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

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

#211

Post by eru »

yummyfajitas wrote: post #199
darawk wrote: post #101

Earlier quoted context omitted.

Did you not read my example? We are talking here about multiple, physically separated exchanges. Example: Vanguard sends a buy order of 1000 shares of AAPL to exchange A. Some HFT firm sees that order on exchange A and knows that it will also be placed on exchange B, and was surely broadcast from Vanguard's trading floor at the exact same moment as the order to exchange A. However, the HFT firm also knows that Vangua…

Here's what the HFT actually sees: TRADE AAPL 1000@$96.98. He does not see "Vanguard" - the trade confirmation is anonymous. It could even be him! (Yes, you are subscribed to a multicast trade confirmation feed and even your own trade confirmations are anonymized.) He does not see Vanguard's physical location - for all he knows Vanguard is closer than he is. So actually, all the HFT knows is that someone bought some…

> Now what? Whenever someone buys AAPL he goes out and buys a bunch more?

Especially since for every seller there's also a buyer.

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

#212

Post by eru »

kasey_junk wrote: post #139
eru wrote: post #102

Earlier quoted context omitted.

Would eliminating the sub-penny rule remove the need to use this strategy? If there were basically an infinite number of points orders could be resting, you could just get in an epsilon above or below some other fund's order to get ahead in the queue?

Chris Stucchio ('yummyfajitas) has argued precisely that. I tend to agree with him but can't say for sure.

Ha, I even linked to his blog where I got that idea from in another post.

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

#213

Post by Lazare »

Dylan16807 wrote: post #193
Lazare wrote: post #160

Earlier quoted context omitted.

> also interrupting. People dislike the interrupting. So your argument is...what? Hypothetically: Let's say I have an inventory of stock A, which I think is worth X, and which try and sell whenever the market price climbs above X. Now there's some new public knowledge that materially impacts my estimation of the value of that stock (eg, a large hedge fund has started buying large blocks of this stock): I no longer th…

For this particular case I can make the answer very simple. How about waiting half a second. Can you not see how it's bad in the specific case where they already issued the order to all exchanges but your order gets processed first because you used a different cable? Ignore the more ambiguous cases for the moment.

> How about waiting half a second.

Why is protecting the interests of hedge funds and investment banks important enough it needs a special rule? This isn't a rule that will benefit the little guy; it strictly benefits the biggest fish.

> Can you not see how it's bad in the specific case where they already issued the order to all exchanges but your order gets processed first because you used a different cable?

To be clear, your concern is strictly that if a hedge fund is buying a very large amount of stock, this will cause the price to move against them as people react to it, and you think they should get a full half second (an eternity at the speed of the modern market) to buy as much as they want before people are legally allowed to react?

That sounds like a terrible idea, and in the specific case you list: No, I don't see why that's bad. I don't see why anyone except a large hedge fund or investment bank would.

Further: Once the order hits the market, you're saying there should be a half second window during which no one can do anything except the hedge fund. But as soon as that half second window closes, there will be a race to (finally) react. Which will be won by...the HFT firms, right? Won't they be able to, hypothetically, get their rSo even if we accept your premise, isn't this just shifting the victims around without fixing anything?

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

#214

Post by mrchicity »

kasey_junk wrote: post #196
SEJeff wrote: post #194

Earlier quoted context omitted.

Can't really say sadly, but it is true. But it is normally the case for Limits, except not all orders are limit orders. You're right mostly, for a certain type of strategy, but not all of them. Ironically I just looked up your profile and on the link you mention Flash Boys: Not So Fast. I used to work with Peter Kovac, that book's author, at Madison Tyler Technology / EWT LLC (which is now Virtu Financial). He's one…

Its been awhile since I perused order type documentation so anything is possible, but I don't ever remember seeing an order type that can jump a resting limit order from the past on any any exchange I've looked at. I have seen odd priority rules around how orders get around sweep or self match protections and the like, but not jumping a resting, visible order. Given the order type doco is public for SEC regulated exc…

ISO limits that create a new price are usually given better priority than Hide-not-slide orders entered with the equivalent working price, even if they were accepted before the ISO limit. Depends on the exchange obviously.

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

#215

Post by SEJeff »

kasey_junk wrote: post #191
SEJeff wrote: post #184

Earlier quoted context omitted.

The atomic clock bit isn't novel at all. I've worked for HFT firms the past 9ish years and using hardware timesources is 101 level intro to electronic trading.

But atomic ones? We used ptp or gps for this sort of work but I don't know that I've seen an atomic clock.

Sure. You can't get roof access (for a gps antenna) or a vendor ptp feed in every exchange. In those places, you get a rubidium decay stratum 0 timesource.

Not all businesses can afford this, but it is only 4 or 5x the price of a normal GPS timesource, which is affordable for the right people.

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

#216

Post by kasey_junk »

mrchicity wrote: post #214
kasey_junk wrote: post #196

Earlier quoted context omitted.

Its been awhile since I perused order type documentation so anything is possible, but I don't ever remember seeing an order type that can jump a resting limit order from the past on any any exchange I've looked at. I have seen odd priority rules around how orders get around sweep or self match protections and the like, but not jumping a resting, visible order. Given the order type doco is public for SEC regulated exc…

ISO limits that create a new price are usually given better priority than Hide-not-slide orders entered with the equivalent working price, even if they were accepted before the ISO limit. Depends on the exchange obviously.

Sure and the non-visible parts of icebergs end up getting later priority than new limits at the same level. I'm not arguing that there aren't order types you can do that will put you at the back of the line priority wise, I'm suggesting the alternative.

If I put a vanilla limit at a level and don't cancel it (and its GTC) today, I've never seen an order type that would allow someone to jump me in the priority queue tomorrow.

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

#217

Post by Dylan16807 »

Lazare wrote: post #213
Dylan16807 wrote: post #193

Earlier quoted context omitted.

For this particular case I can make the answer very simple. How about waiting half a second. Can you not see how it's bad in the specific case where they already issued the order to all exchanges but your order gets processed first because you used a different cable? Ignore the more ambiguous cases for the moment.

> How about waiting half a second. Why is protecting the interests of hedge funds and investment banks important enough it needs a special rule? This isn't a rule that will benefit the little guy; it strictly benefits the biggest fish. > Can you not see how it's bad in the specific case where they already issued the order to all exchanges but your order gets processed first because you used a different cable? To be c…

"Half a second" was not meant to mean "enforce a delay of precisely 500000 microseconds". The point is that the problem would be solved if traders would chill out for the blink of an eye. The fact that it's hard to force people to chill out is a completely separate issue.

> To be clear, your concern is strictly that if a hedge fund is buying a very large amount of stock, this will cause the price to move against them as people react to it,

> in the specific case you list: No, I don't see why that's bad.

The original scenario has nothing to do with order size. The scenario is that X sends a simultaneous order to multiple exchanges, but while it's still in transit to most of the exchanges Y reacts to the order and submits their own on a faster cable, getting there before the order they're reacting to. I think such an outcome is clearly bad. I won't suggest a fix to avoid distraction. Do you disagree with it being bad? Picture it happening to an old lady if you have no sympathy for hedge funds.

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

#218

Post by zouhair »

pgwhalen wrote: post #46
zouhair wrote: post #43

It seems I am the only one out here that thinks computer based trading should be illegal.

I'm curious what you mean by that. Should we go back to all gathering in the same room and shouting at each other?

Actually it would be a good thing, we don't need a transaction every half a millisecond.

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

#219

Post by zouhair »

dsjoerg wrote: post #64
zouhair wrote: post #43

It seems I am the only one out here that thinks computer based trading should be illegal.

could you explain why you think it should be illegal? what exactly do you mean by computer based? can i use a computer to help me decide what to trade? if the computer tells me what to trade and i press a button to agree with it and do the trade is that OK? sincerely trying to understand your perspective and how one might possibly implement it.

What I mean is that now computers algorithms are making the trades, it is so fucked up now that people pay hundreds of millions of dollars to be physically near the stock exchange so that they have less lag.

I should have been more clear, computer based autonomous or semi-autonomous algorithms should not be allowed to trade.

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

#220

Post by zouhair »

andylei wrote: post #62
zouhair wrote: post #43

It seems I am the only one out here that thinks computer based trading should be illegal.

do you think computer based retail sales should be illegal too.

What I meant is that computers that do trades all by themselves should not be legal. Even frigging signing for a gmail account forces you to pass a captcha.
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