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Jump Trading, Virtu and the 'hidden optical fibre cable' under an Ohio field

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Re: Jump Trading, Virtu and the 'hidden optical fibre cable' under an Ohio field

#41

Post by api »

usefulcat wrote: post #19
biomcgary wrote: post #12

Other than seemingly perverse incentives, is there a good reason not to quantize trading time?

If you're talking about something like having an auction (per security) every N seconds, I don't see how that addresses the underlying issue, which is how to determine order priority. If you have a bunch of orders at the same price on the same side, and an order comes in from the other side that crosses those orders (or there is an auction and there are orders on the other side which cross), how do you decide which o…

Randomize orders using a cryptographic hash of the order, client info, and all other fields plus a random salt added when the order is submitted.

Sort by hash. Impossible to game unless you can break the hash function.

Re: Jump Trading, Virtu and the 'hidden optical fibre cable' under an Ohio field

#42

Post by 3eb7988a1663 »

nimish wrote: post #11
_qua wrote: post #8

Earlier quoted context omitted.

Light doesn’t go at light speed through optical fiber.

Sure it does. It's just that the speed of light in non-hollow optical fiber is slower than light in a vacuum. Microsoft bought a hollow optical fiber company for a reason.

Huh, 50% faster. https://spie.org/news/photonics-focus/julyaug-2022/speeding-...

  The immediate allure of hollow-core fibers is that light travels through the air inside them at 300,000 km-per-second, 50 percent faster than the 200,000 km-per-second in solid glass, cutting latency in communications. Last year, euNetworks installed the world’s first commercial hollow-core cable from Lumenisity, a commercial spinoff of Southampton, to carry traffic to the London Stock Exchange. This year, Comcast installed a 40-km hybrid cable, including both  hollow-core and solid-core fiber, in Philadelphia, the first in North America. Hollow-core fiber also looks good for delivering high laser power over longer distances for precision machining and other applications.

Re: Jump Trading, Virtu and the 'hidden optical fibre cable' under an Ohio field

#43

Post by mhmmmmmm »

api wrote: post #41
usefulcat wrote: post #19

Earlier quoted context omitted.

If you're talking about something like having an auction (per security) every N seconds, I don't see how that addresses the underlying issue, which is how to determine order priority. If you have a bunch of orders at the same price on the same side, and an order comes in from the other side that crosses those orders (or there is an auction and there are orders on the other side which cross), how do you decide which o…

Randomize orders using a cryptographic hash of the order, client info, and all other fields plus a random salt added when the order is submitted. Sort by hash. Impossible to game unless you can break the hash function.

So now I probabilistically spam a ton of different orders to on average get my desired fill... This just turns it into a "whoever is best at DoS'ing the exchange" game. As the orderbook fills with competitor orders it makes sense for yourself to also spam orders so each of your orders maintains the same probability of being filled

Re: Jump Trading, Virtu and the 'hidden optical fibre cable' under an Ohio field

#44

Post by api »

mhmmmmmm wrote: post #43
api wrote: post #41

Earlier quoted context omitted.

Randomize orders using a cryptographic hash of the order, client info, and all other fields plus a random salt added when the order is submitted. Sort by hash. Impossible to game unless you can break the hash function.

So now I probabilistically spam a ton of different orders to on average get my desired fill... This just turns it into a "whoever is best at DoS'ing the exchange" game. As the orderbook fills with competitor orders it makes sense for yourself to also spam orders so each of your orders maintains the same probability of being filled

Impose a small order fee.

Re: Jump Trading, Virtu and the 'hidden optical fibre cable' under an Ohio field

#45

Post by 3eb7988a1663 »

cycomanic wrote: post #39
nimish wrote: post #11

Earlier quoted context omitted.

Sure it does. It's just that the speed of light in non-hollow optical fiber is slower than light in a vacuum. Microsoft bought a hollow optical fiber company for a reason.

Yes, funnily enough Microsofts reason was not HFT but AI. Essentially inter-datacentre training is limited by latency between the datacentres. Generally they want to build the datacentres close to metro areas, by using hollow core fibre the radius of where to place the data centres has essentially increased by 3/2. This significantly reduces land acquisition costs, and supposedly MS has already made back the acquisit…

That feels somewhat implausible. I assume a Microsoft sized data center starts at over $100 million. Moving the footprint X miles away might be cheaper, but is probably a drop in the bucket given everything else required for a build out. I would further assume that they were already some distance away from the top tier expensive real estate to accommodate the size of the facility.

Re: Jump Trading, Virtu and the 'hidden optical fibre cable' under an Ohio field

#46

Post by eterm »

usefulcat wrote: post #19
biomcgary wrote: post #12

Other than seemingly perverse incentives, is there a good reason not to quantize trading time?

If you're talking about something like having an auction (per security) every N seconds, I don't see how that addresses the underlying issue, which is how to determine order priority. If you have a bunch of orders at the same price on the same side, and an order comes in from the other side that crosses those orders (or there is an auction and there are orders on the other side which cross), how do you decide which o…

You could partially fulfil both resting orders, weighted by their (remaining) order size.

You might get "games" around people oversizing orders to try to get more "weight" to their orders, but that would be inefficient behaviour that could in turn be exploited, so people would still be incentivised to keep their orders honest.

Re: Jump Trading, Virtu and the 'hidden optical fibre cable' under an Ohio field

#47

Post by _boffin_ »

frinxor wrote: post #30

some fantastic older reading (2014): HFT in My Backyard https://news.ycombinator.com/item?id=8354278 https://news.ycombinator.com/item?id=8371852

If you want even more fun reading, check out: http://www.nanex.net/aqck/aqckIndex.html

It’s the only site I know of that has posts like it. Sadly, he hasn’t posted in awhile.

Re: Jump Trading, Virtu and the 'hidden optical fibre cable' under an Ohio field

#48

Post by indiosmo »

dinkblam wrote: post #4

why would a radiowave that is reflected off the atmosphere (and therefore taking the longer route) be faster than a direct fibre cable?

In addition to the radio signal being faster as noted by the other commenters, for long distances the radiowave is actually the shorter route.

If you take one of the routes in the article, Chicago to Sao Paulo.

The distance is about 8,400km in a straight line.

According to https://en.wikipedia.org/wiki/Skywave a single shortwave hop can reach 3,500km, so 3 hops are required, or about 30ms.

The shortest commercially available submarine cable between the US and Sao Paulo alone is significantly higher than that (almost double), and it comes out of the east coast, so you'd still have to factor in the latency between Chicago and New York.

Even specialized low latency networks that mix wireless and fiber will still have much higher latency than the radio.

The tradeoff is that shortwave radio has very little bandwidth so you're restricted to simple signals.

Re: Jump Trading, Virtu and the 'hidden optical fibre cable' under an Ohio field

#49

Post by stephen_g »

scrlk wrote: post #7
dinkblam wrote: post #4

why would a radiowave that is reflected off the atmosphere (and therefore taking the longer route) be faster than a direct fibre cable?

Radio waves travel at nearly the speed of light, whereas light in an fiber optic cable travels at ~67% of the speed of light due to the refractive index of glass.

I worked for three years designing custom low-latency point-to-point microwave radios for HFT for this very reason. They didn't need very high bandwidths (their long-haul network was less than 200 Mbit, whereas in New York/New Jersey we had about 5 Gbps because the hops were much shorter and they had licenses for more RF bandwidth at a higher frequency).

At those time scales, the difference is so large, it was incredible what they were willing to pay to build these networks!

Re: Jump Trading, Virtu and the 'hidden optical fibre cable' under an Ohio field

#50

Post by tzs »

mhmmmmmm wrote: post #31
biomcgary wrote: post #12

Other than seemingly perverse incentives, is there a good reason not to quantize trading time?

Taiwan Stock Exchange used to have quantized trading times (read "frequent batch auction"), but it led to worse price discovery and a bigger bid ask spread: https://focus.world-exchanges.org/articles/citadel-trading-a... > Our analysis of the TWSE’s transition clearly demonstrates that continuous trading results in better liquidity provision, lower bid-ask spreads, more stable prices and enhanced price discovery, as…

Is that better liquidity, etc., actually needed?

If we consider the function of a market to be to arrive at prices that lead to the optimal allocation of the goods sold on that market, intuitively it would seem that there should be a limit on how fast trades need to propagate to achieve that, and the limit would be tied to how fast new information relevant to the producers and consumers of those goods comes out.

I don't think I'm expressing this well but the idea is that prices of goods should be tied to things that actually affect those goods. That's generally going to be real world news.

If you turn up trading speed much past the speed necessary to deal with that I'd expect that you could end up with the market reacting to itself. Kind of like when you turn an amplifier up to much and start getting distortion and even feedback.

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