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Somebody Stole 7 Milliseconds From the Federal Reserve
An anonymous reader writes "Three to seven milliseconds before the fed moved interest rates, billions of dollars of trades were input that took advantage of the changed rates, reaping huge profits. According to a report at Mother Jones, 'Last Wednesday, the Fed announced that it would not be tapering its bond buying program. This news was released at precisely 2 pm in Washington 'as measured by the national atomic clock.' It takes 7 milliseconds for this information to get to Chicago. However, several huge orders that were based on the Fed's decision were placed on Chicago exchanges 2-3 milliseconds after 2 pm. How did this happen?'"
Can someone explain this to me in idiot? I don't see what the problem is, nor why I should care.
If you don't see a problem, then no amount of idiot will make you care.
...that if the timing is down to milliseconds then the system is broken. It's automatically an unfair playing field tipped towards the largest competitors that have the computing power and programing to operate on that time scale.
Of course nothing about Wall Street is about fairness anymore and usually they don't care about the law, either.
Several large orders betting the other way may have been placed a few milliseconds after 2:00 PM as well. But there is a 'feature' in on-line trading that allows high frequency traders to cancel or abort trades that they claim were made as a result of 'system errors'.
Have gnu, will travel.
That would give away their predictive edge to other traders.
Because then they would get busted for insider trading. This guy set his timers so that he wasn't doing the trade until after it was officially announced, but forgot about the speed of light delay and got busted anyway. Not that the FTC gives a damn about insider trading anyway, it's hilariously and blatantly rampant but they're powerless to do anything about it.
I read the internet for the articles.
If people knew half the shit that Wall Street does they wouldn't like it. I think articles like this actually make it harder to have a productive conversation about the fairness of Wall Street because it makes it seem like this type of abuse is the exception rather than the norm.
There is a revolving door between Wall Street, Corporate board rooms, and the Fed. Not only do people go through that revolving door but so does information, so does hits about what might happen in the markets or what might come out of the Fed. Go watch Wall Street, either one, it's dramatic but its accurate enough for the average person to get a idea of what goes on behind those closed doors.
Lets list the facts:
This type of insider trading is illegal.
The leak that allowed this is a firing offense and also illegal.
Trades were executed in Chicago after the change was announced in Washington D.C. in a classical physics sense.
Trades were executed in Chicago before the change was announced in Washington D.C. in a relativistic physics sense.
What does all that imply?
Someone at the Federal Reserve leaked the information before it was announced.
Someone else wanted to use this information but also not get caught.
That someone doesn't understand relativistic physics.
Light doesn't propagate through fibre as fast as it does through a vacuum.
The information was widely available about 5 minutes in advance:
http://www.zerohedge.com/news/2013-09-24/tip-box-fed-made-it-possible-many-people-leak-it
Someone had the order all queued up, and was waiting for word. He got word of the interest rate move, and keyed in his order, which his computer would execute at 2:00:00:002, forgetting that such an order was impossible without giving away he was cheating by having gotten the announcement early.
Well, yes, yes it would. Did the fed time their release for exactly 2:00 and slave their clocks to the naval observatory (as many modern computer systems do)? Does the financial community know this? The financial community has hyper-accurate knowledge of timing in their own systems as well as exactly how many milliseconds it takes to complete a trade.
Suppose you have information leaked an hour ahead of time. You can't act on it then because it'd be obvious that you had leaked information and you know they're looking for that. So, you have to wait until everybody else has it. But if you wait until everybody else starts to react to the news, your leaked information is worthless.
You also only have an hour to think about what to do, so you can't change your IT system and whatever plan you come up with you have to either act immediately or not. So, you tell your existing IT system that is already capable of hyper-accurate timing to execute a trade just after the announcement.
Later on you realize that everybody has hyper-accurate timing, not just you.
Seriously, I've been contacted by maybe a dozen financial company recruiters who want me to squeeze another quarter millisecond out of their trading network. I'd sooner flip burgers. Millisecond trading is theft. Period. Even when it happens enough milliseconds after receiving information to have broken no law.
Moderating "-1, Disagree" is simple censorship. Have the guts to post your opinion.
Apparently the great minds of the Masters of the Universe aren't familiar with the speed of light. No matter for them though - the head of any major financial institution could rob the president at gunpoint on live TV, and still not be prosecuted for it.
Utah, at the new NSA data center.
Well I will take a crack at it....you see the problem is the current system is designed to allow the parasites, those that have made insane amounts of money by rigging and manipulating the government and the system to keep their elite status by being able to pull shit like this which ordinary folks can't do because they don't have the capital required to "buy in" at the correct facilities to beat the wire.
When i see shit like this, along with both parties seeming not to give a shit about being scene outright kicking the poor when they are down i have to wonder....how much time does the USA really have left? After all as has been pointed out several times the unemployment numbers are bullshit and if you figure in all those that they just magically drop from the rolls we are looking at a good 23%+ unemployment, meanwhile you have the right wing being so damned vicious to the poor you might as well replace the elephant with Monty Burns and then to add the shit icing on the asshole cake you have shit like this which allows the really nasty leeches like Goldman Sachs to make mountains of money off of the American people.
So I have to wonder if this isn't the root cause of why all empires fall, those at the top become so fucking greedy that they tilt the system so damned far out of balance the whole thing collapses. It pretty obvious that in the last 4-5 years or so many in power have stopped caring about the kayfabe of giving a fuck about anyone but the elite, the working poor and unemployed, which outnumber the top 1% by a good 10,000 to 1 (because in reality its more like 0.01% that get a good 70% of the wealth consistently) are just being bombarded with story after story like this where the elite scam billions and the only thing the government does is ask if they want a task break, and the war on poverty by attacking food stamps, medicaid/care, disability, welfare, etc makes it real clear to the poor folks that the elite really want them gone...so is this how it ends? With the poor getting everything taken away until their is nothing to lose and we have own own Arab Spring?
I don't know but I can tell you the flyover states are beginning to look like the depression, small businesses that were here for generations closed and the factories gone so that huge chunks of land are nothing but abandoned buildings, and instead of helping the broke and starving poor those in government seem to be doing everything they can to curbstomp poor folks and take away any benefits they may get. Hell I got a disabled relative that if he isn't able to win against them taking his disability he'll be homeless by Xmas, and I hear similar stories from all my customers, women and kids sleeping in cars because they found a way to take away what pitiful benefits they were getting, tents popping up all over the place because folks got nowhere to live, it makes me wonder if the whole French "let 'em eat cake" situation is repeating here and will end with the same result. The teeming poor have nothing to lose and their ranks grow by the day, its seriously bad here folks.
ACs don't waste your time replying, your posts are never seen by me.
In the U.S. of A. the term "insider trading" applies only to share/stock trading, where it is illegal.
Those not trading stocks - such as commodities, bonds or spot FX need not concern themselves with such nonsense. Trading on material non-public information is perfectly legal in those markets.
Longer version of the story is this
The fed announces the decision at 2 pm (EST). But press people are taken to a safe room ten minutes in advance and told the contents of the Fed release. They have 10 minutes to prepare their brief. Them and the editors are banned from communicating this to the outside world before 2pm.
Probably what happened is that a press guy communicated the announcement with his editor with the understanding that the news will not be released until 2pm. The editor probably spread the news to multiple locations, again with the 2pm restriction. The editor held his side of the agreement, and released it at 2pm (EST) in Chicago.
The news was legally released at 2pm, but just location shifted. They probably did not break the letter of the agreement. Of course, the slobs on Wall Street got creamed, if they were hoping that they could trade faster than Chicago by a millisecond.
This is one rare case in real life where the agreement should have used the relativistic definition of time-space and have the agreement describe the time co-ords for release for each location. But then, since New York is closer to DC than Chicago (an Philly even more so), it would be advantaging some locations more than others.
http://slashdot.org/submission/1062723/Cheap-mobile-data-plan?art_pos=2
Markets are never 100% fair, or 0% fair. So instead of focusing on perfection, we should be focusing on improvement. An obvious way to have made the market more fair in this case would have been to make the announcement after the markets were closed for the day. Another possibility would have been to halt trading for a few minutes before and after the announcement, for the news to settle. I suspect that the person responsible for making the decision to announce in the middle of the trading day was also someone who, directly or indirectly, benefited from the cheating. Cui bono?
If (and only if) the trade occurred before the light-travel time from Washington, then (by special relativity) there exists a reference frame in which the trade occurred before the information was released in Washington.
It would be so fun to see this argument play out in court.
Quattuor res in hoc mundo sanctae sunt: libri, liberi, libertas et liberalitas.
The information was, at the time the trade was executed,
Not in Chicago. Chicago was not in the light cone of the information release at the time that the trades were executed and hence, the information wasn't public. I must admit to being a bit surprised that there is a non empty intersection of relativity and finance law.
But if they had waited those few more milliseconds, they would have been in compliance and yet still most likely beating anyone who had to process the Fed announcement first.
Far more likely, some group created a series of methods for intercepting internal communications (NSA) and passed this information onto another group (CIA) with deep links with major contracting firms (the whole global military industrial complex and it's financiers). Insiders risk getting caught and actually being punished where as, thanks to a whole range political communications interceptions, the other groups will blatantly commit crimes with no fear of prosecution.
Chaos - everything, everywhere, everywhen