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Earlier quoted context omitted.
That was my initial thought as well: this would just become an arms race to submit your trade last? But maybe if the trades were priority queued it would negate that.
Correct. I believe you need to randomize the auction time. This massively reduces the speed advantage. Without that speed is as important as ever. How does a priority queue work?
Is there any mathematical proof that it's harder to game batch auctions than what we have now? For example, while other markets and the real world moves on, you gain info. So the later in the batch you can submit a trade, the greater your advantage.
Earlier quoted context omitted.
Wow - TIL. Thanks. I've been out of the HFT business for a while, so i guess things have moved on.
Haha yeah! Though times for these auctions are double-digit milliseconds, a lifetime for your fpga strategies! And it's still fairly niche, these are complementing CLOBs/dark pools rather than replacing them. Where did you move to from hft?
I'd previously done a lot of work in embedded SCADA systems (hence the fit for working with with FPGAs in HFT).
I left mainly because I genuinely felt that there was a certain futility with ultra low latency trading...it's less about trading and more an arms race between quants and techies of different companies, all with deep pockets.
I guess embedded SCADA systems are my comfort blanket :-)
Is there any mathematical proof that it's harder to game batch auctions than what we have now? For example, while other markets and the real world moves on, you gain info. So the later in the batch you can submit a trade, the greater your advantage.
That was my initial thought as well: this would just become an arms race to submit your trade last? But maybe if the trades were priority queued it would negate that.
If the trades are priority queued, then you have just recreated the speed "arms race" that this idea hopes to eliminate.
I was working in HFT as a dev team lead around the time of this article (2105). I remember this was being seriously considered by one of our target exchanges (can't remember if it was Eurex or Globex). Our main HFT trader didn't seem worried - he said that the race would just change from a race to pick off an opportunity into a race to align with any auction timeframe. Back then, our strategies were implemented in FG…
If your strategies were implemented in FPGA, they were probably not very complicated (considering the things you can do on a regular CPU). Wouldn't markets function better if every participant had a reasonable amount of time to make decisions?
There are severe technological consequences for pushing for synthetic discrete time. Exchanges that currently execute in a serialized fashion may no longer be able to support the trading volume if the underlying platform is unable to develop batch sizes that naturally align with hardware capabilities and timings. Put differently, I think what is going to happen is you will start stacking way more orders at each inter…
Batched auctions require different algorithms, sure. They may even be more expensive to execute. I suppose you have to sort the batch once instead of sorting as you go. Maybe that makes it O(n log n) instead of O(n)? Can you keep a traditional order book up-to-date in O(1) per transaction? Either way, seems like this should be a non-issue. Even if exchanges need to add more shards for order processing, that's just not a big deal.
I was working in HFT as a dev team lead around the time of this article (2105). I remember this was being seriously considered by one of our target exchanges (can't remember if it was Eurex or Globex). Our main HFT trader didn't seem worried - he said that the race would just change from a race to pick off an opportunity into a race to align with any auction timeframe. Back then, our strategies were implemented in FG…
The way I see it, HFT firms provide liquidity to the market, which is good. They do so in an automatic fasion which makes it cheaper than the past system of human traders. But they also do a speed competition which is mostly wasteful. There may be some benefit for the overall market of faster communications but it is pretty low. All systems have waste, some more and some less. This is unavoidable. So the discussion m…