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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."
Putting those FTL neutrinos to work, eh? Good job on the time-to-market, guys!
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
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.
I can't wait to get my spam and server bot attacks even faster than before.
That's what EVERY stock market investor tries to do. Every time someone buys a stock, they believe they are taking advantage of whoever is selling it. Every time someone sells a stock, they believe they are taking advantage of whoever is buying it.
In the market, every bit of market research you do, every bit of data you buy, every moment you spend educating yourself, and every dollar/minute you spend analyzing the data is to find someone to take advantage of on the other side of every trade you make.
How is arbitrage any different - it's just a different avenue?
Why is there an "insightful" mod and why isn't it "-1"? If I wanted insight, I wouldn't be reading
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.)