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LSE Breaks World Record In Trade Speed With Linux

Posted by timothy on from the linus-mentioned-their-startling-speed dept.

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."

25 of 452 comments (clear)

  1. Not just useless, but actually toxic. by QuoteMstr · · Score: 5, Insightful

    Trades that happen this fast are only good for further enriching large investment firms that can afford to spend millions on clever algorithms for shuffling numbers around. This speedup lets these companies make even more money without creating one damned thing that's useful to any living person.

    Limit trades to one per second per institution, and while you're at it, add that tiny per-trade tax. Finance should be boring. Let's encourage people to focus on the real economy that operates in the world inhabited by you and me.

    1. Re:Not just useless, but actually toxic. by Ethanol-fueled · · Score: 5, Funny

      The idiots in charge of the stock markets believe that, since Linux doesn't crash, their stock markets won't either.

    2. Re:Not just useless, but actually toxic. by Anonymous Coward · · Score: 5, Informative

      It is the time measured from when a bid/ask order is sent from the customer's network port, until it has been processed/stored and possibly matched at the Exchange, and back again.

    3. Re:Not just useless, but actually toxic. by dakameleon · · Score: 5, Insightful

      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. You don't have to pay a computer a bonus, and the programmers behind this hardly see the same kind of money as the big swinging dick traders who try to spot the macro inefficiencies. Furthermore, the same strategies and speed advantages are used for algo traders to allow big blocks of trades to go through as best possible without shifting the market, making more cash when the trades are billed to the client at a weighted average instead of the true cost.

      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.

      --
      Man who leaps off cliff jumps to conclusion.
    4. Re:Not just useless, but actually toxic. by NoSig · · Score: 5, Insightful

      I can't tell if you are are someone defending your own work to assuage your conscience or a troll pretending to do so, but anyway: There is no value to equalizing prices in less than a second, especially when the "equalizing" you are talking about is really just pocketing the difference. The only value there would be in equalizing prices in less than a second would precisely be to remove the threat that these people pose. Since sub-second trades are necessarily automated trades, they also cannot be doing anything sensible to keep prices up to date as real world conditions change, as that requires understanding the real world which an automated system cannot. They serve only the function of increasing profits for their investors - how little or how much damage they cause in the course of that is what is debatable.

    5. Re:Not just useless, but actually toxic. by atomic+brainslide · · Score: 5, Informative

      while in theory your idea is correct, the harsh reality is that in practice, the large investment firms increase their profits drastically because there are actually two markets. this isn't strictly legal, but it's there. the large firms have dedicated connections to the exchanges with guaranteed SLAs and lower latencies than any other regular participant in the market. this allows them to stuff the buy/sell queues and rapidly cancel orders before they go through. the purpose of this is to deduce other bidders' price points and gain an edge. there are a number of such hedge funds (and even a major bank whose name escapes me), for example, that have had perfect trading days for over a year. statistically impossible outcomes like this only come from gaming the system in the above mentioned manner. as usual, the regulators are asleep at the wheel and the markets become more volatile week to week with increasing flash-crashes exactly because of these schemes. more efficient markets these are not.

      --
      check out my comic: Essential Tremors
    6. Re:Not just useless, but actually toxic. by MyFirstNameIsPaul · · Score: 5, Insightful

      The regulators are not 'asleep at the wheel'. They are playing their historic role of do what the boss tells you, and if the boss doesn't tell you to bust one of the huge firms, you don't. If the regulators are incapable of protecting the small investors, then get rid of the regulators, but don't blame the technology. Your assumption that the market is more volatile today than ever before is weak. Take a look at the Dow in the 30s.

      --

      I once took an excursion to Reddit, and later HN. Unlimited up/down voting sucks when dealing with a hive-mind.

    7. Re:Not just useless, but actually toxic. by Tom · · Score: 5, Insightful

      Trading this fast brings the market closer to optimal economic efficiency, where prices at any instant accurately reflect value.

      It might, if the trading were actually being done at the exchange, for market prices. It isn't. Most trading today is only registered at the exchange, but the actual deal is brokered elsewhere.

      Also, the amount of liquidity a market needs is subject to discussion. Do you really need to have a counterpart available this second for a market to work? That is nonsense, the market (the real market, not the speculative one) wouldn't burn and die if you had to wait a second or two or even *gasp* five for a deal to go through.

      Providing liquidity is a valuable role. However, you are ignoring the fact that everyone is in it for the money. If the cost of liquidity, i.e. the amount of profit the high-speed traders extract from the market, becomes too high, the market also suffers. Somewhere, there is an optimal point between the positive (more liquidity) and the negative (the cost of this liquidity).

      --
      Assorted stuff I do sometimes: Lemuria.org
    8. Re:Not just useless, but actually toxic. by LingNoi · · Score: 5, Insightful

      It might crash but at least it won't have an 8 hour down time like their previous windows based system had. Oh, and you can forget about the imaginary support you'll get with that windows license as the London stock exchange found out the hard way.

    9. Re:Not just useless, but actually toxic. by hughbar · · Score: 5, Insightful

      There's a huge problem with the word 'value' in the above.

      To declare interest, I'm ex-investment banking and not too proud of it. The 'values' and 'derivatives' exchanged are often not mapped to anything happening in the 'real' world [think manufacturing, [useful] services even], however they do have a negative impact on it [factory closures, bank bailouts paid by the taxpayer, for example].

      Try a thought experiment, does anything useful change in 126 microseconds? Bread get baked? Pizza cooked? House built? Seed planted, if you want to get rural and idyllic?

      Incidentally, I'm not against simple futures, for example, they smooth the farmer's year and have a purpose. I am pretty much against most exotic financial derivatives and against short-term [126 microseconds, for example!] 'investment' to use ironic quotes...

      --
      On y va, qui mal y pense!
    10. Re:Not just useless, but actually toxic. by wvmarle · · Score: 5, Insightful

      This is not about investors. They are barely if at all affected by these fast trades. Investors are people that buy stocks to hold for long-term gains (either dividends or value increase).

      This is about speculators. The people that try to ride the natural fluctuations to make a quick buck.

    11. Re:Not just useless, but actually toxic. by Anonymous Coward · · Score: 5, Informative

      It's not only updating tables...

      The exchange gets a cut of every sale, so at the very least, the more sales you have the more you can profit.

      It's more insiduous than that though. Between the price a buyer wants to pay and a seller wants to receive, there's a certain spread. Faster trades allow the exchange to take advantage of that spread. Sometimes it lasts a second or so, but trading volume means a second can make thousands of dollars.

      Faster exchanges also allow 'tasting'. The average investor doesn't get to take advantage of it, but the large houses do. They can float a price out there and see how many people are willing to buy at that price. Then they can test a higher price... Then higher.. At some point they reach a price that maximizes their profit.

      It also means that certain brokerage houses can get their trades in faster. So that means a popular and rising stock goes to those houses that pay for the privilege of first dibs. These houses can then set the price on the stock.

      There are dozens of other ways that faster trades help.... Of course, none of it helps us, the average stockbroker.

    12. Re:Not just useless, but actually toxic. by TheLink · · Score: 5, Informative

      Actually what is most disgusting is:

      When those algo/HFT systems have bugs or lose big
      a) the stock market rolls back the trades[1]
      b) the small timers beating those algorithms get sued.[2]

      But they don't do that when the small timers make mistakes or the algo/HFT systems beat the small timers.

      Even though many of the HFT bunch are doing dubious stuff:
      http://www.nytimes.com/2009/07/24/business/24trading.html
      http://www.nytimes.com/imagepages/2009/07/24/business/0724-webBIZ-trading.ready.html

      [1] http://www.reuters.com/article/idUSTRE6456QB20100507
      [2] http://www.computerworlduk.com/news/security/3244186/norwegian-traders-convicted-for-outsmarting-us-stock-broker-algorithm/

      --
    13. Re:Not just useless, but actually toxic. by Lobachevsky · · Score: 5, Insightful

      Liquidity isn't just about there being _someone_ willing to buy or sell; it's about the spread. Do you want to go back to 25 cent spreads from the early '90s? Most spreads today are 1 cent. If you're happy paying 25 cent spreads to get rid of automated traders, I'd say that's a bit like chewing off your arm to swat a fly. Most automated traders make anyways from 0.1 cents to 0.5 cents per share. Comparatively, retailers like E*Trade charge customers $9.99 for trades that average around 400 shares, which is 2.5 cents per share. Mutual funds like Fidelity often charge 1 to 2% management fees on investment, which is 30 to 60 cents per share on a $30 stock.

      Trying to bend the rules of the market to wipe out a segment that makes 0.1 to 0.5 cents per share is silly when there's zero effort concerning E*Trade making 2.5 cents per share, or Fidelity making 30 to 60 cents per share. Professional services like Lime (a high-end version of E*Trade) charge 0.1 cents per share. No one is angry that E*Trade charges 2.5 cents per share while Lime charges 0.1 cents per share? Oh, that's right, because it's "only $9.99 !!"

      That's the irony of all of this. The average person writes of $9.99 to E*Trade but the media tries to get them concerned about "costs" that are effectively 1/20th of that. I put quotes around "costs" because the spreads have come down from 25 cents per share in the early '90s to 1 cent nowadays. So the average person benefited 24 cents on the spread, and is angry that liquidity providers make 0.1 cents per share? Where was the anger in the early '90s when specialists (a cartel of liquidity providers) were raking it in, making 10+ cents per share? Where is the anger now at Fidelity _losing_ our money in 401ks _and_ charging management fees of 30 to 60 cents per share, annually?

      The biggest to benefit from automated traders going away are the Larry Ellisons and other market manipulators who want to buy up companies without "moving the price up." It's all misdirection, trying to convince you and me that we're being hurt. It's the "death tax" all over again. The average person was never affected by estate tax, yet the media convinced us we should be against it, just so some rich jackasses can save money. The same deal is happening now. Rich folks want to buy out the public companies you and I are invested in, cheaply, and stealthily. They don't like automated traders sniffing their actions with pattern matching heuristics and raising the prices (benefiting long-term owners like us).

    14. Re:Not just useless, but actually toxic. by khallow · · Score: 5, Insightful

      Try a thought experiment, does anything useful change in 126 microseconds? Bread get baked? Pizza cooked? House built? Seed planted, if you want to get rural and idyllic?

      Yes. All of the things you mention, for starters. I'm being a bit pedantic, but you do any of those activities in a long string of periods of 126 microseconds.

      It surprises me how many people do a job for years and fail to understand what it is they do. You should know what a baker, pizza maker, home builder, and farmer have in common. They all trade. People like derivatives traders take that to the purest level, trading fairly abstract things, but still things with an attachment, however tenuous, to the real world. Nothing wrong with that. The trades themselves don't close factories or cause bank bailouts.

      The real problem is leverage. For example, when you were a banker, how much collateral did you have to put up for your borrowed money? 1 unit per 10 of debt? More? In the real estate securities market, there were apparently people who could borrow 50 units for every unit of assets they had. I can't comprehend that level of foolishness, though I'm sure it make good bank for a time for the people who could get away with it.

      Bottom line, what do you think would happen if pizza makers could get 50 to 1 leverage? I could use the pizza store I owned to borrow enough to build 50 more. I could use my car as collateral for one or more pizza stores (depending how nice it is). In a few months, we'd be up to our eyeballs in new pizza restaurant construction. There'd be incredibly specialized stores catering to the gay, vegan, Hispanic boardgamer.

      And after the bust, when people realize that they didn't like pizza all that much? Pizza would be vilified, an epithet for people who need something to hate. Pizza makers would be scoundrels of the Earth who don't make anything connected to the real world, unlike bread bakers, home builders, farmers, or even the investment banker. Much would be made of their negative impact, such as factory closures and bank bailouts (paid by the taxpayer), for example. Even pizza makers would be self-flagellating themselves over their worthlessness.

      The above is an interesting sociological phenomena, but the lesson boils down to high leverage causes massive fuckups every time no matter the industry, no matter how "real" the product is, and is the number one cause of market crashes and trigger for recessions.

  2. I love this "Ad" by Microsoft: by ClarkMills · · Score: 5, Informative

    http://www.youtube.com/watch?v=BwSM55bsCrM

    I could watch it over & over... It puts a smile on my face... :)

    http://news.cnet.com/8301-13846_3-10036286-62.html

    Cheers... Clark

  3. Communist Linux by Anonymous Coward · · Score: 5, Funny

    Communist Linux - bringing speed and efficiency to the dregs of capitalism.

  4. trade speed by Eivind · · Score: 5, Insightful

    Trade-speed is irrelevant to investors.

    It's relevant to highly speculative robot-trader algorithms that try to make a profit by arbitraging sub-second timing-issues. But this is a zero-sum game: one trader can only gain $X by taking advantage of timing if other traders lose PRECISELY $X, so to the sum of traders, this is irrelevant.

    Stock-exchanges, make a living trough fees. The fees are coupled with volume, i.e. a broker that has a larger volume of orders, will pay higher fees.

    So lower latency is good for the stock-exchange, neutral for traders on equal grounds and negative for those suckers who play at daytrading. It -does- tilt the table towards those with machinery though, but the effect is irrelevant for traders who aren't extremely short-term.

    In short: yet another reason to invest rather than speculate.

    If you buy and sell 20 times today, each time with the table tilted a tenth of a promille against you, you'll on the average lose 2 promille, plus the fees. This doesn't sound like much, but a trader that does this 200 days a year, will have lost 20% of his profit to the tilted table. (if his flat-table profits where less than 20%, he'd thus run a minus)

    Meanwhile, the investor, who holds stock on the average 5 years, will also lose a tenth of a promille in every transaction, but since he's got 2 transactions in 5 years, that works out to 0.4 transactions/year -- thus his loss relative to the flat table is 0.4 * 0.01% = 0.004% pro year, which is irrelevant.

  5. Microsoft, get these facts! by Idaho · · Score: 5, Insightful

    Remember that this very stock exchange moving to a purely Microsoft/.NET based solution was widely touted in Microsoft's so-called 'Get the "Facts"' campaign. Microsoft was involved (with Accenture) in the implementation of the project, not just in selling some Windows licenses. So this screwup should really be a PR disaster for them. If Microsoft themselves cannot even get a .NET project to work in places where their Linux-using competitors have no trouble at all (Chi-X is also Linux-based), then that sure looks like a platform in trouble to me.

    Remember that the entire thing crashed down for an entire trading day, something that you can imagine didn't go over well, and together with the high latencies and other numerous problems, was the reason they dumped it for Linux.

    --
    Every expression is true, for a given value of 'true'
  6. Re:Linux: 1, MS: -1 by Sean+Hederman · · Score: 5, Insightful

    The software was written by Accenture with assistance from Microsoft, so that would tell you all you need to know.

  7. clearly not: prices are chaotic, fractal, etc. by r00t · · Score: 5, Insightful

    Prices are discrete, quantized, non-differentiable, etc.

    Prices are chaotic and somewhat fractal.

    Going faster does not solve this. Think of sign(sin(1/x)) as x approaches zero; it changes rapidly but this doesn't make it smooth.

    Hourly trades would be reasonable. You get a few minutes to submit secret bids, the exchange gets nearly a half hour to match them up, the exchange gets a few minutes to publish results, and you get nearly a half hour to decide on your next bid.

    There is no reason that the finances of normal corporations and normal investors should be subjected to the abuse of today's stock market.

  8. Re:Linux: 1, MS: -1 by Sean+Hederman · · Score: 5, Interesting

    Okay, well to anyone who's ever had to work with Accenture code, it would tell them a lot.

    I agree wholeheartedly that it has nothing to do with MS vs Linux, I think it has to do with another shoddy Accenture implementation. Even the .NET decision has nothing to do with it IMO, I'm a firm believer that algorithms and design have far more impact than OS or language choice.

    Oh, and calm the hell down. It's a discussion, not a flamewar.

  9. Re:Linux: 1, MS: -1 by flyingfsck · · Score: 5, Informative

    Well, obviously the LSE wanted a real-time system and Accenture and Microsoft used .NET, which was a total failure on their part. You cannot do real-time with .NET - Idjits...

    Then on top of being dog slow, it fell over, costing the LSE a ton of money. So they probably implemented it with an Access DB and Exchange mail server as well.

    So, MS touted this as a major win and then fell on their asses.
    1. Euphoria:
    http://web.archive.org/web/20080303191622/www.microsoft.com/casestudies/casestudy.aspx?casestudyid=51828

    2. Reality:
    http://blogs.computerworld.com/london_stock_exchange_suffers_net_crash

    3. Tux to the rescue:
    http://www.computerworlduk.com/news/networking/3244936/london-stock-exchange-smashes-world-record-trade-speed-with-linux%22%22

    4. The dead cat bounce?
    http://moneycentral.msn.com/investor/charts/chartdl.aspx?symbol=MSFT&CP=0&PT=11

    --
    Excuse me, but please get off my Pennisetum Clandestinum, eh!
  10. THIS by Joce640k · · Score: 5, Insightful

    If you want to stabilize the global economy put a tax on all stock trades. Stocks and shares should be long term planning, not microsecond.

    --
    No sig today...
  11. *sigh* This again by Anonymous Coward · · Score: 5, Insightful

    Arguably the most important idea of communism was that workers own the tools of their trade. In traditional sense, this could mean (Marx didn't really go into the details of the implementation) that workers of a factory democratically vote for all the important issues (wages, etc.) and as such the workers benefit from their work (as opposed to one guy at the top pocketing the money) if they do it well... and have to tighten the belt or begin doing something else if they do the job is unnecessary or done poorly. There was more about the utopia that this would lead to, but that was the primary concept.

    It is indeed true that socializing medicine has nothing to do with communism. Socialism means that government owns the production facilities, Communism means that workers own them, Capitalism (In original meaning of the word, not as a synonym for "free trade") means that some other private entity benefits from the people who work for him. The three are mutually exclusive concepts and communism is at least as far (perhaps further) away from socialism than capitalism is. After all, communism and capitalism both rely on question and demand while socialism includes the idea that some things aren't economically feasible but should be provided for the people anyways. Communism is effectively capitalism where workers of a company own all its stock and each worker owns a fair portition (Not necessarily "equal" as people who have worked there longer could own more because of that and it would still be canon).

    Now, Linux is - to some extent - communism. It obviously isn't socialism (no government owns it) and it isn't capitalism (nobody at the top owns it and benefits from the people who work for him) but rather the community (the people who work to develop it) own it, own the tools to develop it, make decisions about it and benefit from their work for it. So, while it is a project, not a economic concept (So you can't say "Linux is communism". Communism is communism. Linux is Linux.), it certainly is based on a lot of the ideas that make up the foundation of communism.