$300M To Save 6 Milliseconds

Cheaper than a huge flying vacuum by rolfwind · 2011-09-12 21:14 · Score: 3, Insightful

To suck American's and other peoples' money out of their wallets from overhead. Same basic effect.

Re:Cheaper than a huge flying vacuum by ArsenneLupin · 2011-09-12 21:24 · Score: 5, Funny

Indeed. Everybody knows that light speed is fastest in vacuum...
Re:Cheaper than a huge flying vacuum by igny · 2011-09-12 23:03 · Score: 3, Insightful

Re "What it really comes done to is the investors willing to invest into an infrastructure."

What it really comes down to is investing in a tool to facilitate the robo-gambling, aka Wall Street. The claimed profit of $100m/ year would come from retirement funds of John Does from the Main Street.

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In theory there is no difference between theory and practice. In practice there is. - Yogi Berra
Re:Cheaper than a huge flying vacuum by MrNaz · 2011-09-13 00:26 · Score: 3, Interesting

Absolute earnings are irrelevant at this point in history. It's the relative wealth holdings and the ability to translate that wealth into political power that really divides the classes. The whole system no longer has to enforce a gap between the rich and poor, it is now so well honed that it can perpetuate a gap between the empowered and the disempowered without requiring a wealth gap any more.

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I hate printers.
Re:Cheaper than a huge flying vacuum by Jawnn · 2011-09-13 01:36 · Score: 4, Insightful

Congratulations on completely missing GP's (admittedly off-topic) point. Making money off of the buying and selling of money is a drain on the economy. It produces nothing of intrinsic value and, by design, enriches only a lucky few. If you read your history, you will find that the rise of such an "economy" is frequently the harbinger of society's fall from dominance, if not it's outright collapse. And that is most certainly not "a good thing".
Re:Cheaper than a huge flying vacuum by rolfwind · 2011-09-13 03:39 · Score: 3, Interesting

Most of the money floating getting passed back and forth is from insurance companies, banks and various types of investment funds. Because each of these contributors is continually dumping more money into the market (when the economy is behaving normally, anyway), the odds of making a profit are generally in your favor-- which is where the stock market differs from gambling.
This would imply valuation would no longer matter, but it does. There are enough other competitive investments besides the stockmarket, like real estate, antiques, art, gold and commodities.
What you seem to be describing is a pure Ponzi scheme. It relies on infinite growth (and parts of our current economy unfortunately do) for prosperity. But what happens when Baby Boomers pull out their stock fund during their retirement and it's not replenished?

Sure, someone loses big every once in a while,
Bernie Madoff and Penny Stocks - people lose fortunes everyday.

Re:Great by Anonymous Coward · 2011-09-12 21:17 · Score: 3, Insightful

now they can lose everyone else's money even faster!

FTFY

Proof that the system is corrupt by dargaud · 2011-09-12 21:20 · Score: 5, Insightful

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" ?!?

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Non-Linux Penguins ?

Re:Proof that the system is corrupt by Rosco+P.+Coltrane · 2011-09-12 21:39 · Score: 5, Interesting

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" ?!?
I heard some european head of state (Sarkozy perhaps) suggest that stock transactions be taxed based on speed, i.e. speculators who buy and sell very fast to make a quick buck get taxed a lot, but real investors who're in for the long run and keep their stock for a long time don't. That sounds like a great idea to me. With a scheme like that, the super-fast transatlantic cable would make speculators be taxed even more heavily.

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"A door is what a dog is perpetually on the wrong side of" - Ogden Nash
Re:Proof that the system is corrupt by wisty · 2011-09-12 21:51 · Score: 3, Interesting

Well, my personal recommendation would be to add some white (or log-white) noise to trade timestamps. If you get in 1ms faster, there would be an almost 50% chance the next guy would make the trade, not you. If you were a whole second faster, you win for sure.
Traders would focus *less* on high-speed performance, and more on more useful stuff.
Re:Proof that the system is corrupt by delt0r · 2011-09-12 23:48 · Score: 3, Insightful

When will people understand that liquidity is a GOOD thing?
When it is measured in microseconds and milliseconds? Seriously! And then you bring up trading stocks 100 years ago? WTF! 1 second to make a trade IS liquid.

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If information wants to be free, why does my internet connection cost so much?
Re:Proof that the system is corrupt by Asic+Eng · 2011-09-12 23:55 · Score: 3, Interesting

When will people understand that liquidity is a GOOD thing? How would you like to be in the situation 100 years ago where you want to sell your stock but no one is around to buy it?
Those are not the only two options. We didn't have millisecond buy/sell operations 30 years ago, the market was still working so there is no reason to assume that restricting trade speeds would cause us problems. Conversely excessive trade speed is a genuine problem. The taxation plan suggested is a reasonable way to address this.
Re:Proof that the system is corrupt by macson_g · 2011-09-12 23:56 · Score: 3, Informative

The collecting asks/bids is called 'auction' and it is already available. The idea of market participants not knowing of each other's orders is called 'dark pool'. They do exists and people use them. If you want to trade this way, you can do it. Whoever goes to this 'corrupt' 'first-in, first-served, executed ASAP' exchanges does it voluntary.
Re:Proof that the system is corrupt by Bengie · 2011-09-13 00:09 · Score: 5, Interesting

Tax starts at $0.01 and doubles every time you do a buy+sell. Counter doesn't reset for 24 hours after your last buy+sell.
When you get these crazy companies doing trades measured in microseconds, this adds up really fast. Think binary. First transaction cost is (2^1-1)*0.01, second is (2^2-1)*0.01, third is (2^3-1)*0.01.. etc.. Those pennies add up. It doesn't stop people from doing short term buy+sells, but it discourages them from doing a bunch of them in a row.
Or something that scales exponentially.
Re:Proof that the system is corrupt by dkleinsc · 2011-09-13 00:19 · Score: 5, Informative

I heard some european head of state (Sarkozy perhaps) suggest that stock transactions be taxed based on speed, i.e. speculators who buy and sell very fast to make a quick buck get taxed a lot, but real investors who're in for the long run and keep their stock for a long time don't. That sounds like a great idea to me.
This concept actually was first proposed in 1972 by Nobel-winning economist James Tobin, with the idea that it would apply to currency transactions to prevent speculators from rapid trading like the kind you're describing. Basically, the concept is that with such a tax in place, traders would have to hold onto the asset long enough that they could pay for the tax, plus whatever gains they were anticipating, so that meant that they'd have to expect to own something for longer than a few minutes. There have since been discussions of applying the same idea to stocks, bonds, mortgage-backed securities, and other assets.
The purpose of that tax isn't so much to generate revenue (although this definitely would happen), it's to slow down the markets enough so that the assets could be properly valued rather than people making money on millisecond-level differences.

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I am officially gone from /. Long live http://www.soylentnews.com/

New performance metric. by geekmux · 2011-09-12 21:22 · Score: 3, Insightful

"...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.

Re:New performance metric. by camperdave · 2011-09-13 00:46 · Score: 4, Funny

"...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.
Who'd have thought there'd be that much interest in buying shrubbery?

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When our name is on the back of your car, we're behind you all the way!

Re:Blame the market by Rosco+P.+Coltrane · 2011-09-12 21:42 · Score: 4, Insightful

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.

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"A door is what a dog is perpetually on the wrong side of" - Ogden Nash

Re:Blame the market by sjames · 2011-09-12 21:43 · Score: 3, Insightful

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.

The giant leach on society by Puff_Of_Hot_Air · 2011-09-12 21:53 · Score: 5, Insightful

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!

Re:The giant leach on society by Puff_Of_Hot_Air · 2011-09-13 00:50 · Score: 4, Interesting

Give me a team of 20 programmers, 2 years and unlimited political cooperation, and I will give you a financial system with unlimited liquidity, complete security, and a tiny drain on the global economy. The thing you don't seem to get, is that there is no value in any of this. A few bits in a database are equivalent to a good meal; except that they aren't. It's all just a way to help us keep score as we go about doing the things that matter. The problem is that the "game" is now more important than the reality, and we all suffer as a result. If too many people go around collecting the colored beads, and not enough people are growing the crops, then we all starve to death.
Re:The giant leach on society by Puff_Of_Hot_Air · 2011-09-13 02:39 · Score: 3, Insightful

See this is exactly the ignorance I am trying to fight! That you imagine modern innovation is a product of financial institutions boggles the mind! This is a chicken and egg situation, and you are claiming that egg has feathers! Modern financial institutions are a product of need brought about by massive industrial development. I am not denying the need, I am decrying the abuse. To put it in over-simplified terms, the financial institutions are the middle men in all the commerce that occurs, all the development, all the property. They take a percentage for their services, and there is nothing particularly upsetting about this. Where it becomes a problem is when more money is being removed from the overall system through abuses in the methods. HFT fits this bill, and I see no reason not to decry it. Invest in that which will ennoble; science, arts, engineering, and stop playing these foolish games.

Arbitrage by Fred+Ferrigno · 2011-09-12 22:10 · Score: 5, Informative

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.

Zero sum game by AlecC · 2011-09-12 22:15 · Score: 5, Interesting

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.

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Consciousness is an illusion caused by an excess of self consciousness.

Re:Gambling by _merlin · 2011-09-12 22:57 · Score: 3, Informative

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.

But this also adds more bandwidth as well right? by Joe_Dragon · 2011-09-12 23:37 · Score: 4, Interesting

But this also adds more bandwidth as well right? as well acting as a back up for other cables.

A short history of unfair trading practices... by thesandbender · 2011-09-13 00:12 · Score: 4, Insightful

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.

Already Noted in Slashdot by InterGuru · 2011-09-13 00:27 · Score: 4, Insightful

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.

Re:How? by Turken · 2011-09-13 02:23 · Score: 4, Insightful

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.

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