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.'"

Comments

Wow,

[Antony T Curtis]

This is the madness of high-speed trading...

Re:Wow,

[Anonymous Coward]

High speed trading is all about stealing as much money as quickly as possible before anybody else has a chance to do it.

It serves no purpose but to move money from the hands of everyone else to the banks -- the same banks that caused the financial mess in the first place.

I blame this squarely on the American concept of capitalism -- the Republicans and Libertarians will tell you this is how it's supposed to work, because they and their benefactors directly profit from this.

The super rich just skim off the top and bypass the entire 'market' for their own purposes.

And this is why there never has been, and never will be a free market and it can't do what it claims -- because someone will always game the system for their own benefit, and there's nothing to keep them in check. And the big players define the market choices, so there is no actual options for people.

I view HFT as wholesale theft, which is pretty much exactly what it is. Nobody earned anything, they just have a direct hook into the system whereby they can bypass everything and make money before it exists to anybody but them.

Burn Wall Street. Eat the rich.

Re:Wow,

[Anonymous Coward]

At least porn is of arguable value. HFT brings absolutely nothing of value to the table. It doesn't help the traded companies, it doesn't help the market, it doesn't help any country economies. In fact, all it does is give the same hedge fund bozos who trashed the US and EU's economies another way to scarf income without adding anything.

Markets need to have some sanity. Either only allow trades each 15 seconds or tack a very small surcharge per transaction which wouldn't affect normal transactions, but penalize HFT enough to not make it worth the bother.

Re:Wow,

[Anonymous Coward]

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.

Re: Wow,

[smaddox]

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.

Re:Wow,

[vux984]

I agree with you, but go further.

HFT brings absolutely nothing of value to the table. It doesn't help the traded companies, it doesn't help the market, it doesn't help any country economies. In fact, all it does is give the same hedge fund bozos who trashed the US and EU's economies another way to scarf income without adding anything.

HFT isn't merely neutral adding no value; the income they "scarf" is income the rest of the stake holders lose. (To the extent that one can lose something one never got, at least.)

Either only allow trades each 15 seconds

I propose 10 minutes or even longer, and even that's more than fast enough. A company's fundamental value doesn't change 6 times an hour.

10 minutes lets news hit, lets people think and consider what they value the stock at, and even people not day trading for a living can react and put in a trade order without being 100 million trades "too late".

or tack a very small surcharge per transaction which wouldn't affect normal transactions, but penalize HFT enough to not make it worth the bother.

Not just every transaction -- every ORDER. HFT spams millions of orders to probe, guide, bait, etc, most of them never close and are cancelled; within milliseconds of being placed.

Those need to be 'taxed' as well.

Finally eliminate "dark pools". All trades MUST go through regulated markets. There should be no dark pools of unregulated trade.

Re:Wow,

[WheezyJoe]

Burn Wall Street. Eat the rich.

No, tax Wall Street, Tax the rich.

Why? To punish the rich for being rich? To punish Wall Street for making so much money?
No. To control the market, to put a disincentive to trading for trade's sake and locking up capital in the hands of a few until they come to control the market itself.
After the last Great Depression, people realized that Wall Street will always go out of control, eventually. We've forgotten those lessons, and removed the regulations that kept Wall Street boring (it sure wasn't sexy to be a banker in the 70's) and kept capital where it belongs: industry.

Under those old rules, Wall Street made money by performing financial services, and thus sharing in the success of industry, but otherwise sat on the sidelines.

Trading for trading's sake, however, is simply buying low and selling high. No matter how complex the instrument, it all boils down to buy low, sell high. And therein lies the rub; somebody has to lose.

Yep, there has to be a loser. One of the parties in the trade is going to get something that's worth less than they think it is, and the other's going to profit from it. Arbitrage, for example, is where some poor fool is offering more money to buy something than some other poor fool is selling it for. Wall Street swoops in, buys from the one and sells to the other, banks the difference. Free money! Too bad the two fools couldn't have found each other on their own... both paid/received the wrong price.

HFT only facilitates one bank making the deal (getting at the sucker) quicker than another. And the higher the speed, the less thinking the other party has to consider whether the deal is any good or not. Assuming that the first party can think that fast, which they probably can't. But they can't appear to be trading with yesterday's tech, can they? Otherwise, people will consider them out-dated, and target them for a sucker.

Buy low, sell high. I know this stack of Mortgage Backed Securities is worthless, but you haven't heard the news and I'll tell you it's great and you have 15 seconds to make the trade or it's going to someone else. That's right, little fish, take the bait.

Re:Wow,

[fh8734]

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.

Re:Wow,

[Anonymous Coward]

HFT provides liquidity, and liquidity is of the utmost importance to traders.

Liquidity? And efficiency?You actually believe that bullshit? It's not about liquidity, efficiency, market making etc. It's all about transferring money from other people to them.

And that's of utmost importance: http://www.zerohedge.com/news/2013-05-08/jp-morgan-has-zero-trading-losses-first-quarter
When you can do it with zero trading losses day after day it's almost like a tax you impose on everyone else (guess where their money comes from).

If the market is becomes more efficient as you claim why'd would these parasites be raking in big bucks? They'd be raking in smaller and smaller bucks instead. Think about that.

And they get bailouts and transaction rollbacks, trading pauses whenever they screw up big time.

When Joe Sixpack trader screws up, nobody bails him out or rolls back his transactions. And if he outsmarts an algo he risks getting a prison sentence: http://www.computerworlduk.com/news/security/3244186/norwegian-traders-convicted-for-outsmarting-us-stock-broker-algorithm/

Reality is it's about the rich and powerful continuing to transfer wealth from the less rich and less powerful.

Re:Wow,

[defcon-11]

Whatever you think of HFT, this tech sounds awesome and may have other interesting applications.

Re:Wow,

[Anonymous Coward]

The owners of the exchanges see value in it or else they wouldn't bother supporting it.

Of course they see value in it and support it -- they're doing HFT trading too.

All you've identified is that the rich assholes and corporations who run this are all in agreement.

HFT brings no value to the table other than the large financial entities which are profiting from it. It's pulling money out of the market at the expense of everyone else, and for the benefit of the financial institutions. Of course they're fucking well in favor of it, it makes them huge amounts of money they skim off the top.

Dictators see value in dictatorship, because they benefit from it. That doesn't make it better.

Re:Wow,

[cazzazullu]

If you allow trades only every 10 minutes instead of continuous, you will end up with a whole lot of additional problems, and the big players will take advantage of it again anyway. Let me explain.

First of all, the "price" of a security is the price at which the last transaction happened. Normal people like me and you consider this "the price" of that security if we want to buy it. Suppose you want to buy a security at a certain price. You give an order out, buy 10 shares at price X. If a sell order for shares at price X exists, these orders are matched up, and depending on the sizes of the orders, executed partly or completely. These order are public knowledge, and the order books are visible: I can see that there are 1000 shares bid at price X, 900 at X-1, 789 at X-2 etc..., The same for the ask, so many shares at X+1, X+2, and so on.

Several algorithms use this knowledge. If I want to buy a gigantic amount of a given stock at once, I will be forced to buy the 1000 shares that are offered at X, then the next 900 offered at X+1, etc., so I will end up paying way more than X on average. The final price paid will be "the" price of the security after my buying spree, and will be significantly higher than X.

Now how can you make this work with 10 minute trading intervals? Normal people can't find out the current "price", since the last transaction was 10 minutes ago. You could look at the bids and the offers, and their volumes, to get an idea of what the price might be in the next trading slot, but these bids and offers can be made and cancelled within milliseconds. If I bid X, and see an offer for X-1 appear, I can cancel my bid, and bid X-1. It would be stupid otherwise.

HFT firms will still run their algorithms, manipulating these orderbooks to steer the price, and putting in bids in the very last millisecond. It might end up being even more profitable for them, since all the "sheep" that cannot trade so fast, or god forbid, use a keyboard to enter trades, will be fleeced even more: Now you see an order come in, you quickly frontrun it and make one cent of gains (before someone else is able to react). In a 10 minute system, you see order coming in, and have plenty of time to manipulate and steer the price before the orders will be executed.

Re: Wow,

[Anonymous Coward]

High Frequency Traders (HFTs) are not investors, they are market makers. They find a willing buyer and a willing seller, arrange the transaction, and execute the trade.

No, a market maker is an entity willing to buy or sell an issue when others won't. That entity makes or creates a market where one would otherwise not exist.

An entity that matches buyers with sellers is usually called an Exchange. Exchanges usually make their income from a commission paid by the buyer and the seller. The distinction between taking their profit from a commission and from simply keeping the 'spread' is important: if the agreed price is the same for the actual buyer and actual seller, then it probably represents a fair estimate of the actual price, and the participants know how much the exchange costs. If the seller sells for less than the buyer buys, then the fair price remains unknown and both buyer and seller have paid an unknowable fee for the privilege of exchange.

Re: Wow,

[Anonymous Coward]

Just make the tax rate on trades inversely proportional to how you've held the item you're trading.

As time approaches zero, rate approaches 100%.

Re:Wow,

[ShanghaiBill]

And ultimately they ripped me off for less.

This is flat out wrong. Transaction costs have gone down by an order of magnitude since HFT became common. Claiming that HFT increases costs doesn't even make sense. If that were true, why would anyone trade with them?

Re:Wow,

[garyebickford]

This has been argued many times. You have to look at the total picture. The early huge gains from HFT were because it was a new technology, and there was a tech bubble around it (which coincided with some other bubbles, but that's aside the point). Now essentially every significant institution is doing it, and most of the pure-HFT entities are having trouble making any money because the spreads have shrunk ever closer to zero - that is a good thing in general, as it moves the market ever closer to the ideal they talk about in Econ 101 - any new piece of information that comes into the market is quickly incorporated into the pricing, and the 'ringing' that used to occur is damped out quickly by opposing 'traders'.

This has become so effective that, except for unusual events like an announcement about a particular company or market segment or political situation or whatever, nearly all individual stocks (outside penny stocks etc.) follow the macroeconomic situation in parallel.

Even when a big mistake happens, between the opposing algorithms 'covering' each other by buying or selling counter to each other and the various mechanisms put into place to short-circuit sudden anomalies, those anomalies are sorted out within minutes. Back in the old days an anomaly could take hours, days, weeks or years to get fixed.

HFT (and related tech) also makes it possible for Schwab, for example, to allow you to buy, sell or hold 153.73215 shares of a stock, because your 'trade' is nearly always executed solely within the Schwab computer system and never sees the real market - the Schwab computer system bundles your virtual trade with others to drive their HFT algorithm to actually buy or sell as required.

TL;DR - HFT just makes the approximation of the market to the macroeconomic situation less digital, closer to the 'true' analog state, and makes it easier for everyone to participate.

Re:Wow,

[vux984]

No, your methods all assume things that would not be true.

There would be no placing and cancelling orders in milliseconds. The market resolution is 10 minutes. There would be a fee for placing an order, and once placed it would not be cancel-able until after the next interval because THAT is the market resolution.

The orders go into the black box at the exchange, and every 10 minutes they get matched.

The order depth on bid/ask etc would just be what's still in the queue that didn't execute 10 minutes ago. And that's still going to give you a very good idea what the price is. Like a thinly traded OTC for example... where bid and ask are usually within a nickle until someone comes in and either buys at the ask or sells at the bid.)

Think of it as the "clock" only ticks every 10 minutes; there is no "real-time" game taking place between the 10 minutes. *Nobody* gets information faster than once every 10 minutes. There is nothing to 'game' in the interval because there's NOTHING to see in the interval; nothing happens. You are between ticks of the clock.

Re: Wow,

[alexander_686]

No, a market maker is an entity willing to buy or sell an issue when others won't. That entity makes or creates a market where one would otherwise not exist

You are half right. It is a exchange helps match buyers and sells – it creates the market. It seems that you are assuming that the buyer and seller are at the market at the same time which they rarely are. A Market Maker (who is usually not part of the exchange) solves the time issue – having an inventory of stock that they buy and sell. Even Aristotle recognized the virtue of middle men. Why should a farmer wait all day in the market waiting for a buyer for their goat? They have better things to do. Sell to a middle man.

A good market should have both breadth and depth. That is lots of people on both sides of the trade (breadth) even during extreme price swings (depth)

Over the past 20 years the explicit costs have fallen by 90% thanks to spread compression. What is more impressive is that implicit costs have fallen by more than 60%. The breadth of the market has greatly expanded.

If you want to hurl a criticism at HFT you might get away with depth. There were times during the financial crisis that HFT were losing money so they just turned off their computers. Traditional market makers would always have to make a market. Of course they were guaranteed a $.125 profit on every trade they made .

Re: Wow,

[tolkienfan]

If you had it your way, how long would I be forced into holding into a declining stock?

Re: Wow,

[tolkienfan]

Would you prefer a system where you can only buy from and sell to the original issuing company? And then only make money if they pay dividends, or if they choose to buy back and at a higher price?
I personally prefer to be able to sell my share to whomever I choose. It doesn't hurt the company if I sell to a third party. Plus a company might get more initial investment if the investors know they can sell if they need to mitigate risk.

What a waste

[stewsters]

These people could be used to develop more efficient hardware for everyone to use, or fix medical conditions, rather than make rich traders even richer at the expense of another economic collapse. It seems wrong that our economy prioritizes high frequency trading so much.

Re:What a waste

[larry bagina]

You could be used to develop more efficient hardware for everyone to use, or fix medical conditions, rather than posting on slashdot.

Re:What a waste

[internerdj]

Apparently they make life possible because they move capital where it is needs to be, and deserve the medal of honor for what they graciously give the rest of us. http://finance.yahoo.com/blogs/daily-ticker/99-owe-debt-gratitude-1-harry-binswanger-153327379.html

Re:What a waste

[Anonymous Coward]

They have. See https://en.wikipedia.org/wiki/Alphamosaic for their previous jobs. Also, 3rd generation of their chips is in the Raspberry Pi, as the CPU.

Re:What a waste

[Urza9814]

High frequency trading isn't investment, it's gambling. It's hard to do any "meaningful economic activity" when the amount of money you have to do it with changes every couple milliseconds....

Investments are long-term. Investments are saying 'here's some money, you go build X and give me Y% of your profits'. That's an investment. And you don't need millisecond speed trades and specialized FPGA NICs if you're leaving your money there long enough for R&D, marketing, and sales. Investments last months or years, not minutes or milliseconds.

Re:What a waste

[curunir]

That room full of insightful, creative people gets their money from venture capitalists/angel investors. The only role the stock market has is making it easier for venture capitalists to exit from successful investments. Without the stock market, there could still be investment made in early stage companies, but investors would have be more discerning about what they invest in because they'd have to make their money back through company stock buy backs, dividends or acquisitions.

The way that investment happens would most certainly change but, in some ways, it would change for the better. There would be far fewer photo-sharing apps and other such nonsense that really doesn't need to exist. And I'm still not convinced that tying our retirement savings accounts (401(k), IRA, etc) to the stock market is such a good thing. The stock market continues to go up and up, in part, because of the millions that flow into it each month from workers saving for retirement. This has a Ponzi-ish feel to it...in the same way that Social Security will run into problems when the baby boomers retire, the market will also start to decline as withdrawals from retirement accounts outpace contributions. The whole thing feels like a Social Security that Wall St gets to skim large amounts of money off of.

The stock market is A mechanism for investment. It's not the ONLY mechanism. We should be able to separate stock market criticisms from the ad absurdum argument against all investment.

Re:What a waste

[GameboyRMH]

So thank goodness their moneyed overlords are willing to lend some of the cash made on the backs of such creative people, so that the creative insightful people can do more work and give the lion's share back to the moneyed overlords. It's a good thing we have a dynastic class of people controlling all the capital.

Re:What a waste

[internerdj]

Well I'm not sure how I would have modded my own post but funny isn't exactly the reaction that I had to the article.

Re:What a waste

[defcon-11]

HFT algos aren't making bets on equity price movements. They're usually using sophisticated methods of finding and exploiting arbitrage opportunities.

Re:What a waste

[Mr. Slippery]

Effective allocation of capital is absolutely critical to an efficient economy.

This has nothing to do with effective allocation of capital; the effective allocation of capital does not change on a millisecond-by-millisecond basis.

It is a sine qua non of free societies. It is why centrally planned economies don't work in competition with market economies.

During WWII, the U.S. economy was, in effect, centrally planned -- government spending hit a peak of over 50% of GDP. A centrally planned economy beat the Nazis and developed atomic weapons. And a centrally planned economy, the USSR, took a peasant nation and made it into a global superpower that won the space race. I'm not a fan of planned economies but it's not nearly as simple as you make it out to be

Labor and creativity are important too, but they don't turn into meaningful economic activity without capital.

Only because we have a system where labor (which includes creativity, intellectual labor is labor too (one of Marx's bigger blunders was neglecting that)) doesn't get access to capital without allowing capitalists their parasitic share. We can have capital without capitalists; we can't have labor without laborers.

Next step : superluminic packet

[aepervius]

So that you can send your order before even the price quotation comes. Oh , wait, those guy already can do that and send packet back in time : http://news.slashdot.org/story/13/09/25/1955220/somebody-stole-7-milliseconds-from-the-federal-reserve /sarcasm

Re:Next step : superluminic packet

[Anonymous Coward]

Neutrinos exist.

Re:Next step : superluminic packet

[SuricouRaven]

Because there is more than one exchange. New York, London and Tokyo run the big ones. If you can get faster inter-exchange communication than anyone else, you can exploit the small differences in prices between them.

eg: Someone buys a ton of stock in Widgets, Inc in New York. This causes the price of that stock to suddenly rise, in a matter of miliseconds. Information reporting this is sent out as fast as the fiber will carry it towards London. Meanwhile, your sneaky neutrino communicator sends out the news too to your London end. Upon arrival, your neutrinos arrive a few miliseconds ahead - that gives your London trader enough time to buy as much Widgets, Inc stock as possible. Miliseconds later the news of that big purchase arrives for everyone else, and the stock prices surges in London too - at which point you sell, and pocket your profits.

So much innovation for so little value

[hirschma]

Things like high frequency trading make me want to vom. Essentially, all they're doing is shuffling money around, taking advantage of an outdated system, and increasing risk for the entire world.

It'd be great to see this kind of innovation in something that actually is useful and valuable - not for creating an incremental improvement on a corrupt system.

Re:So much innovation for so little value

[KiloByte]

Essentially, all they're doing is shuffling money around.

More exactly: they're shuffling money from our accounts to theirs. If your bank has any securities involved with the stock exchange, it is your money that is getting nicked here. A zero-sum game requires that besides a winner there must be a loser.

Re:So much innovation for so little value

[HornWumpus]

The big loser is the trading clearinghouse/broker. Bid/ask spreads are about 1% of what they used to be.

The other big losers are speculators (as opposed to investors, look up the difference).

I see no problem with this except when the HFtraders are able to say: 'Our bad, back out all those losing trades for us'. That's just fucked.

Re:So much innovation for so little value

[AmiMoJo]

Just wait until someone figures out how to write an exploit targeting HF trading systems. Within milliseconds they could execute the biggest cyber attack in history and crash the economy of an entire country. They could even interlock it with trades from other countries just to make un-picking all the damage nearly impossible.

Of course it might just happen that way due to a genuine bug in one of the systems. Would be hard to tell which it was from a distance.

Re:So much innovation for so little value

[green is the enemy]

I think most non-finance people who read a little about high-frequency trading systems are repulsed by the concept. Can someone point out a useful economic function for them?

One the one hand they dramatically reduce the bid-ask spread for low-volume trades. But is that really all that economically beneficial?

On the other hand, they prey on large trades that mutual funds must place to rebalance their holdings. This probably hurts the average investor quite a lot.

Some claim that they increase liquidity and reduce volatility. Is that really so?

Re:So much innovation for so little value

[lewkor]

I fail to see what possible connection this has to reality. I could dig up my old economics text book and trot out my old economics theory, but I don't have to. What possible change of the value of a good or service can take place in time scales of less than a milisecond? Computer trading systems are a fraud perpetrated by people that have a severe need of a reality check!!!

As the parent post alluded to all this serves is to make a dynamic system less stable. If the actions super rich (who else uses these devices) people didn't affect the likes of the rest of us I wouldn't care if they wanted to play these games! However, their nonsense like trading in derivatives have put the whole world monetary system in jeopardy!!!

Further, if like me you believe in the conspiracy theories of history (and if you don't then you are ignoring that conspiracies are ubiquitous in history), this may be the goal of the elites - to bring down the current ponzi scheme (the federal reserve system) so that they can reap the benefits of using the collapse to obtain real assets from the rest of us and put in place another fiat currency that lasts for another hundred years before they collapse that one too!!!

Re:So much innovation for so little value

[GameboyRMH]

This would be really hard to do. Similar things have happened by accident, at least within a single stock exchange, and the trades are simply rolled back.

Re:So much innovation for so little value

[dunkelfalke]

Arbitrage is just another form of speculation, and while it may help price stability, it may just as well help to price volatility and needlessly high prices. Which, when we talk about food, actively kills people.

And before you dismiss that as not fitting into your worldview, consider that what I have written comes from the internal papers of Deutsche Bank Research [1] [2] which was big news here in Germany a while ago.

Fuck off and die

[Anonymous Coward]

Fucking parasites (and their toolmakers).

Your Start Trek reference

[Anonymous Coward]

Makes no sense.

Older idea than you might think

[Anonymous Coward]

I have a friend who works in the defense industry but interviewed with HFT firms around 3 years ago. My friend also had this idea, and discussed it with me since I am close to the industry.

If an industry outsider like my friend had this idea within a week or two of merely interviewing for jobs, it is a good bet many others had already conceived it and even gotten it working before that.

Re: Huh?

[Anonymous Coward]

No, this is arbitrage. Taking advantage of price differences within or between markets.

Out, Out, Damned Glitch

[b4upoo]

Just think of the expenses that could be involved if one of these programs screws up. Instead of sell! sell! sell! One could buy! buy! buy! the wrong stock in very large quantities. Instead of a billion dollars in buggy whips one might end up with a billion dollars in donkey whips. What a bummer.

Re:Out, Out, Damned Glitch

[Minwee]

Just think of the expenses that could be involved if one of these programs screws up.

This has already happened. The screw-ups in question lost over $400,000,000 in half an hour.

Don't understand

[XanC]

What is with the vitriol here? Why should buyers and sellers not be able to come together to make a transaction at any time that they like?

Re:Don't understand

[GameboyRMH]

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.

Most tenuous link ever?

[wonkey_monkey]

In The Undiscovered Country they modified a torpedo to home in on gas emissions from a Klingon Bird of Prey. This is a story about building trading algorithms into an ethernet switch.

Apart from "needing to do something quickly," I really, really can't see the connection.

Re: Huh?

[Minwee]

now I wouldn't have a problem with it if it was accessible to everyone, for example if anyone could buy machine time from vm's that were all given the information at the same time(artificially arranged, wouldn't work otherwise!) at the stock exchange.

Sure you would. You might not think so, but suppose that the exchange set up a perfectly equitable system in which identically configured were made available to every firm and provided with identical market feeds all perfectly synchronized so that no single trading VM has any advantage over any other.

I would give that system about three hours of run time before you discover that:

• - Your competitor has just acquired seventeen different vms through deals with other firms and is using them to dominate the market, pushing out firms using only one or two vms,
• - Your market feed is being saturated with bogus bids and offers which reduce your ability to see real market data, but somehow one of your competitors is able to filter it all out and trade ahead of you,
• - Other VMs on the same host as yours suddenly start running at 100% of their CPU and I/O capacity, causing slowdowns for you, and
• - A mysterious and completely untraceable hardware fault causes all vms except for the first seven to experience periods of unexplained latency at key times during the day.

Just look at the tricks that players in the game are already using, and ask yourself how changing the rules is going to stop them.

Who Stole 7 Milliseconds From the Federal Reserve?

[transporter_ii]

I think we just found our culprit.

Re:HFT can easily be stopped

[Minwee]

Okay, I am holding 500 shares of ABCD. At 10:01:32.0512 I buy 500 more shares at 10.12. At 10.01:32.7691 I sell the original 500 shares at 10.13, but am still holding on to the new 500 I just bought. Have I just broken your simple rule?

I have? Then how about this: Firm A buys, and then firm B sells the same thing less than a second later. X hours after the original buy, Firm A sells the same stocks to firm B. While both firms are owned and run by different people, they share the same address and make a large number of trades with one another. Are either of these firms breaking your rule which easily stops HFT?

Concepts are easy. Making rules is hard, especially for a game which is played by the biggest rules-lawyering munchkins on the planet.

"free" market solution

[Thud457]

tax every transaction.
Also tax rolled back oops, my bot "ran amok" transactions. Also track these and send the history to our regulatory watchdogs who, supposedly, will take an interest in the chicanery of anyone abusing this "feature" of the markets. Or just don't allow them to be undone in the first place. caveat emptor, bitches.

Re:"free" market solution

[Raul654]

"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/

Re:"free" market solution

[ShanghaiBill]

Uh, then how are they making money?

They make money because their transactions costs are lower. Their transaction costs are lower because their risk is lower. Their risk is lower because they are holding the stock for a very short period of time. If the "hold time" is increased through legislation, the risk goes up, and the transaction costs go up.

Rewards

[Spazmania]

We need to stop rewarding folks for high-speed trading. It basically steals money from the folks genuinely invested in the companies whose stock is traded and adds no value to the system at all.

Re: buy buy sell buy buy sell sell jump.

[jd2112]

if (likelihood-of-getting-caught == high)
{throw (EXCEPTION_POSSIBLE_ILLEGAL_TRADE)}
else {SetCompliance (IGNORE_ILLEGAL_TRADES)}

simple life

[Tom]

Some things in life are simple:

Almost everyone agrees that HFT is evil.

Nothing is being done about it.

How can both of these things be true at the same time without revealing a serious, dangerous flaw in our political and economic system?