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LSE Breaks World Record In Trade Speed With Linux
LingNoi writes with this excerpt from ComputerWorld UK: "The London Stock Exchange has said its new Linux-based system is delivering world record networking speed, with 126 microsecond trading times. The news comes ahead a major Linux-based switchover in twelve days, during which the open source system will replace Microsoft .Net technology on the group's main stock exchange. The LSE had long been criticised on speed and reliability, grappling with trading speeds of several hundred microseconds. The 126 microsecond speed is 'twice as fast' as its main international competitors, the London Stock Exchange said. BATS Europe and Chi-X, two dedicated electronic rivals to the LSE, are reported to have an average latency of 250 and 175 microseconds respectively. Neither company immediately provided details. But many of the LSE's older and more traditional rivals offer speeds of around 300 to 400 microseconds. Nevertheless, Linux is now standard in many exchanges, including the New York Stock Exchange."
I respect your optimism and idealism when it comes to these things, but Index Arb desks are making some of the most effective, near-risk-free profits for the big banks, and it's little wonder the LSE wants to be at the forefront of this market.
And your point is? We shouldn't allow arbitrage? We need to feel emo about big banks? Keep in mind that the profit isn't risk free for two reasons: 1) the big bank has to invest in trading infrastructure and personnel for a chance at arbitrage profit, and 2) somebody else can get it first.
But then you don't see these numbers in the breakdown of the Goldmans profit numbers, and you never will. In the casino of the share market, the dealer is helping the sharks fleece the sheep.
Hard to believe that you speak of arbitrage and casinos in the same post. I suppose it's because you don't understand how arbitrage helps reduce the "casino" atmosphere of markets. An arbitrage opportunity is a mispricing of two or more disparate markets (this is a far from perfect summary of arbitrage, but it does cover even arbitrage in stock option trading which is the current market versus the same market in the future).
If nobody could make that trade, then the various markets involved would trade at different prices. Someone would be getting a worse deal than they'd otherwise get and someone would be getting a better deal than they should. Arbitrage couples these markets together to deliver better, more accurate prices for everyone.
Sure, only traders with significant resources and, most importantly, low transaction costs (ie, people like "big banks") can trade arbitrage effectively on modern markets. But how is it a bad thing that an asset traded in one market is closer priced to the same asset traded on another market? Or assets in current markets (along with their standard call/put options) trade consistently with the asset at a future time?
To claim that arbitrage is wolves fleecing sheep is ignorant. The sheep pay even worse prices without arbitrage.