Earlier quoted context omitted.
comment was entirely irrelevant - deleting
Dark Pools isn't by Michael Lewis, it's by Scott Patterson.
Huh. You're right. Wonder where that impression came from, then..
Hedge Fund Wants to Use Atomic Clocks to Beat High-Speed Traders
61–70 of 223 posts
Re: Hedge Fund Wants to Use Atomic Clocks to Beat High-Speed Traders
#62It 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.
Re: Hedge Fund Wants to Use Atomic Clocks to Beat High-Speed Traders
#63Its invention, developed by the firm’s co-chief executive officers, Robert Mercer and Peter Brown, first sends an order to a central server, which breaks it up into multiple smaller orders. Those are then routed to venues that offer the best prices and most liquidity, much the same as brokers do now. But before that happens, the smaller orders are sent to servers located as close to the exchanges as possible, along w…
I don't know why you need a great clock either, if you have stable, symmetric network paths from a central location to all your servers colocated at exchanges, you can predict the delay between sending from the server and getting to the exchange, you can split your order and send it to the various exchanges with appropriate delays and know that everything will arrive at the same time. If you're wrong, it's going to s…
That exact strategy is also mentioned in Flash Boys, in the form of THOR.
Re: Hedge Fund Wants to Use Atomic Clocks to Beat High-Speed Traders
#64It 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.
Re: Hedge Fund Wants to Use Atomic Clocks to Beat High-Speed Traders
#65Earlier quoted context omitted.
Renaissance is not that type of hft firm. Renaissance uses algorithms to predict price movements before they happen. The type of hft this system is designed to prevent is front-running. Which is me seeing your order on exchange A and buying ahead of you on exchange B before your order arrives. Those types of hft firms are surely eating into Renaissance's profits in a big way.
What you are describing is an acausal (i.e. physically impossible, since cause effect happens before cause) version of demand anticipation - changing prices in response to market demand. It's impossible because the HFT will only know your order has reached exchange A after exchange A has told him about it. Obviously A can't tell him about it until after your order has arrived. Front running is a strategy where your b…
Perhaps the parent comment was edited after you posted, but while what is described is not "front running", it's not acausal. The observation is happening at Exchange A, the reaction at Exchange B.
Re: Hedge Fund Wants to Use Atomic Clocks to Beat High-Speed Traders
#66Earlier quoted context omitted.
Using ntp or whatever the new variant is is also standard, which as I recall can hit sub-microsecond consistency on a wide area network with good hardware. So yeah, not new.
PTP - Precision Time Protocol. https://en.wikipedia.org/wiki/Precision_Time_Protocol . It requires hardware support, and a stable isolator inside of the machines.
It doesn't require hardware, though it really improves the performance. I've implemented 1588 a few times and was able to achieve ~ With software, it really depends on how deterministic your packet handling and timestamping routines are (or how deterministic the OS scheduler is). I was able to achieve accuracies of less than a microsecond on a Linux system, but it was "touchy".
For reference, there's an open source implementation called "ptpd" and "ptpd2".
Re: Hedge Fund Wants to Use Atomic Clocks to Beat High-Speed Traders
#67Earlier quoted context omitted.
Dark Pools isn't by Michael Lewis, it's by Scott Patterson.
Huh. You're right. Wonder where that impression came from, then..
I'm about 90% sure that Lewis mentions it in his "acknowledgements" in Flash Boys, as a great resource to go more in depth (which is why I ended up reading it). You might have made that association.
Re: Hedge Fund Wants to Use Atomic Clocks to Beat High-Speed Traders
#68It seems I am the only one out here that thinks computer based trading should be illegal.
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 all this is that it created an arms race in the industry when it comes to the technologies used to facilitate HFT or fight it.
Now whether that technology trickles down to the rest of us through new and interesting things remains to be seen.
Re: Hedge Fund Wants to Use Atomic Clocks to Beat High-Speed Traders
#69Earlier quoted context omitted.
All they're saying is that with absolute synchronicity among all of the clocks at all of their co-located servers, all pieces of the order are executed at multiple exchanges at precisely the same time. Even very small differences among the clocks at each one can create opportunity for others to step in front of the trade, and this helps them avoid that. While this may sound obvious, they wouldn't be doing it if it ha…
Nanosecond differences are too small to take advantage of, that's only 30cm. My guess is that you'd be at least in (or close to) the microsecond range before you'd worry about HFT stepping in front of your orders. If you're hitting multiple exchanges, then you can take milliseconds and still be fine.
Microseconds are not enough, because the arbitrage works by the HFT setting the order in one place, and then rushing the arbitrage to the other place. As long as you're more coordinated than speed of light between the two locations, you're fine.
Also, GPS clocks are cheap and precise, atomic clocks seem gold plating. (Which sometimes is actually necessary in electronics, BTW...)
Re: Hedge Fund Wants to Use Atomic Clocks to Beat High-Speed Traders
#70An exchange could work just as well and provide just as much liquidity if it accepted sealed bids into a queue for one minute, then settled and showed the full queue, while accepting sealed bids for the next minute. HFT would no longer be a thing, and everyone would trade on more equal footing. ("One minute" is a guess. Could be right interval is 20 seconds or ten minutes or whatever... But needs to be slow enough to…
And how would that exchange handle tie breakers? Also what about cross exchange arb? You'll probably be interested in reading Eric Budish.
Everybody would see the arbitrage within the next trading cycle. So, rather than try to eliminate the arbitrage opportunity, put reaction times into a human time scale and let every actor share.
Tie breaks can be fair split with cryptographically random split for the last share, for example.
Yes, "all or nothing" would complicate, of it's still a necessity, but all those things are solvable, if we believe in fairness of markets and avoiding the next flash crash.