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Low-Latency Network Shaves Milliseconds from UK-Asia Traffic
New York's had its turn; now, an anonymous reader writes with this excerpt from eWeek Europe: "Financial traders and law firms are set to benefit from a new low-latency network between London and Hong Kong, which can conduct data on a round trip from Europe to Asia in around 176 milliseconds. The cable network, run by UK-based trading technology company BSO Network Solutions, has been in place for some time, but previously had to route around large parts of Russia, due to difficulties laying fibre in that country. However, a new lower latency and higher availability 'Transit Mongolia' connection has helped to reduce the time of a round trip by more than 20 milliseconds during the last 12 months."
We can talk about how scumbags are ruining the market again...
Putting those FTL neutrinos to work, eh? Good job on the time-to-market, guys!
It makes market more efficient therefore it is evil.
It makes money therefore it is evil.
Traders who make money through "arbitrage" need access to more than one exchange — they're making money off the price differences of securities on each. They justify this as being beneficial to the market, because they're making prices equal across the world. Guess it's just coincidence that it's beneficial to their bottom line too, eh?
Sure but each office can only be across the street from ONE exchange.
Currencies, commodities and some shares are traded on multiple markets. If you own the first computer to spot a difference in price between the same item in different markets then you can make money by making a buy in one market and an equivilent sell in another. The faster you can exchange data the lower the risk that someone else will get there first.
note: i'm known as plugwash most places but i screwd up registering that here somehow in the past and now can't register
... of being able to outsource the high speed trading decisions to countries with lower labor costs, thus saving millions and increasing shareholder value.
Does having a witty signature really indicate normality?
While it's very nice to have low-latency connections for lots of things, the current state of electronic trading means that even lower latency links are BAD for the world.
We're currently at a position where we give a HUGE advantage to those able to afford systems which can trade at lower latencies than others. Boiled down to it, that means the more wealth you have, the easier it is to create more wealth at the expense of those who don't have access to such super-fabulous systems and links. Basically, if I (some corp) can afford $100m in systems next to/in a trading center, I can make huge profits on arbitraging trades by even someone who has a $10m system slightly further away, and the ordinary human trader is screwed. None of that profit the mega-corp makes is economically useful activity (ask any economist) - they're simply leeches in the system, able to legally game it to their advantage (and, to everyone else' disadvantage, since trading is a zero-sum game).
From a societal standpoint, I see no benefit whatsoever at the current sub-10ms trading intervals, and the trend (which this new network link is a part of) to lower this even further for the privileged few bodes worse.
Sub-human-response-time trading is BAD for everyone except the trading floors (and their cronies, the investment banks), which live like leeches off of the financial system, sucking off profit from everyone else's trades (or, what do you think high-end arbitrage is?) It's also what leads us to those stupid market "storms" where automated systems jerk the trading around far faster than human can tell the computers are out-of-whack.
Bottom line - the tech this story promotes is great, but the primary purpose driving it isn't. We need to get a hold on the use of our technology.
-Erik
Man dude, while your advice may be pertinent to somebody visiting websites, this is a very different communication going on, with no web browser involved at all.
Anonymous is right....
Someone bump up parent post...
Bitcoin pyramid: Join here: http://www.bitcoinpyramid.com/r/1427 it's FREE!
Routers using quantum entanglement to transmit data over long distances. Whee!
I find this offensive
You offend too easily. It's a common phrase, like saying "everyman" or "Joe the plumber".
W..w..W - Willy Waterloo washes Warren Wiggins who is washing Waldo Woo.
because they're making prices equal across the world.
They also improve liquidity.
W..w..W - Willy Waterloo washes Warren Wiggins who is washing Waldo Woo.
isn't this a dupe?
This is entirely unnecessary, I sit in Japan and get low enough ping to play quake 3 in London (70 lower).
It won't benefit the general population and low-latency/high-frequency trading should be illegal.
Let's lay this line through Africa shall we?
The idea isn't THAT simple.
If you're saying that people should be allowed an advantage just because they discovered an advantage, you're flat wrong.
I understand why financial institutions want the lower latency but what work could a law firm be doing that could in any way benefit from 20 ms faster packets?
Or Joe Sixpack... I dont have a sixpack... I have a keg, jerk!
Neat, some financial firm spent a lot of money making a private network used only for stock trades. This helps me or you how? It doesn't. I want news for nerds, not news for suits.
You aren't the author's grandmother. The article says 'my grandmother' not 'a grandmother'.
the internet the web. The guys in the story are certainly not doing web stuff.
nice rant though.
The Cloud - because you don't care if your apps and data are up in the air.
Yeah, they aren't using DNS, possibly not even TCP/IP, so your advice is completely useless to them as well.
I'm sorry, but you're talking about something that has NOTHING to do with the circumstances here. It's just you ranting. Like Loud Howard.
You're probably going to get more people to ignore you just because of that.
Awesome indeed
"Computers are a lot like Air Conditioners" "They both work great until you start opening Windows"
great so now I can get spam 20ms faster.
Wolfram Alpha tells us that the direct path round trip by fiber would take 90 milliseconds. I'm rather impressed that it takes less than twice that to do the trip in reality, what with all of the additional routing delays and non-ideal paths that the data must take.
Nobody cares.
So what you're saying is, preserving any national identity that isn't yours is stupid? Your hateful, redneck bullshit is what should have been bred out.
You could do this with normal neutrinos - they's travel through the planet, not around it. However your receiver will be a bit on the large side. If they had FTL neutrinos they could do far better: they could receive the signal before they send it!
yea boo hoo you state this horseshit every chance you get, obiously your not busy enough with your special grandchilderen or your awesome career so STFU already you bleeding heart
I would advise a change of pusher, your speed is making you all tweaked ....
Damn!
I need to get one of those new low-latency networks!
By Black men...
You go into how you're a moron, who has no idea how stupid you're coming across to everybody else.
There's a reason why you're being buried at -1. And that's because you can't be modded down to -5 as you deserve.
Nobody cares what shit you do, if you can't relate to other people in any kind of terms, but instead come across as somebody who just yells and rants about nonsense, you're not going to get anything except ignored.
Notice how I don't give a crap about you, but I figure Jesus wants me to heal even the social lepers who know not what they do.
I can't wait to get my spam and server bot attacks even faster than before.
Are you really so ignorant? Well yes you are in one way, you made a moronic and hateful post like you did yet you were smart enough not to log in so the whole world could see who you are. I think slashdot should do away with all anonymous posting to keep the true trolls out of here and let the back wood ass rednecks show who they really are. Personally I find what you said sick and offensive, maybe you should go post on kluklux.com or wherever the hell people like you spout off at the mouth.
Great, all we need is a faster way to orchestrate a market crash.
When Fascism comes to America, it will call itself Anti-Fascism, and tell you to give up your guns.
I wonder if said grandmother is irked by all this mileage as a rhetorical device.
Bio questions? Ask me to start a Q&A journal. Computer analogies available for most topics!
I have a question that may or may not be related. I keep asking but haven't heard a good answer.
How is that possible? Why hasn't the weakness of the stock market and real estate leveled the distribution of wealth? If high-frequency trading, or insider trading, or anything "unfair" has happened on a large scale, it should be detectable because the distribution of returns should be more skewed - that is, the best should be beating the market by a wider margin than before. Are they?
When are they going to learn and force all trades to happen in bins. I.e. all trades arriving within each X seconds (or even some reasonable fraction) window get treated the same. The window being well-known and the same for all traders. That would put an end to most of this zero-sum gamesmanship trying to beat/trick/manipulate the other guy's trading algorithm and jump ahead of normal Joe Shmoes who can't afford to get a fat/fast pipe within uS of the trading network.
Oh, wait, the exchanges are making money by charging for this unequal access? Nevermind.
"You saved 1968." - Ms. Valerie Pringle to the crew of Apollo 8
Personally I find what you said sick and offensive
I concur. I find this image macro to sum the parent up pretty well.
yes creating a market for goods in the name of supply and demand is evil
your an idiot
blocking ads is stealing you theif and you don't even have the guts to log in and face me
why do you cower? what are you afraid of?
cower in my shadow behind your stolen webpages some more, feeb
Having just dealt with a fuckton of spam, I'm hoping routing around large chunks of Russia will be the rule from now on.
YHBT. HAND.
No, it's not a coincidence. A lot of people that are producing things that are beneficial to others are contributing to their own bottom line when doing so. In fact, most people do exactly that.
It's possible that HFT is contributing to it to some small extent, but I would think that other factors would have more to do with it. For one thing, the super rich have highly diverse investments. They own stocks, but also government bonds, corporate bonds, land, commodities, etc. It is very rare that all of those things go down together, and in fact usually when one of them goes down another goes up. They also have a bunch of high-priced investment advisers whose entire job it is to make sure they aren't on the losing side of the deal and that if they might be then it's properly hedged.
On top of that, a lot of these people outright own a large private company, and a lot of those companies will regularly beat the market because they're run by the owners rather than officers overly focused on quarterly profits and afflicted with the principle-agent problem.
The thing that concerns me about HFT is that it's quite possibly a significant cause for why the stock market is doing so poorly. Think about it: If the HFTers shave a penny or so per share off of each trade between exchanges, future prospective buyers will be willing to pay that much less for their shares, because they know that when they ultimately sell them they'll suffer the same loss again to the HFTers. In consequence the seller is obligated to lower the price by that small pittance per share in order to make the trade, which sets the new market price for the stock. The value of the stock will continue to go down until it accounts for the amount of value the HFTers remove over the period of time that the average investor holds the stock.
The more the HFTers make over a given period of time, the less the stock is worth to "real" investors. More to the point, if the "true" value of the company does not increase faster than the speed at which HFTers remove value from stockholders through arbitrage, the value (and therefore stock price) of the company will continue slowly falling indefinitely, because no one will want to buy shares that will post-arbitrage be worth less than they paid for them. (In practice what will happen is that the value will fall until the only remaining investors holding the stock will be long-term investors, who reduce the value removed by HFTers because they no longer have a sufficient volume of trading to arbitrage, and so the stock will stabilize at a non-zero price where the value of the company is increasing faster than the arbitrage removes, but at a much lower value than it would be absent HFT.)
Those 20ms shaved off the previous route could make for a super-fast sting operation against those using the old system.
sigo ergo sum
So what it has a long beard or something?
liquidity and equalizing the prices across different exchanges are admittedly benefits of arbitrage. Yet doing it in millisecond is not only pointless but benefits only some of the agents in the trade. Then again speeding up the networks is a good thing only this purpose is at least doubtful. For the purpose of arbitrage I think trading every minute is good enough. Real world and real economy is not changing that fast at least we humans do not perceive it so. Already the fact that we talk about real economy and the rest (i.e finance world) is telling.
Doing it in milliseconds rather than a minute reduces the risk for the trader.
Buying some stock in Asia, and selling it a minute later in New York carries a much bigger risk than selling it 0.1 seconds later. A minute may seem short to you, but when you spend all day doing those trades, a window of a minute means 600 times the risk of a 100 millisecond window that the price of the stock will change.
To offset this 600x bigger risk, the trader needs to have bigger profit margins on the trade as an insurance, which means a bigger price difference between global markets, which means that the average investor will get a worse price on their stock transaction.
Faster trading therefore benefits the real world and real economy.
Yes, all very well thought out investments that will help the companies and economy grow strong for the long term.
This kind of split-second trading has to stop.
Slashdot social media options: AIM, ICQ, Yahoo, Jabber and Mobile Text. Why no MySpace?
Congrats?
W..w..W - Willy Waterloo washes Warren Wiggins who is washing Waldo Woo.
It could be read as after 12 months of tweaking they managed to shave 20 Ms off of the time of a round trip, or that the time shaved off of a round trip is soo small it took 12 months of operation to realize a total of 20ms off of all round trips combines in that period
The businesses that they own 50% of made money in that time. Lots of money.
W..w..W - Willy Waterloo washes Warren Wiggins who is washing Waldo Woo.
That higher risk only exists if the price can change at such a small time scale. Higher trading frequency decreases the time scale at which the price can change, and therefore does not give the high frequency trader a lower risk, but instead increases the risk for any non-high-frequency trader. Basically, it doesn't matter at which frequency you clock your market, as long as that frequency is higher than the relevant real economic frequencies. Which are certainly not measured in milliseconds. However, the faster your market works, the less time you have to react as soon as something goes wrong.
The Tao of math: The numbers you can count are not the real numbers.
As I pay for my online time out of my own pocket. They do the same to others too. So, "facing you" right now on that note & this one too -> Grow up Mike. U fail vs. myself, every time.
and thanked apk for his post on hosts files http://news.slashdot.org/comments.pl?sid=2444706&cid=37505652 so you can quit your illogical off topic ad hominem attacks and blow your mod points needlessly ac troll because you can see others disagree with you in the link above.
Quit projecting your faults onto others. I was going to say "Have you considered decaf?" but it seems you're into the "hard stuff". Is that off-topic b.s. the "best you've got", troll?? Apparently so. This surprises no one as your intelligence is shockingly limited.
Tells others to log in here? Hahahahaha. Just how many 1000's of accounts have you registered on slashdot by now, Mike??
Information relevant to the market comes in at all times of the day. For instance, in the middle of a trading day, news could come out that a company has a major setback, like an explosion on a big plant. If a trader was just in the middle of a stock transaction, having bought some cheap shares in Asia, and trying to sell these in London for a penny more, and this news hits the market, all of a sudden the buy offer may be canceled, and the trader is stuck with overpriced stock.
For Joe the investor, it is pretty unlikely that he's going to have a buy order outstanding right at the moment that the bad news hits the market, and somebody dumps his shares on him for his overpriced offer. For a high frequency trader, who's constantly doing trades in thousands of different companies, he has a much bigger exposure to these upsetting events, especially if he's required to hold them for a minute. The fact that bad news for a particular company is a low frequency event doesn't matter.
That not only SPEEDS ME UP MASSIVELY but also secures me & gets ALL of what I pay for bandwidth & speedwise online.
APK
P.S.=> HOSTS files do all of the above for you, no questions asked... who's the bigger idiot here? Myself, doing the above, OR yourself, NOT doing the above?? apk
about capitalism seeking the efficiency of capital. The trouble is, you're still working on the assumption that human beings consistently make rational choices. Adam Smith made the same mistake. What's slowing the velocity of money is pure capitalism is bunching it up at the top. A rational man doesn't hoard wealth for no reason. He invests it. But our super rich are just sitting on society's wealth. Doing nothing with it (It's something like $3 trillion worth or capital sitting in corporate war chests alone). Our entire civilization is grinding to a halt while the most absurd whims of a few lucky individuals are indulged. The classic example of this is the Sheik who built a ski resort in the middle of his desert. Private jets are another good example. And even the contents of this /. article are an example of our society prioritizing the whims of the super wealthy in a pointless and irrational way. Adam Smith didn't imagine conspicuous consumption. He never saw the iPhone coming, or landfills full of last years (perfectly good) phones. There's more, of course. Globalism breaks capitalism (for all his mistakes, Marx was right about that). I could go on for ages. But the bottom line is, Capitalism is a broken toy.
Hi! I make Firefox Plug-ins. Check 'em out @ https://addons.mozilla.org/en-US/firefox/addon/youtube-mp3-podcaster/
Welcome, next advertisement would be "Long Term Investors" can benefit from our ultra-fast/low latency network!
.. would be great to play street fighter with.
While you are talking about HFT specifically here, this is an issue generic to traders using market-making strategies. The presence (or absence) of market makers should not depress the price of a stock, but it will definitely impact the bid/ask spread. You are imagining the "penny shaving" from a buyer's perspective, but market makers view buying and selling as mostly symmetric (buy low, sell high; or sell high, buy low), hence why the spread is impacted and not the "price". In actuality, HF market makers are competing with each other for increasingly small penny-shavings, and they're able to do so because reduced latency leads to reduced risk.
Regardless, a long-term investor is looking profit at least an order of magnitude above the cost of liquidity, so none of this should matter to Joe Sixpack and his 401k.
You are imagining the "penny shaving" from a buyer's perspective, but market makers view buying and selling as mostly symmetric (buy low, sell high; or sell high, buy low), hence why the spread is impacted and not the "price". In actuality, HF market makers are competing with each other for increasingly small penny-shavings, and they're able to do so because reduced latency leads to reduced risk.
I am imagining it from the perspective of anyone who is not a "market maker" -- someone who intends to hold the stock for more than a minute.
Let's take an example. A company has 1000 shares of stock. 800 are held by long-term investors who all intend to keep them for at least a year as long as nothing drastic happens. 200 are held by short term investors, who each intend to sell them within a short period of time X. The buyers for those 200 shares in turn intend to hold them each for another X period and then sell them again to another short-term investor, and so on indefinitely.
Now let's say that the "true" value of the company will increase by 2 cents/share every period, and everybody knows and expects that. Moreover, the short-term investors demand that profit of 2 cents per share every period at the current stock price, otherwise they'll take their money elsewhere and buy bonds or commodities or something. If there are no "market makers" then every period the short-term investors sell their stock for 2 cents/share more than they bought it for previously. Now enter the market makers. Let's say that for each trade, the market makers take an average of 1 cent/share.
Look at the chain it creates: The prospective buyers in the first period demand a 2c/share profit over the next period; they won't buy the shares for any more than what is necessary to achieve that. They know the market makers will take 1c, so what they demand is a 3c increase in the bid price over the period that they hold the shares. Based on the fundamentals the price will only go up 2c however. No one will pay more than the share is worth at the end of the period, so to create the required difference the immediate share price must go down by 1c.
But wait, there's more: The same dynamic will exist in the next period: The buyer in period two demands a 2c profit, which requires a 3c bid price increase over one period, and the natural value will again only increase 2c. In consequence the bid price for the stock in period two will be reduced by 1c/share. The buyer in period one realizes this, and still demanding a 2c profit, will now bid 2c/share less than due to the market makers -- 1c to cover the market maker's cut on this trade and 1c to cover the amount the next bidder demands to cover the market maker's cut on the next trade. And it goes on like this, driving down the current-day price of the stock because short-term investors are willing to pay less and less for it because the HFT market makers are over time predicted to consume that portion of their expected profits.
Regardless, a long-term investor is looking profit at least an order of magnitude above the cost of liquidity, so none of this should matter to Joe Sixpack and his 401k.
So you're looking at it from the perspective of the long-term investor and saying that it doesn't matter to them because they're going to buy for $N/share and sell for $2N/share, and the penny or two per share shaved off at the back by a market maker doesn't matter one lick to him because it's 0.5% of the profit. The trouble is that most of the buyers on the market at any given time are the short-term investors. Long-term investors go years without buying a share; they are not regularly available as buyers to other long-term investors. So when it comes time for a long-term investor to sell his shares, the value of the shares to the short-term investors is what matters. If the market makers materially decrease the value of the shares to those short term investors, it will correspondingly impact the price at which the long-term
Your link doesn't claim that wealth inequality grew, it claims the income inequality grew (which is true for the US....IIRC within country inequality is mostly growing, worldwide inequality mostly falling). The share of income taken in return on capital (dividends and suchlike) has risen over 10 years in the US, and the share taken by labour has fallen. That can easily happen when, for example, corporate profits are increasing. I can't find an original source, but there's a graph here: http://www.frumforum.com/incredible-shrinking-workers-income
http://www.telegraph.co.uk/technology/news/8753784/The-300m-cable-that-will-save-traders-milliseconds.html
It seems there is a new US-UK cable going in too.
"Of course, verifiable figures are elusive and estimates vary wildly, but it is claimed that a one millisecond advantage could be worth up to $100m (£63m) a year to the bottom line of a large hedge fund."
Is it a problem that traders are buying things they don't actually give two shits about then selling them after creaming off small amounts of money from the system less than a day later? Now they need more low latency cables to help them drive the economy into the ground milliseconds faster.
Regardless of the holding duration, that's a buyer.
This is not a valid premise—the behavior you are describing is more fitting for bonds, or perhaps dividend-bearing stocks (where the $0.02/share is reflected in cash rather than an increase in the worth of the existing shares). In reality, stock prices are very volatile, and trading activity on exchanges serves to give all observers a reasonably clear view of the "consensus" value. Nobody knows the "true" value of a stock, hence the volatility.
Your further analysis basically comes to the conclusion that market makers remove capital from the system, depressing stock prices. Among other things, this ignores the set of participants who lose money on their trades. This could be investors who expect the stock to move up $0.02 but stop-loss out when the stock instead moves down $0.05. Or this could be market makers who expect the stock to hold its price, but stop-loss out when the stock instead moves $0.02 against their current inventory. These "losers" are effectively infusing more capital into the system.
Furthermore, anyone who doesn't want to pay for immediacy doesn't have to. You can submit a limit order for a specific price, and wait for the normal volatility of the market to come to your limit price.
Just to give you an idea about the scale, my armchair analysis is considering participants who buy for $N/share and sell for $N*1.05/share. That sort of target is suitable for speculation on quarterly reports.
Regardless of the holding duration, that's a buyer.
Not if they already have the stock and are deciding when to sell it.
This is not a valid premise
The premise is not required, it is only a simplification to make the explanation easier. Let me put it a different way: Suppose that in the world without market makers, the majority of people would expect it to go up by approximately the specified amount. I am only trying to create a baseline in order to analyze the effects of modifying it.
Your further analysis basically comes to the conclusion that market makers remove capital from the system, depressing stock prices. Among other things, this ignores the set of participants who lose money on their trades.
Unless you are trying to argue that market makers on average have non-positive net profits, I'm not sure what this is supposed to be buying you.
Furthermore, anyone who doesn't want to pay for immediacy doesn't have to. You can submit a limit order for a specific price, and wait for the normal volatility of the market to come to your limit price.
That is something the seller can do regardless of the effect I'm talking about, so I'm not sure how it is relevant.
I apologize for being unclear. What I mean is that your[1] participation strategy in the stock market is to buy stocks, let them appreciate, and then sell them. Your profit when stocks you own appreciate during your holding period. This is in contrast with market makers who profit when stock prices don't change during their holding period.
Your subsequent explanation was based on an assumption of reliable appreciation of a stock. The simplification is too distant from the reality of the stock market for the explanation to remain valid.
I am referring to all participants having a chance to lose. However, you do bring up a good point. The biggest exchanges in the stock market offer rebates for providing liquidity and charge (slightly larger) fees for taking liquidity. In terms of trading, market makers on these exchanges can have net losses and still make a profit because of the rebate. This is the real penny-shaving.
[1] the proverbial "you", not the Anthony Mouse you.
Have you taken your medication today? Obviously not.
Let's explore this "chain of events" then, shall we?
1.) Investors yell @ investments brokers to get them a quarterly dividend OR higher ones
2.) They in turn, go to boards of directors (or create bad press on "poor returns from company X" etc.)
3.) Boards of directors then threaten corporate mgt. to yield higher returns (telling them "you make this happen, or YOU are 'gone-with-the-dawn'").
4.) Mgt. then turns to the EASIEST SINGLE THING THERE IS TO CONTROL, costs-wise: Payrolls (start shaving jobs, or shall I put it the "PC way" - downsizing begins).
5.) The more jobs that get shaved off, the less folks you have with disposable income (monies beyond rent/mortgage, food, utilities (basics needed for survival))
6.) YOU HAVE WHAT YOU HAVE TODAY - global economic recession
* ALL THE WHILE THE RICH GET RICHER, THE MIDDLECLASS ERODES AWAY, & THE MASS OF "POOR" GROWS LARGER... & largely due to THIS VERY PROCESS/CHAIN-OF-EVENTS happening!
APK
P.S.=> This? This is "economic 101" @ a macro (and eventually micro) level... due to GREED, pal!
... apk