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Heat and Humidity Slow Down High-Frequency Trading Due To Microwave Links (hackaday.com)
szczys writes: Even tiny slowdowns have major ramifications on automated stock trading. To put the computing power as close to the markets as possible, microwave links (point-to-point links via dedicated microwave dishes) connect Wall Street to server installations in New Jersey. Hot weather, especially when accompanied by high humidity, slows those links down enough to make an impact on trading. From a report via Hackaday: "For short-haul links around the financial centers in New York, though, dedicated network links are favored for low-latency connections. Rather than trusting their trades to the vagaries of the internet and risk an unfavorable routing path or a cable severed by an errant backhoe, high-frequency trading firms often rely on microwave links to exchange information. [...] As it turns out, those microwave connections are the weak link in the system. During the early July heatwave, the links were experiencing slight delays in transmission times over that 16-mile path and throwing off the timing of the trading algorithms. The delay was minuscule -- on the order of 10 microseconds -- but in a business where millions are made and lost in seconds, that's substantial." Last month, Bloomberg reported that high humidity was impeding radio transmissions among three New Jersey data centers where U.S. stocks trade. According to a note Nasdaq sent customers, it took about 8 microseconds longer to send info from the stock exchange's facility in Carteret to the New York Stock Exchange data center in Mahwah, and an extra 2 microseconds to send data to Cboe Global Markets' exchange in Secaucus.
I doubt it.
Maybe if fewer quants tried to hedge things to change a method for investing capital into a method for legalized gambling, the world would be a better place.
(caveat - some of my cousins work for such firms)
Of course not. By it's nature it's an activity that produces nothing (it's not like a company's going to shut down if someone doesn't buy its stock for that particular tenth of a second), punishes investors (it raises the price for the person who wants to invest in the company but can't afford the millions in infrastructure cost to get a give few seconds advantage), increases the divide between the rich and the poor (see #2), and is a drain on human society.
From a geeky perspective it's a fun idea, though. It's just using technology for pseudo-evil that happens to make you rich.
I missed something. How do high frequency traders rip off the rest of people?
They don't. They provide liquidity and depth to the markets. Those are good things -- they keeps bid-ask spreads small, and provide lots of inventory for both buyers and sellers.
Of course, all of that high-frequency speculation occasionally can result in some rapid swings in the price of stock, but that's not the only reason stocks fluctuate. And HF traders are not ripping off those of us in longer-term positions. If anyone, HF traders are trying to rip off (i.e., outgame) other HF traders.
If it weren't for deadlines, nothing would be late.