16) – Combinatorial auctions market for US equities

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Re: Launch HN: OneChronos (YC S16) – Combinatorial auctions market for US equities

#21

Post by lpage »

zitterbewegung wrote: post #16

What is your SLA for an expressive bid? I'm guessing it its less than 1ms? Do you use a database of some sort? How do you to handle settlement? How do you handle ingest?

> What is your SLA for an expressive bid? I'm guessing it its less than 1ms?

The optimization procedure (which includes bid evaluation) is ~30ms. We cycle bound (under a formal model of computation via function application and graph reduction) computation of bidders to ensure that everyone shares an identical and deterministic resource cap.

> Do you use a database of some sort?

Not as part of the real-time trading system, which operates as a CP fail-stop distributed system model checked for safety and liveness by TLA+ and system tested by Jepsen.

> How do you to handle settlement?

Regular way (T+2 settlement with a 3rd party clearing BD)

> How do you handle ingest?

We use a constellation of GPS synchronized Stratum 1 clocks and proprietary network timestamping software + hardware to ensure that we process orders entered by the auction call time regardless of what physical host we receive the order on. We do the same for market data broadcast from other trading venues across data centers and geographies. We stream both market data and orders to a central point for processing. Every node in our distributed system that processes orders or “away venue” market data broadcasts a “Gateway Call Announcement (GCA)” message at auction call time to downstream compute nodes that run the auction. Auction solver nodes get to work after receiving GCA messages from the hosts they expect to hear from.

Re: Launch HN: OneChronos (YC S16) – Combinatorial auctions market for US equities

#22

Post by jpthurman »

sjbase wrote: post #11
jpthurman wrote: post #10

Earlier quoted context omitted.

>Who would use this and why? This isn't clear to me - are your buyer's institutional investors? Are they buying your technology to create trade options for their end users i.e. an individual investor? I don't know what an ATS is so I gather that I'm not a direct user of your technology - perhaps I would be an indirect user? Would E-Trade, for example, leverage your technology to provide me with a combinatorial buying…

An ATS is like an exchange, so we match buyers and sellers. And you guessed correctly that the initial users are institutional investors - or more directly their brokers. So initially we'll have institutions creating and sending in "Expressive Bids" to improve their execution performance, and to express trades they currently can't via plain limit orders. That said, we'd love to get to the point where E-Trade etc. are…

Thanks. Obviously I'm not a direct user of your technology and so maybe this is not intended for me but if you could translate your "A" and "B" into a hard, real-life example that I could understand I would be empowered to be an advocate for you. Best of luck to you.

Re: Launch HN: OneChronos (YC S16) – Combinatorial auctions market for US equities

#23

Post by lpage »

retube wrote: post #12
lpage wrote: post #3

Earlier quoted context omitted.

> This seems like really deep technology. That it is! > What is the one sentence describing who would use this and why though? Today's market structure costs institutional investors (and by extension households) at least a trillion dollars annually (and Smart Markets hold the potential to eliminate that loss).

> a trillion dollars annually? lol. source / evidence?

Fully appreciate that it's a very large sounding but very real number once you start unpacking the scale of capital markets: https://news.ycombinator.com/item?id=30247693

Re: Launch HN: OneChronos (YC S16) – Combinatorial auctions market for US equities

#24

Post by lpage »

totalZero wrote: post #13
lpage wrote: post #5

Earlier quoted context omitted.

> This would be far more impactful IMO for a market where price discovery is weak and market access is challenging We very much agree that the potential is even more significant for markets where opacity and price discovery is less efficient than US equities. We chose US equities as a beachhead given the mature regulatory framework and the extent of market fragmentation. Other asset classes and geographies are immedi…

If you decide to go that route, hire me. I can be useful there.

Please email me! careers [at symbol] onechronos.com

Re: Launch HN: OneChronos (YC S16) – Combinatorial auctions market for US equities

#26

Post by sjbase »

jpthurman wrote: post #22
sjbase wrote: post #11

Earlier quoted context omitted.

An ATS is like an exchange, so we match buyers and sellers. And you guessed correctly that the initial users are institutional investors - or more directly their brokers. So initially we'll have institutions creating and sending in "Expressive Bids" to improve their execution performance, and to express trades they currently can't via plain limit orders. That said, we'd love to get to the point where E-Trade etc. are…

Thanks. Obviously I'm not a direct user of your technology and so maybe this is not intended for me but if you could translate your "A" and "B" into a hard, real-life example that I could understand I would be empowered to be an advocate for you. Best of luck to you.

No worries, happy to concretize this: the really easy example would be shoes. How much would you pay for just a right shoe or just a left shoe? A lot less than the pair, since you might not be able to find the other shoe in the right size, condition, etc. Same with the seller - they don't want to be stuck trying offload a single left shoe.

In stocks, A might be a company you invested in and B some ETF that you bought as a hedge for A. What if you sell out of A, and then the price of the ETF drops? There's value in being able to liquidate the full position - the single stock plus the hedge - at once.

Re: Launch HN: OneChronos (YC S16) – Combinatorial auctions market for US equities

#27

Post by lpage »

gbasin wrote: post #25

This is very cool. In a past life, I built a quant + HFT MM trading firm where we did a lot of spread trading. Always thought something like this was needed! Good work

Thank you! That's my past life as well. The impedance mismatch between what I knew was possible on the market design front courtesy of my academic background and what I did day-to-day as an algo trader is part of the origin story. Steve and I want to figure out how we could bring Smart Markets to finance so that everyone could spend more time on alpha and less time on market structure workarounds.

Re: Launch HN: OneChronos (YC S16) – Combinatorial auctions market for US equities

#28

Post by retube »

lpage wrote: post #23
retube wrote: post #12

Earlier quoted context omitted.

> a trillion dollars annually? lol. source / evidence?

Fully appreciate that it's a very large sounding but very real number once you start unpacking the scale of capital markets: https://news.ycombinator.com/item?id=30247693

I am aware how big the markets are. I am also aware that transaction costs are miniscule.

By your own data above, if typical fees are $0.0009 per share traded, $1tr in costs implies notional value of instruments traded each year of approx $1x10^17, assuming average price of $100 / share.

Re: Launch HN: OneChronos (YC S16) – Combinatorial auctions market for US equities

#29

Post by lpage »

retube wrote: post #28
lpage wrote: post #23

Earlier quoted context omitted.

Fully appreciate that it's a very large sounding but very real number once you start unpacking the scale of capital markets: https://news.ycombinator.com/item?id=30247693

I am aware how big the markets are. I am also aware that transaction costs are miniscule. By your own data above, if typical fees are $0.0009 per share traded, $1tr in costs implies notional value of instruments traded each year of approx $1x10^17, assuming average price of $100 / share.

Ah, agreed, but we're talking about two different things—direct transaction costs versus allocative inefficiency/missed Pareto outcomes. OneChronos is about unlocking Pareto efficiencies—situations in which two or more parties can trade to mutual benefit. An easy example is a (scaled down in price differences, scaled up in size) version of the complements example above, e.g., an ETF arb trading the basket against the underlying with a small tolerance for tracking error. An institution that can take the basket or the underlying as a hedge or as an investment position can interact with the arbitrager, creating economic gains for both parties in the process. At institutional scale, efficiency gains measured in bps and compounded exponentially add up.

Re: Launch HN: OneChronos (YC S16) – Combinatorial auctions market for US equities

#30

Post by lpage »

polskibus wrote: post #19

Finally, something truly new, taking care of complexity for businesses for a win-win scenario, not aiming at buying users in batches with VC money and tracking them for life. I appreciate you being humble and honest that it is an application of known methods to a different problem. Good luck, let us know how to follow you for your latest achievements.

Thank you! We really appreciate that. We're happy to be working on something that has already worked incredibly well in other domains while facing major technical blockers against use in ours. It gives us a clear, albeit challenging, problem to tackle.
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