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How To Profit From Planetary-Scale Computing
An anonymous reader writes "MIT physicist Alex Wissner-Gross and mathematician Cameron Freer have devised a technique for exploiting geographic location in high-frequency trading, reports FastCompany. From the article: 'We view this work as one of the first serious, credible justifications for covering the planet's surface with computers. [...] We've perhaps identified a new type of natural resources that sovereignties might take advantage of.' Physicist and hedge-fund manager Jean-Philippe Bouchaud says, 'This shows that the technological arms race to extract every penny from high-frequency mechanical arbitrage will soon reach its ultimate limits.'"
You're thinking too two-dimensionally. Think carefully: what location minimizes the average distance to every spot on the Earth's surface? I'll tell you right now it's not in Siberia! But you should probably spend some extra money on the air conditioning system for your server farm if you want to set up shop there.
what's the betting that our elected representatives can?
Don't worry, they have lobbyists to help them.
Yes it IS a sin.
It's a SIN because the heads of NYSE and NASDAQ continue to spread this lie that HFT shops contribute liquidity to the system. THEY DO ANYTHING BUT!
Have you seen the offices these HFT shops rent out in New Jersey and CT? They're cheap Class B space, warehouse loft and other low-rent space. They don't have the capital it takes to be a market maker. They just have capital---and they aren't going to sit in the market when it is hurting and make trades no sane person would make to keep liquidity flowing.
That is the job of a REAL market-maker. A market-maker will step in and be the counterparty to keep the issues they are responsible on the exchange moving.
What the fuck do you think happened on the May 6 flash crash? Almost all the HFT shops ran to their server rooms and SIGSEGV their software and pulled out to avoid taking more pain. The bids all dried up on the NYSE which is why the first crazy market order for $0.01 a share came to the exchanges, NASDAQ cleared it so for a while, several stocks were at zero print... like Accenture.
When you have the most top companies on your exchange printing zero in the flash of an eye... YOUR MARKET IS BROKEN. How is this even debatable?
Why would I want to put the kids college fund money in this fucking disaster?
HFT sucks.
Another lie the chairs of NASDAQ and NYSE love to tell the world is that HFT speeds up price discovery.
How is this even POSSIBLY true??? They are algos. Those algos don't have any clue what the future performance of a company is. The algos are not going to tell you how successful AAPL's iPhone 5 will be, or when the next class action lawsuit is coming.
And algos break ALL THE TIME. It has been happening more often these days because stocks are breaking 120DMA more often, and most of these algos are doing nothing but backtracing trends on top of their arbitrage schemes. When a big investor comes in the room, they jump on him like nervous poodles.
That's why the May 6 event was such an eye opener. Waddle and Reed didn't cause the flash crash. They executed a normal transaction that wasn't even a Big Fish transaction, and all the algos went haywire.
So much for the quants and their MIT-smartness.
A) Require 1/2 hour averaging for all trades.
B) Tax all automated computer trades at 1%.
Result - trading moves to another exchange where this is not required. Your solutions depend on international cooperation between government and exchanges, all of which compete with each other. Good freaking luck getting policies like that instituted.