Hedge Fund Wants to Use Atomic Clocks to Beat High-Speed Traders • Hacker News Board

Re: Hedge Fund Wants to Use Atomic Clocks to Beat High-Speed Traders

#201

Post by yummyfajitas » Tue, Jul 12, 2016, 4:53 AM UTC

dllthomas wrote: post #200

yummyfajitas wrote: post #198

Earlier quoted context omitted.

If he sees an order on exchange A (which is completely anonymized and disconnected from anything on exchange B), he cannot know if you are making an order on exchange B. "Buying ahead of you" requires some kind of advance knowledge, and in the scenario described you simply don't have it.

If there's a pattern of sloppy traders trying to fill large orders by splitting them across exchanges and firing them off at roughly the same time, then having seen a trade at one exchange and not yet at another, it might be a good guess that a trade was incoming, if I'm faster enough to make those decisions. I don't really know if that is the case (or ever was). In any event, it's not acausal.

It's a really terrible guess, actually.

Suppose there is a pattern of 10% of traders being sloppy, and 90% being not sloppy. If you run this strategy, you lose 90% of the time.

Additionally, whenever a small trader comes along, you are again overreacting. I.e., I make quite a few (automated) trades. I never cross exchanges or blow up more than 1 level. Whenever I trade you are again buying all the shares and probably losing money.

What I described as acausal is responding to an order at BATS before it gets there. Guessing that maybe an order might go to BATS because you saw one at ARCA isn't acausal.

Re: Hedge Fund Wants to Use Atomic Clocks to Beat High-Speed Traders

#202

Post by dllthomas » Tue, Jul 12, 2016, 5:36 AM UTC

yummyfajitas wrote: post #201

dllthomas wrote: post #200

Earlier quoted context omitted.

If there's a pattern of sloppy traders trying to fill large orders by splitting them across exchanges and firing them off at roughly the same time, then having seen a trade at one exchange and not yet at another, it might be a good guess that a trade was incoming, if I'm faster enough to make those decisions. I don't really know if that is the case (or ever was). In any event, it's not acausal.

It's a really terrible guess, actually. Suppose there is a pattern of 10% of traders being sloppy, and 90% being not sloppy. If you run this strategy, you lose 90% of the time. Additionally, whenever a small trader comes along, you are again overreacting. I.e., I make quite a few (automated) trades. I never cross exchanges or blow up more than 1 level. Whenever I trade you are again buying all the shares and probably…

I think we're agreed, here.

Re: Hedge Fund Wants to Use Atomic Clocks to Beat High-Speed Traders

#203

Post by syngrog66 » Tue, Jul 12, 2016, 5:45 AM UTC

CelestialTeapot wrote: post #146

eru wrote: post #96

Earlier quoted context omitted.

Keep in mind that Flash Boys is not worth the paper it's printed on. (See https://www.goodreads.com/book/show/23570025-flash-boys )

In any argument there is your side, their side, and the truth.

beautifully said

I've evolved to keep this rule in mind when I hear almost any story/portrayal/claim/news anymore. Especially anything that feels sensational or too-good-to-be-true-at-first.

For example, people often lie about sex or money. National governments often lie about, well, pretty much anything that suits their best interests. When I say "lie" I don't mean completely wrong or totally false, merely, spun a certain way, sometimes a careful omission of critical modifiers, the use of weasel words, etc.

Re: Hedge Fund Wants to Use Atomic Clocks to Beat High-Speed Traders

#204

Post by mrchicity » Tue, Jul 12, 2016, 6:05 AM UTC

djoldman wrote: post #72

hourislate wrote: post #68

Earlier quoted context omitted.

HFT systems scalp. They make their millions .001 at a time on front running and volume. A way to discourage this is by adding a very small fee to each trade. This eats/takes away their profits. The problem is their are too many folks making money that are connected to the right people in Government.There will always be talk about doing something about it but nothing will ever happen. The only positive outcome from al…

If you wanted to kill HFT, it's actually pretty easy. Just make the minimum increment incredibly small. In other words, let people trade at $.0000000001 increments. No fees needed.

The idea you suggest already exits for stocks in the US with very high prices because the minimum increment doesn't scale with stock price. For example, Google is $700 a share, making the minimum $0.01 price tick equivalent to 0.0014% vs. 0.08% for a $15 stock like Bank of America. HFTs generally don't even bother with stocks like Google because they aren't profitable enough. The rebate and value of making a tick goes down as price increases. This causes spreads to widen and these stocks are generally harder to trade for the buy-side. Not a good situation.

Re: Hedge Fund Wants to Use Atomic Clocks to Beat High-Speed Traders

#205

Post by eru » Tue, Jul 12, 2016, 6:14 AM UTC

kasey_junk wrote: post #192

darawk wrote: post #179

Earlier quoted context omitted.

What is your argument that insider trading is good?

I don't know how I feel about it, but several relatively common arguments in favor of it are: 1) speeds up price discovery 2) makes complying with regulation cheaper 3) it is nearly impossible to enforce currently Some op-ed pieces arguing for it. http://www.marketwatch.com/story/why-insider-trading-should-... http://www.forbes.com/sites/jeffreydorfman/2015/03/22/a-mode... https://www.washingtonpost.com/news/wonk/wp/…

Yes, that's along the lines I would be arguing.

I am on the fence myself, not having thought about the matter too much. Instinctively, I'd say insider trading should be handled as a breach of contract (ie if I trade on something that I signed an NDA for), not as a criminal matter.

Re: Hedge Fund Wants to Use Atomic Clocks to Beat High-Speed Traders

#206

Post by eru » Tue, Jul 12, 2016, 6:15 AM UTC

pas wrote: post #113

eru wrote: post #110

Earlier quoted context omitted.

GPS plus atomic clocks. And, boy, do the off-the-shelf commercial offerings suck. The vendors are not really used to dealing with the stress that Google puts these things under.

Could you elaborate on that?

Sorry, not sure I am allowed. :(

But, their drivers and APIs seem woeful judging by the complaints I heard.

Re: Hedge Fund Wants to Use Atomic Clocks to Beat High-Speed Traders

#207

Post by eru » Tue, Jul 12, 2016, 6:15 AM UTC

andylei wrote: post #153

eru wrote: post #105

Earlier quoted context omitted.

HFT is only a bad thing, because it's removes bright minds from working on other problems; not because it hurts other market participants (which it doesn't---apart from being competition to other market makers). I've read some interesting proposal that removing the subpenny rule would make speed less of a concern, since it would be possible to undercut on price instead. See https://www.chrisstucchio.com/blog/2012/hft…

a lot more bright minds are working on making you click on ads than hft

Two wrongs don't make a right.

Re: Hedge Fund Wants to Use Atomic Clocks to Beat High-Speed Traders

#208

Post by eru » Tue, Jul 12, 2016, 6:18 AM UTC

curiousDog wrote: post #164

eru wrote: post #99

Earlier quoted context omitted.

GPS can fail. Atomic clocks give you a second system to fall back on. At Google, we use both GPS and atomic clocks for Spanner.

I think the main innovation in Spanner is the notion of Truetime not the atomic/gps clocks though. In fact MSR has come up with something called ClockSI that does global snapshots with a modified NTP I believe.

Yes, I think you are right.

Re: Hedge Fund Wants to Use Atomic Clocks to Beat High-Speed Traders

#209

Post by eru » Tue, Jul 12, 2016, 6:19 AM UTC

CelestialTeapot wrote: post #146

eru wrote: post #96

Earlier quoted context omitted.

Keep in mind that Flash Boys is not worth the paper it's printed on. (See https://www.goodreads.com/book/show/23570025-flash-boys )

In any argument there is your side, their side, and the truth.

And not all sides have an equal distance to the truth.

Re: Hedge Fund Wants to Use Atomic Clocks to Beat High-Speed Traders

#210

Post by mrchicity » Tue, Jul 12, 2016, 6:22 AM UTC

yummyfajitas wrote: post #56

Animats wrote: post #51

Earlier quoted context omitted.

"In reality the other HFT are not buying/selling new orders. Instead what they are doing is cancelling or modifying their existing orders so that they don't get hit by incoming orders." Right. One of the strategies is: - Put in standing order to sell a small amount of security slightly below market and leave it active. - Wait until a buy order triggers it. - Buy same security faster than rest of buy order can be proc…

You haven't even described a strategy. Guess what, I made a bunch of money off brexit by buying low and selling high! Consider the alternative way this "strategy" can go: - Put in a standing order to sell a small amount slightly below market. - Wait until you receive a "TRADE CONFIRMATION 100@$10" message. - Buy a lot of same security very fast and put in a sell order at higher price. - No one actually buys it. - Los…

This strategy could work, but only on exchanges where your own private trade confirmations are faster than the public quote broadcasts, and only if you can use the information to aggressively trade a different, but highly correlated security.