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Undiscovered Country of HFT: FPGA JIT Ethernet Packet Assembly
michaelmalak writes "In a technique that reminds me of the just-in-time torpedo engineering of Star Trek VI: The Undiscovered Country, a company called Argon Design has "developed a high performance trading system" that puts an FPGA — and FPGA-based trading algorithms — right in the Ethernet switch. And it isn't just to cut down on switch/computer latency — they actually start assembling and sending out the start of an Ethernet packet simultaneously with receiving and decoding incoming price quotation Ethernet packets, and decide on the fly what to put in the outgoing buy/sell Ethernet packet. They call these techniques 'inline parsing' and 'pre-emption.'"
That's right!
I understand that none of the Democrats will have anything to do with WallStreet.
Heck, not a single one of them owns any stocks from what I hear.
Neutrinos exist.
Why only 15 seconds? Why not 24 hours? What reason, other than gaming the system, could there ever be to hold a stock for less than 24 hours? I don't understand why this wasn't made illegal 30 years ago... Well, I do - the people making the laws are the people profiting from them - but the reason is not a good one.
Exactly. Say there's a classified site that you can only load once per minute due to bandwidth restrictions (being a human). I post "Bicycle for sale $500" and another guy posts "wanted: bicycle, $600 or less."
But there are some guys who can reload the page faster because they've bought a very expensive premium service from the classified site. Not a very fair site is it?
One of them sees the two ads, buys my bicycle, and posts "Bicycle for sale $599" before any non-premium members can see what's going on.
Who did that help except for the guy with the premium service? I didn't make more. The guy who wanted a bike just got screwed out of $99.
"When information is power, privacy is freedom" - Jah-Wren Ryel
HFT provides liquidity, and liquidity is of the utmost importance to traders.
HFT is very misunderstood by people who don't participate in or understand trading. HFT in fact adds tremendous value to all market participants by dramatically increasing market efficiency with the significant proportion of trading volume it's responsible for.
When you trade a security, there are actually two prices: the bid price and the ask price. When you buy, you pay the ask price; when you sell, you receive the bid price. The ask price is always higher than the bid price, with the market makers keeping the difference. This means that if you buy a stock and immediately sell it, you lose this difference--this is known as slippage. When there aren't many trades occurring, these prices widen out, and the high degree of slippage makes trading profitably much more difficult. With markets as efficient as they are now, which is largely due to HFT, these spreads are often a single penny wide. Before HFT, these spreads were often ten, twenty, or more times as wide.
Anytime you want to buy or sell something, it's highly desirable to have a line of people willing to make you an offer. High frequency traders are these people. It doesn't matter why they want to take the other side of your trade. All that matters is they are there enabling you to make trades more easily and at better prices.
Getting rid of HFT would be like going back to the dark ages when everyone was being ripped off by market makers.
HFT algos aren't making bets on equity price movements. They're usually using sophisticated methods of finding and exploiting arbitrage opportunities.
"Because the effect of that would be to push even more transactions into unregulated "dark pools". Why do you believe that HFT is harmful? Do you have any evidence, other than fear of something you don't understand?"
Yes - (1) HFT has the potential to cause extreme volatility swings. (2) HFT essentially introduces a tax on every other buyer and seller in the market (because it actually widens the difference between the post and the offer).
On point #2, I'll just leave this here: http://qz.com/95088/high-frequency-trading-is-bad-for-normal-investors-researchers-say/
To make laws that man cannot, and will not obey, serves to bring all law into contempt.
--E.C. Stanton