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$300M To Save 6 Milliseconds
whoever57 writes "A new transatlantic cable (the first in 10 years) is going to be laid at the cost of $300M. The reason? To shave 6ms off the time to transmit packets from London to New York. The Hibernian Express will reduce the current transmission time — roughly 65 milliseconds — by less than ten percent. However, investors believe the financial community will be lining up to pay premium rates to use the new cable. The article suggests that a one-millisecond advantage could be worth $100M per year to a large hedge fund."
To suck American's and other peoples' money out of their wallets from overhead. Same basic effect.
now they can lose money even faster!
Just imagine how much better gaming will be w-- oop, nevermind, just got headshotted by a chinese / russian sniper again.
Slashdot is serious business. You Brits will do anything to get first posts!
This kind of thing is the direct proof that the way the stock exchange is built is deeply flawed. Why don't they try to build it on sounder bases than "the fastest takes all" ?!?
Non-Linux Penguins ?
"...The article suggests that a one-millisecond advantage could be worth $100M per year to a large hedge fund."
I think we now have real proof that life is moving too fast when the metric to measure your performance as a large hedge fund investor is now measured in single milliseconds.
I'm glad I'm not a large hedge fund investor. Think your 30-minute lunch break is shitty? These guys don't have time to blink.
"Only" a few milliseconds? Do you realize that's trillions of femtoseconds? Twenty thousand femtoseconds for each otherwise worthless dollar. Get some perspective man!
Fractional reserve banking actually creates money. It doesn't create an artificial scarcity.
Yep, it creates money and debases it in the process. So you're correct, it doesn't create artificial scarcity, but it creates real poverty in the long term for those who have a little money.
"A door is what a dog is perpetually on the wrong side of" - Ogden Nash
It only creates money if it is distributed to all. Currently it creates artificial abundance for a tiny percentage at the top and creates a scarcity for the rest of us.
This 1ms advantage is worth 100m USD, isn't relevant to transatlantic bandwidth.
The quote from wikipedia https://secure.wikimedia.org/wikipedia/en/wiki/Low_latency_(capital_markets) is
"A 1-millisecond advantage in trading applications can be worth $100 million a year to a major brokerage firm, by one estimate."
I can't find the original source of this - but IIRC its from the CTO of someone like Goldman's or BoA.
If you are doing high frequency trading on a NY or London based exchange, you don't buy the lowest latency connectivity from the exchange to you. You put your systems as close to the exchange as possible AND THEN you buy the lowest latency connectivity from the exchange to you. Your systems which trade in NY are based in NY, and your systems which trade in London are based in London.
I'm sure there is some minor advantage of NY and London being slightly closer together from a latency perspective, but I'm sure its not as much as 100M USD.
Alex
The entire finance sector fills me with equal parts revulsion and sadness. This is yet another example of enormous resources consumed for no net gain to society. At least in this case something (however unnecessary), tangible is produced as a result. Think of the huge numbers of brilliant mathematical and programming minds that have been consumed by this nonsense! Think of the resources and financial liquidity that is reinvested into this zero sum game! Every hour of work, every employee, every structure erected in praise of this wholly disgusting idol of modern nihilism, makes the rest of our society just that little bit worse. To those who would praise the enabling power of our new financial systems I say Pah! We can create better financial systems within virtual worlds. The only intrinsic value in the financial institutions is the power it gives; and this has been abused for all it is worth! Give me back my engineers! Give me back my scientists! Give me back my hope for a better future!
The reason why a low latency connection is valuable is than many identical stocks and commodities are traded in both NY and London. If you are the first one to detect a pricing difference you can make a sure profit.
If you're in London and you know 6ms before anyone else that the price of oil in New York just shot up, you can buy oil right now and then sell it in 6ms for a tidy profit.
Sadly, the high speed trading for which this is designed is a zero sum game - the extra dollars made by the hedge funds are shaved off someone else.
Banking has a very valid job to do: transferring money from savers to borrowers, aggregating small savings into large investments, and ironing out risk by spreading it over many loans. But these are, fundamentally, decisions made by humans, and such decisions will be made on timescales of, at the fastest, a minute or so. In order to ensure liquidity, and to even out large lumps in the trading,it is useful to have automated system which work on a timescale which is, say, ten times faster. Such banking and trading adds value. and it the reason we need banks. But any trading faster than that is purely profiting from irregularities in the system, and adds no value to the world. So any value extracted by the traders, or used to build links for such traders (as described in the article) is money wasted: a net loss to humanity.
I would like to put a drag on such trading: one which would dissuade high speed trades while not harming legitimate trades, including legitimate spreading of large risks. A nano-tax might do it - and the premium traders will pay to use this cable suggests the magnitude of such a nano-tax.
Consciousness is an illusion caused by an excess of self consciousness.
Only if you assume the underlying economy doesn't grow. Alternatively, it would be bad if the economy grew, but not enough money was created to handle the increased value. The trick is to keep both in balance.
Adding delay will actually make investors worse off, because quoting will become less competitive. Let me explain this with a contrived and simplified example.
Let's say I'm a market maker quoting a derivative, a call option on wheat futures for example. I decide what I think the option is worth based on the current price of the future and my guess at volatility, and we come up with a fair price. Let's say that the fair price is $50. The fair price for the option will move when the price of the underlying contract moves. The proportion by which it moves is called delta. Let's say this option has delta of +0.5, so if the price of the future changes by $1, the fair price of the option moves by $0.50.
In order to make some money quoting it, I need to quote a spread - i.e. buy options for less than I sell them for. Let's say I want to quote a spread of 2% of the fair price, or $1 in this case. I drop our bid in at $49.50 and our offer at $50.50. You, as a wheat farmer or exporter, want to hedge yourself against fluctuations in wheat prices, so you're interested in trading these options. When I'm quoting a 2% spread, you can buy or sell options with a transaction cost of 1% of the fair price of the option, or $0.50 on a $50 option. That's not too bad.
But remember that pesky concept of delta? If the price of the wheat futures moves around, I need to move my quotes on the option. For example if the price of the future increases by $2, I need to move by quotes up by $1 on the delta +0.5 option, So if that were to happen, I'd be quoting at $50.50 bid and $51.50 offer - note that I'm still only taking a premium of about 1% of the fair price.
Hopefully you can see that if the price of the future moves around, I need to be able to keep up with it or I'll be screwed over when I try to hedge my options position. If the price of the future moves faster than I can move my quotes, I need to factor a safety margin into the spread I quote to cater for this.
Suppose you introduce a random delay of up to one second. That means I have to consider the worst case scenario. Maybe I think the price of the future might change by up to $10 in one second. Since this is a delta +0.5 option, I need to factor in a risk of a half of $10, or $5, into the spread I'm quoting, because the price of the future could move by that much before I can move my quotes.
So factoring in the $5 base move risk as well as my 2% spread that I'm trying to make money off, I'd be quoting $44.50 bid and $45.50 offer. Now your transaction cost has increased to $5.50 over the fair price per trade on the option, or 11%. It's not looking so attractive now, is it?
Introducing delays won't hurt me as a market marker - I'll just increase my spreads to cover the risk, as will all the other market makers. It will definitely harm you as the person with a need to trade. Lower transaction latencies increases competition between market makers to quote tiny spreads, minimising the transaction costs for people who need to trade. Sure, the money is being distributed differently: instead of more market makers, each with a small slice of the pie, taking a big cut of each transaction, you now have fewer market makers taking a tiny cut of each transaction, competing to get a big enough slice of the pie to remain profitable.
Every MS helps to those battlefield3 servers, bullets are fast.
I need every ms too.
Liberty freedom are no1, not dicks in suits.
So if using this connection gives $600M advantage a year over those that aren't using it, everyone will simply start using it. That way nobody will have the advantage and it's back to square one - only everyone be paying extra for the faster connection.
Only dumb birds land downwind.
Fractional reserve banking ONLY creates debt.
Ahh denial, that strongest and most basic of instinctual coping mechanisms. Please explain the new-found strengths in the Swiss Franc and the Japanese Yen for me if the US is in such great shape?
Americans and Europeans are not allowed to own any part of China. Any corporation created by foreign devils sorry allowed to operate in China must meet specific requirements, like having majority shareholders who are Chinese nationals. Have you actually BEEN to China - apart from the designated tourist areas I mean? Have you gotten the necessary government permits and been assigned the mandatory government interpreter/guide who will make sure you visit ONLY the areas you were allowed to visit? China has made progress but don't think you can just move there and open up a McDonald's in some small town of your choosing.
Seven puppies were harmed during the making of this post.
But this also adds more bandwidth as well right? as well acting as a back up for other cables.
Diary of a Very Bad Year, by Anonymous Hedge Fund Manager
The Asylum, by Leah McGrath Goodman
The Big Short by Michael Lewis
-- interviews with real people who know how real hedge funds actually work in the real world, not the fantasy land of milton friedman and ayn rand.
1817 : Major Brokerage leases building on Wall ST!
1836 : Major Brokerage house installs first telegraph!!
1890 : Major Brokerage house installs first telephone!!!
1990 : Major Brokerage house has access to internet!!!!
Sound investing is based on research but it is also based on the ability to react quickly to that information. If a company in the US announces that their CFO has been indicted, then investment firms in the UK are definitely going to pay to get that information and react to it as quickly as possible. Before you could submit bids to the fed electronically, investment firms used to place runners in pay phone booths next to the Fed so they could call them at the last minute and have them get in the best bid. Fundamentally, there is no difference between that and this.
And yes, "black box" high-frequency traders are going to be the primary users of this line but that doesn't mean there aren't valid and legitimate (as far as the average consumer is concerned) uses for this line.
He screwed up. By the way, the abbreviation for the unit "seconds" is not capitalized.
by yours truly, here .
I just read an article in Popular Science that almost made me sick to the stomach. The headline says it all "Pricey Transatlantic Cable Could Save Milliseconds, Millions by Speeding Data to Stock Traders".
Here is $400M being spent just to give flash traders a 5 ms advantage in trans-atlantic trading. It adds nothing to the economy, just lets the Wall Street Casino operators skim more money from the economy. I addition, it diverts talent from productive projects.
Never has Matt Taibbi's description of Goldman Sachs, and by extension, all the big banks, as "a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money" seem even more apt.
> 'liquidity' is another word for 'garbage laden toxic assets that have been AAA rated
> through fraud and corruption'.
No, it describes how easy it is to buy and sell on the marketplace. It has nothing to do with the quality of what you're buying and selling.
Don't you think, though, that the people investing $300m in this cable have thought a little bit about their business model and believe it to be sound? Clearly those 6ms are really valuable to some people, and if not high frequency traders then who?
You don't know many people in the financial sector, do you?
"I zero-index my hamsters" - Willtor (147206)
>>> Any corporation created by foreign devils sorry allowed to operate in China must meet specific requirements, like having majority shareholders who are Chinese nationals. Have you actually BEEN to China - apart from the designated tourist areas I mean? Have you gotten the necessary government permits and been assigned the mandatory government interpreter/guide who will make sure you visit ONLY the areas you were allowed to visit?
You are completely wrong. The recommended corporate structure for foreign friends is WFOEs - wholly foreign owned enterprises. You can't buy land (it's *all* on 70 year leases from the state, even if you are Chinese), but foreign businesses have essentially the same rights as Chinese ones, unless they try to do things illegally and get screwed over when they realize that the laws can actually be enforced.
As for permits, there's no need for a guide. There are some sensitivities visiting Tibet, and Xinzhang, but you can otherwise go where-ever you want. You need a visa, and you need to alert the police to where you are going (hotels do this for you), but that's no different than staying in Europe, but the enforcement is much laxer - you can stay at unlicensed hotels, if you can find them. You can go literally anywhere. I also knew a guy who drunkenly walked into a military complex, pretending to be an English teacher looking for his school. They politely guided him off the premises, and told him which way to go (it was probably too much paperwork to shoot him, or report him to the cops, and the military probably didn't want to co-operate with another government agency - actually the army is not even technically part of the government, but part of the party which happens to get government subsidies, yes, China has turf wars, they just don't announce them on CCTV, the ludicrously named official TV station).
There's no government guides. That's North Korea. If you are a visting VIP, you might get minders, I don't know. If you visit a business, they might *pretend* to send you an official guide, to make sure you don't see any of their dodgy practices, but that's not really a legal requirement (not that the government cares either way).
There's a Chinese saying - "Heaven is high,and the emperor far." The unspoken corollary is "so everyone just does whatever the f*ck they want, as long as it doesn't piss off a more immediate authority". That's China.
Because all high frequency trading does is inflate the cost for those of us who do invest in the "old-fashioned" buy-and-hold manner.
I heard it best described in this way: There's a hot new gadget that's being released today, and you *really* want to go buy one. Unfortunately, as you're walking down the street, some hedge fund investors see you coming and quickly jump in front of the store milliseconds before you get there to form a line at the door. The store opens, the investor at the front of the line buys ALL of the gadget inventory. He then turns around and sells all those units to the guy behind him for a small profit, who sells to the guy behind him for a small profit, who sells to the guy behind him, etc.
Eventually, they get back to you, but now if you're going to buy that gadget, it's going to cost you some significant percentage more to purchase for actual use. And you don't really have any option if you're going to buy one, because every store selling the gadget has a pool of financial sharks circling the entrance just waiting for another "traditional investment" sucker.
In the end, the store doesn't benefit, since they still only sold the item at the normal price, and you don't benefit because you just got your price jacked up. The only beneficiaries are the HFT scum who have played the system in such a way to artificially inflate your costs to their own benefit while adding absolutely no actual value to the product as it passed through their hands. This DOES impact you, because the more of your investment that gets siphoned out by the hedge funds, the less you have left to actually invest in the original stock.
There are two issues.
1) they may be cheating and many have reason think so.
There have been accusations that they find out about orders in advance. In this case when you sell your shares, they sell theirs first (pushing down the price) and then buy yours later (immediately taking your profit). There are even admitted cases (see this document from an HFT company) where this could happen without the HFT company even doing it deliberately, just because they have the advantage of ultra fast trading and your trade happens in an unlucky way which basically gives away information about the trade before it has been completely executed.
2) many think so
Your shares are worth what people think they are worth. If people believe the HFT companies are cheating then this causes the other people not to joint the market. The key currency of the stock market is trust and right now people don't trust it. This means your shares are worth less than they would be otherwise. Importantly, this means that companies can get less investment by putting out shares, so it means there is less money to be made from the stock market generally.
In other words; perception is reality; HFT damages perception, so HFT damages reality.
=~ s,(.*),<sarcasm>$1</sarcasm>,g if any_point_you_wish();
why should the bank collect interest on money they borrowed from the people's government for next to nothing?
- where did you read my endorsement of such a deal?
I am completely AGAINST government meddling with economics and currency. Banks must not be bailed out and stimulated by government lending, they must survive on their own by providing customers with products that make it beneficial for the customers to lend their money to the banks!
When you put your money into a bank, you are not just giving it to them for safekeeping (or you can do that with a safety deposit box, or only holding cash in checking account, but this doesn't even guarantee that your money isn't used by the bank for loans), but you are giving them a resource, a reserve, which they can then lend out. As long as there is no bank run, bank can make loans based on the reserves it has that come from depositors.
FDIC made it so that the bank customers stopped caring about the business practices that banks are engaged in. So instead of choosing a bank and a plan based on risk aversion, bank customers only chose banks based on proximity to their house and maybe based on the interest that they could get while their money was in savings accounts.
Government regulation in form of FDIC in this case created the moral hazard where customers of care more about which toaster brand they are going to buy rather than which bank they will lend their money to.
Funny thing is is now that some banks got the bail out money, they are now charging reverse interest on the money you hold there (negative real interest rates) based on the fact that everybody know that the moral hazard is there, so if there is another financial collapse (and it's coming), those banks WILL BE BAILED OUT AGAIN. Of-course this can only continue until the government itself collapses because the currency collapses and nobody can bail out USA with all its debts and no production capacity.
Now that they can borrow from the fed for next to no interest and we can only benefit if we pay vastly inflated interest on bank loans, they have turned nasty.
- banks needed to fail.
When I write comments that explain how wrong the monetary policy of money destruction is, I get moderated in ways, as if I am proposing that everybody starts molesting children and kittens, so now I decided to write more in the journal instead.
You can't handle the truth.
What IS basic income? If you have federal reserve print 10,000USD (federal reserve notes, IOUs, which in the past meant those were promises to give GOLD for the note), then you basically set the reference price on USD.
10,000 USD = 0.
Money does not come from thin air, it must be earned - products must be made, and then it can be either consumed or it can be saved (under-consumed) and it can be invested if it's not spent.
Government cannot create actual wealth - products that people want, so it can't legitimately make money - profit. It cannot do it unless basically it's a command economy, like the kind I was born in (USSR), and it fails, because nobody is smart enough, no system is smart enough to understand all of the intricacies of what people, individuals = markets want or need.
How would a bureaucracy KNOW to attempt building iPads? How?
I don't want everything to come down to me from some government, I want free market of ideas. I just wrote a comment on how the Internet is the last bastion of actual free market in the world, and that's why I don't hire people, but I do pay people on the Internet to do jobs for me. I don't even know who I paid, they don't even know who they worked for. We exchanged: I gave them money, they gave me the product. It's a world wide free market economy at its best. Without this the depression would have started in early 90s and would have been incredibly terrible.
The FDIC was a necessary step because a lot of people were seriously harmed financially during the big crash before the depression
-
1. FDIC was solving a non-issue. Only about 2% of bank deposits were actually lost. However the deflation made the remaining 98% of deposits that were not lost much more valuable, because much more could be bought with that money (and gov't tried everything to keep prices for agriculture products up, just like they are doing since 2008 in housing).
2. The recession of 1929 has its roots in 1925, when US federal reserve started printing USD to buy bad UK debt, which created too much money and inflated the bubble in agriculture stocks.
3. FDIC cannot solve a problem, no government regulation can solve any problem. The concept is "blowback" - everything backfires and does the opposite of what was intended EVEN if the intention was "good".
People had no ability to evaluate the banks business practices to find a suitable one (and they still don't, are you REALLY going to audit BoA's books to open a savings account?).
- of-course!
You don't have to do it YOURSELF, you ask to see the private insurance underwriter report before you put your money their.
Do you know all the paper YOU have to sign when you buy a house and a bank gives you a loan?
IT IS THE SAME PRINCIPLE IN REVERSE.
You are giving a bank money, you must be careful who you are giving money to. Gov't can't remove risk, it can't.
It's the same problem with people not understanding the concept of health insurance. It's why when Ron Paul was asked in the last debate in Tampa: "Do you let a 30 y.o. person die if they have no insurance?"
He said "no", he gave his answer based on his medical experience of taking care of patients without insurance.
I, on the other hand, am not a doctor. I would have said this:
You CANNOT base policy on CORNER CASES. Because if you base your policy on corner cases, you are going to corner the entire system.
Yes, in certain cases people need to be let go of, the market economy requires that we are allowed to do things that are not very smart, so that some of us can be examples to others of what is not a good idea. Some people would die, well, some people die today in the current system in all countries.
You can't handle the truth.
Providing an electronic currency IS minting in the digital age.
- OK, it's a bit contrived.
Private currencies tend to run into trouble.
- currencies are not money. Currency is a coin or a note. Money is gold or maybe silver. If currencies are undermined by counterfeiting, they will run into trouble, private or not. That's what all currencies today are showing - they are all in trouble due to government counterfeiting.
I never claimed that government creates wealth, it creates money.
- government doesn't create wealth or money.
Government is supposed to MINT coins out of money that YOU own already. So you bring your gold nugget to mint, and they'll make a coin out of it for you.
Today, on the other hand, government counterfeits CURRENCY, not money. Currency - an IOU, a federal reserve NOTE.
If your world makes opening a savings account as complex as buying a house, I don't want to live there and neither do a lot of other people. That kind of overhead doesn't come for free either you know.
- that's what competition is for. I am NOT smart enough to know what's best for economy at any point of time, what's best for consumers, what's best for market.
I am smart enough to understand that the individual will make choices based on their understanding and this a much better, safer, flexible system, than what you have now.
A person with no insurance but in need of life saving medical care is HARDLY a corner case.
- in free market it is a corner case.
Ford was paying $5/day to his employees in 1914 I believe because of high turnover. So he came up with a way to address the market regulation (high turnover) by paying twice as much as anybody else at the time, by reducing working hours to 8/day and by reducing work week to 5 days.
This was at the time when gold was just under $20/troy ounce, so in a week that was 1.25 ounces of gold, which is about 2500USD today, or over 130K/year.
That's without unions. That's without income taxes. That's without SS. That's without payroll taxes. That's without any of the regulations you have today. That's at a time, when private health insurance was around $2/month and a visit to a doctor was 1-2 dollars. The point is that in that system a person not making enough money to pay for insurance and to pay for doctor out of pocket (like they ALL did at the time and they paid for tuition out of pocket too), would have been a corner case.
Corner cases are handled by other corner cases, and it's wrong to base policy on this. That's why Ron Paul answered as he did: we didn't turn anybody away. Well, that's because there were so FEW people without insurance or money to pay out of pocket.
I left a comment long ago on this, with a lot of government data showing how popular and cheap private health insurance was prior to 1965, that it was more popular than public offerings (blue shield/cross), before government jumped in with all the money and which means with all the corruption, that allowed prices to skyrocket.
At least Ron Paul didn't try to weasel out of answering the very legitimate question.
- he always answers question unlike every single other R or D out there. He is the only legitimate statesman, nobody else can claim that title in the race on any side.
You can't handle the truth.