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Goldman Sachs is spending $100M to shave milliseconds off stock trades

cnbc.com

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Re: Goldman Sachs is spending $100M to shave milliseconds off stock trades

#41

Post by nickles »

buzzdenver wrote: post #27
nickles wrote: post #16

Earlier quoted context omitted.

> even every 1s. If we can do auctions for web ads, we can do auctions for the stock exchange. There was ~$107 billion in online advertising in 2018. There was ~$145 billion traded in Nasdaq listed equities yesterday . Global financial markets and online advertising have different requirements. [0] https://www.marketingcharts.com/advertising-trends/spending-... [1] http://www.nasdaqtrader.com/Trader.aspx?id=DailyMark…

> There was ~$107 billion in online advertising in 2018. There was ~$145 billion traded in Nasdaq listed equities yesterday. That is a pointless comparison. That $107b was all revenue for somebody (Google, Facebook, etc), while the $145b was just the nominal value of shares traded. (edited typo)

> That is a pointless comparison.

I was highlighting the difference between online advertising and financial markets. They operate at different scales.

> That $107b was all revenue for somebody (Google, Facebook, etc), while the $145b was just the nominal value of shares traded.

These are cash instruments, not derivatives, so that is indeed $145b of cash changing hands each day.

Re: Goldman Sachs is spending $100M to shave milliseconds off stock trades

#42

Post by resters »

whatshisface wrote: post #18
nickles wrote: post #12

Earlier quoted context omitted.

> pointless expenditure on an ultimately meaningless arms race What about price discovery is pointless? Would you prefer that prices update only once a day? Once a week? Once a month? Realtime pricing of securities and derivatives is critical for an efficiently functioning economy. > if we imposed reasonable limits on the time required to hold an equity in order for a trade to be legally recognized This would damage…

Nanosecond pricing updates might be a little more than anybody needs. Maybe if the exchange cleared once every second, that would serve anyone's purposes. Remember the market is ultimately about allocating capital between businesses and governments, and for economic purposes it doesn't need to run any faster than they can.

> Nanosecond pricing updates might be a little more than anybody needs.

This statement reveals that you do not understand what is happening when a transaction occurs. The price is simply the market clearing price. It is not as if updates are being published, simply that the correct price is being discovered more rapidly.

If you think of the price erroneously as something that has been published, then of course there is nothing beneficial about speeding up the transaction turnaround time.

But if you think of each transaction (and every participant willing to transact for close to the clearing price) as a vote that the price being transacted is close to accurate, then the more participants and volume available amount to significantly more information than was previously available.

Imagine if trades were available only once per hour. Consider the kind of spread would a market making firm have to utilize to avoid losing money!

Speeding up the market adds additional efficiency and reduces inventory risk for market making firms, increasing information and liquidity for all.

Re: Goldman Sachs is spending $100M to shave milliseconds off stock trades

#43

Post by maximente »

jedberg wrote: post #32

Can someone explain to me what is gained by processing the trades in real time vs. batching the processing into say 1 second increments? What does GS gain by being able to get their trade there a few milliseconds before the competition and what do I as a consumer gain from this?

suppose "real time" means order of magnitude milliseconds for example's sake.

the price could change a bunch in that interval of 1000ms. you may think "well only slightly" - fractions of cents - but if GS can make fractions of pennies on those events, scaled up to all seconds that the market is open, you can see why that's potentially attractive.

for whatever it's worth, GS in 2009 claimed that HFT generated <1% of their profits. whether you believe that is another thing.

Re: Goldman Sachs is spending $100M to shave milliseconds off stock trades

#44

Post by infinite8s »

vannevar wrote: post #22
voldacar wrote: post #20

Earlier quoted context omitted.

If they were noise, they would not be profitable strategies.

Noise compared to the signal actually needed for a market to function. Markets functioned nicely on much, much longer timeframes in the past.

They also had much higher transaction and information costs.

Re: Goldman Sachs is spending $100M to shave milliseconds off stock trades

#45

Post by huac »

nickles wrote: post #41
buzzdenver wrote: post #27

Earlier quoted context omitted.

> There was ~$107 billion in online advertising in 2018. There was ~$145 billion traded in Nasdaq listed equities yesterday. That is a pointless comparison. That $107b was all revenue for somebody (Google, Facebook, etc), while the $145b was just the nominal value of shares traded. (edited typo)

> That is a pointless comparison. I was highlighting the difference between online advertising and financial markets. They operate at different scales. > That $107b was all revenue for somebody (Google, Facebook, etc), while the $145b was just the nominal value of shares traded. These are cash instruments, not derivatives, so that is indeed $145b of cash changing hands each day.

not necessarily, money has velocity; market participants don't have $145B to spend, they spend a fraction of that and then reconcile balances at the end of the day.

see https://en.wikipedia.org/wiki/Clearing_(finance)

Re: Goldman Sachs is spending $100M to shave milliseconds off stock trades

#46

Post by maximente »

codingslave wrote: post #17

People love to rail on HFT, but at this point, its really not that profitable. It's just a reality of trading in the markets. There was a blip of time between 2008 and 2014 when HFT was extremely profitable. Those inefficiencies have been gone from the market for years. People were whooped into anger about how much money was being made, at this point its a complete non issue and needs to be removed from the highlight…

not to mention risky. remember Knight Capital, the kings of HFT?

on August 1 no less, their new software deployment essentially annihilated half a billion dollars, all due to - you guessed it - a refactored command line flag! can't make this stuff up.

Re: Goldman Sachs is spending $100M to shave milliseconds off stock trades

#47

Post by jedberg »

maximente wrote: post #43
jedberg wrote: post #32

Can someone explain to me what is gained by processing the trades in real time vs. batching the processing into say 1 second increments? What does GS gain by being able to get their trade there a few milliseconds before the competition and what do I as a consumer gain from this?

suppose "real time" means order of magnitude milliseconds for example's sake. the price could change a bunch in that interval of 1000ms. you may think "well only slightly" - fractions of cents - but if GS can make fractions of pennies on those events, scaled up to all seconds that the market is open, you can see why that's potentially attractive. for whatever it's worth, GS in 2009 claimed that HFT generated <1% of t…

Ok that explains why they want to do it, but how does it benefit the market to allow that? How does it benefit the consumers and corporations? In other words, what is the argument against creating a law that requires a minimum of 1 second batches for example?

Re: Goldman Sachs is spending $100M to shave milliseconds off stock trades

#48

Post by wbl »

ggggtez wrote: post #39
voldacar wrote: post #20

Earlier quoted context omitted.

If they were noise, they would not be profitable strategies.

I don't want to get caught up in arguing what is noise in the mathematical sense. I think the parent is refering to the fact that the arbitrage traders are not adding any real value by making these trades this fast. The market would adjust in miliseconds. Who really wants to let some guy who built a 825 mile cable be a rent seeker on every trade for all eternity? https://www.businessinsider.com/chicago-stock-exchange…

He's not a rent seeker. Absent his existence, the people on both sides of the trade would be harmed by crossing a bigger spread.

Re: Goldman Sachs is spending $100M to shave milliseconds off stock trades

#49

Post by ggm »

codingslave wrote: post #17

People love to rail on HFT, but at this point, its really not that profitable. It's just a reality of trading in the markets. There was a blip of time between 2008 and 2014 when HFT was extremely profitable. Those inefficiencies have been gone from the market for years. People were whooped into anger about how much money was being made, at this point its a complete non issue and needs to be removed from the highlight…

Yea, I was one of them. I mixed up trading ahead from side-channel knowledge which breaks insider-trading rules, with having a fast engine which can just move bits faster than the other guy.

I don't "like" HFT the same way I don't "like" the market at all, but HFT is not actually stealing grannies money.

Re: Goldman Sachs is spending $100M to shave milliseconds off stock trades

#50

Post by kasey_junk »

nickles wrote: post #41
buzzdenver wrote: post #27

Earlier quoted context omitted.

> There was ~$107 billion in online advertising in 2018. There was ~$145 billion traded in Nasdaq listed equities yesterday. That is a pointless comparison. That $107b was all revenue for somebody (Google, Facebook, etc), while the $145b was just the nominal value of shares traded. (edited typo)

> That is a pointless comparison. I was highlighting the difference between online advertising and financial markets. They operate at different scales. > That $107b was all revenue for somebody (Google, Facebook, etc), while the $145b was just the nominal value of shares traded. These are cash instruments, not derivatives, so that is indeed $145b of cash changing hands each day.

I’ve worked in both. For the purpose of the earlier conversation, the auctions for ad exchanges happen at about 1 order of magnitude more than for exchange tradable symbols.

That is to say there is no tech reason that financial exchanges couldn’t run auctions.

Aside: personally I think that continuous exchanges are great & people who have problems with them usually don’t know what they are talking about.

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