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NJ Server Farms Remake the US Financial Markets

Soulskill posted more than 3 years ago | from the flops-to-dollars dept.

Businesses 216

1sockchuck writes "The engine of Wall Street has shifted from the stock exchange floor to data centers in New Jersey, where computer-driven trading now accounts for 56 percent of all trading activity, according to the New York Times. 'While this Tron landscape is dominated by the titans of Wall Street, it affects nearly everyone who owns shares of stock or mutual funds, or who has a stake in a pension fund or works for a public company,' the Times writes. 'For better or for worse, part of your wealth, your livelihood, is throbbing through these wires.' There are also photos of the data centers powering the high-speed trading operations, while 60 Minutes has video of a huge new 'liquidity center' run by the NYSE."

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216 comments

Throbbing money (0)

Anonymous Coward | more than 3 years ago | (#34748026)

'For better or for worse, part of your wealth, your livelihood, is throbbing through these wires.'

Can pennies throb?

Re:Throbbing money (3, Informative)

migla (1099771) | more than 3 years ago | (#34748150)

>Can pennies throb?

Sure. It's a widely used idiom, popular in phrases such as "The sweaty lumberjack lustfully thrust his throbbing pennies deep into the moist slot of the pink piggy-bank."

Re:Throbbing money (0)

Anonymous Coward | more than 3 years ago | (#34748214)

Apparently those wires are actually penises. They are probably about as thin as CmdrTaco's micropeen as well.

short term skimming (4, Insightful)

FuckingNickName (1362625) | more than 3 years ago | (#34748032)

And nothing of value was gained.

Re:short term skimming (2, Insightful)

purpledinoz (573045) | more than 3 years ago | (#34748240)

Exactly. Goldman Sachs and JP Morgan earn a huge chunk of their profit from high-frequency trading. This profit must come at an expense of someone else (like regular stock holders). In my mind, this is legal theft.

Re:short term skimming (1)

certron (57841) | more than 3 years ago | (#34748306)

This is why the markets creep up on almost no volume and everyone wonders why stocks drop so quickly when someone sells a large enough block of stocks. These programs are the reason for the 'flash crash' and not the ridiculous 'typo by a trader' explanation. The argument of 'providing liquidity' doesn't really seem like it has that much value for a normal investor. It's robots all the way down!

Re:short term skimming (2)

Yvanhoe (564877) | more than 3 years ago | (#34748696)

Indeed. Actually, making the market trade with a period of one day, and randomizing the priority of orders arriving would sanitize a lot of things.
I have yet to see a good argument against that. I mean one that doesn't say things like "pschhh, you know nothing about economy, let us manage this thing". Sorry guys. We paid for your dumb errors in the subprime crisis, so now that you are creating speculation on yet another imaginary value (physical closeness to the servers of the stock exchange ? Really ? Changes in the value of a company on the millisecond scale ? Are you serious ? ) you better show your whole scheme.

Re:short term skimming (1)

Sponge Bath (413667) | more than 3 years ago | (#34748726)

I would guess most of the profit comes from people on the losing side of a high-frequency trade. Buy and hold investors should be largely immune from short term churn.

Re:short term skimming (1)

0100010001010011 (652467) | more than 3 years ago | (#34749060)

With NTP, why don't they offer 2 buys/sells a minute? That lets everyone look at something, decide if they want to buy or sell, and it stops all this instatrading from happening.

On top of that, it seems that this lightning fast trading works great and they're happy if they're making money. If something cascades into failure (like it did earlier last year, or was it '09?) then they just say 'oops, do over'. Meanwhile some people were caught up that were cashing out their pensions or transferring funds between accounts.

I mean, they wouldn't make as much, but it'd be fair to the common person.
-
OR, the other suggestion that I saw would be to tax trades inversely proportional to how long they're held.
1 minute: 90%
1 hour: 80% .. .. .. ..
20 years: 5%
40 years: 1% (people that actually it as investment).

Re:short term skimming (1)

jonbryce (703250) | more than 3 years ago | (#34749220)

Because high volume traders could use any changes in that 500ms to make arbitrage profits when they decide to say yes or no.

Re:short term skimming (2, Insightful)

raw-sewage (679226) | more than 3 years ago | (#34749078)

Exactly. Goldman Sachs and JP Morgan earn a huge chunk of their profit from high-frequency trading. This profit must come at an expense of someone else (like regular stock holders). In my mind, this is legal theft.

I see this mantra repeated often around here, but I'm not so sure it's entirely true. First, what is a "regular stock holder"? On one end, there are small-time, buy-and-hold investors such as myself; on the other end, there are big institutional investors who manage massive portfolios for pension funds, insurance companies, mutual funds, etc. And there's everything in between. From one end of the spectrum to the next, you have very different trading profiles, and thus are affected very differently by high-frequency trading.

For someone like myself, I make maybe a few dozen (relatively) small buys per year. These buys are usually in the neighborhood of 100 shares. If a high-frequency trading program jumps in and effectively front-runs me to to make a few pennies, I don't really care. Overpaying by a penny or two per share means nothing given my buy and hold (long term) strategy. I'm already out $9.99 per trade in commissions to my broker. I'm looking at a horizon of at least ten years, when these relatively small additional costs shouldn't matter.

On the other end of the spectrum is the big institutional investor, like the pension- or mutual-fund manager. This person's job is to constantly rebalance the portfolio to meet some pre-defined metrics; he's generally actively trading huge amounts on a daily basis. While he certainly wants to get the best price possible when he trades, it's practically impossible for him to do that given the volumes in which he deals. Unless he has a highly specialized trading algorithm---that is, something just as sophisticated as the high-frequency traders---he can't help but signal his intentions to the market. Telegraphing his intentions is what makes him a "victim" of the high-frequency traders.

I'm not a fund manager, but my assumption is that, like me and my small buy-and-hold strategy, he also doesn't care about having a small percentage skimmed off of each transaction. To me, it's like buying a big-ticket item, such as a car. Say you budget $27k to buy yourself a new car. Now, some enterprising company goes out and manages a massive, real-time database of every car available for sale in the country. This company can use this database to find you the exact car you want, right now for $27,250. If you're willing to spend $27k, do you really care if you pay an extra $250? And for that $250, you get precisely what you want, and don't have to wait. Compared to going to a dealer, who, if you're lucky, might have what you want at your price... but chances are, the dealer will have something close to what you want, and you'll have to negotiate the price. Or maybe the dealer can get you exactly what you want, but you'll have to wait while he works the intra-dealer process to provision the car. Or maybe he can get you exactly what you want, for even less than $27k, but you'll have to wait for the car to be manufactured. A car buyer can face all these scenarios, but I believe the fund manager most closely mimics the first: that is, he knows exactly what he wants, and he wants it right now.

My prediction is that we'll see the high-frequency trading landscape continue to evolve. Like anything, there will come a day when that kind of business and the skills required to do it are commoditized. And when it reaches that point, it will be much less lucrative. I think we'll see traders of all profiles using ideas and techniques from the high-frequency world in their own trading, meaning that the very people high-frequency traders take from will become direct competitors. The small-time trader like me will implicitly use such techniques, though they will be invisible, as it will actually be implemented by my discount broker (perhaps they'll offer me the BestPrice(tm) service, which just uses high-frequency methods to get me a better price). The big institutional investor will build out his own algorithmic trading system with better "stealth" tactics, and also competes directly with the high-frequency types. I think we are heading towards a truly automated financial landscape. The "market" will consist of a bunch of little competing programs, and we'll see near-100% of all trades being not just electronic, but initiated by an algorithm rather than a human.

The ethics of all this I think is the same as with all technology. In the USA, doctors usually have high salaries. Even mediocre doctors probably fall into the "upper middle class" category, and some exceptional and specialist docs trickle into the "wealthy" category. And I think most folks would agree that an honest doctor's benefit to society is fairly tangible---they're helping you and your loved ones stay healthy. So perhaps they deserve their big paychecks. I also think conventional wisdom holds that jobs like nurse and teacher have tangible benefits to our society, though these are typically "middle class" or even "living wage" positions. But if you can consistently detect a mis-priced asset, or a major market move, and express this as a computer program, you'll find yourself securely grounded in the "very wealthy" class. But where's the tangible benefit to society?

Sometimes I take the socialist viewpoint that this is a major failing of capitalism: wealth isn't distributed according to benefit to society. Of course "benefit to society" is subjective, but our current system says detecting mis-priced asset is more valuable than saving a human life. On the other hand, perhaps that asset mis-price detection is truly more valuable than saving a life, we just don't yet have the ability to demonstrate it.

But ultimately, I think it's just human nature. Whenever there's a technology revolution in any industry, we always see questions of "is it too soon to use this?" For example, vaccines in medicine. As someone expecting his first child any day now, I found that there's a huge body of conflicting information (some of it downright scary) regarding infant vaccination. Just like with high-frequency trading, it seems to be a very polarizing topic, with staunch opinions on either side. I find that in situations like this, the truth is usually somewhere in the middle. And I like to think that my take on high-frequency trading is the middle ground---that it's ultimately neither good nor bad for markets, or even the economy as a whole. There's a lot of money to be made in it while it remains a fad. But as the techniques mature and become commoditized, it will be less glamorous and likewise less controversial. Human history is filled with stories of people making fortunes by being early adopters and implementers of technology. I'm not sure mankind has ever seen a new technology that didn't have a silver lining. Algorithmic finance falls into the same category---great for some, but others see the warts. When high-frequency trading as an industry matures---when finance is overwhelmingly algorithmically driven---it will be the "norm" and the warts will have smoothed over someone or at least accepted.

Common View, Common Error (4, Interesting)

istartedi (132515) | more than 3 years ago | (#34748402)

If you can find a way to reduce bid-ask spreads without this kind of stuff, then I'll agree. Until then, I can't join the chorus of detractors.

With liquidity in the market, anyone who buys stock gets a narrow spread. Take liquidity out of the market, and you send us back to the dark days when stocks would trade at $1/8th spreads if you were lucky. $1/4 was common. Not only did you pay higher commissions, you paid the spread.

Unless you're pining for the days when you called your broker, paid him a percentage of the trade, and he placed your order in a market with a huge spread then you should be thanking the liquidity providers, not bashing them.

The current system doesn't hurt the little guy. The old system made it so the little guy wouldn't even think about it. I know, because I came of age when the old system was still in place for a few years. Buying in with a $1/4 spread on something trading for $10-$20, and then waiting for a significant percentage gain just to cover the spread??? No thank-you. HFTs? I LOVE them.

Re:Common View, Common Error (0)

DeadCatX2 (950953) | more than 3 years ago | (#34748488)

That's not how I read HFT. It sounds like skimming to me. Perhaps you could provide more details so I can understand what exactly you mean by "bid-ask spread", and how exactly HFT lowers it by holding onto stocks for a few hundred milliseconds.

Short selling, yeah, I can see how short selling can be useful for instigating corrections to over-valued stocks. But HFT? Seems a lot like "I can buy big, fast computers and a high-speed connection to the stock exchange, so I get to squeeze some value out of the stocks just before you buy them."

Re:Common View, Common Error (4, Insightful)

e065c8515d206cb0e190 (1785896) | more than 3 years ago | (#34748578)

No offense, but if you need a definition of bid-ask spread, you need to learn the basics before criticizing HFTs.

Re:Common View, Common Error (0)

DeadCatX2 (950953) | more than 3 years ago | (#34748684)

No offense, but if you had given me a real answer, perhaps I might have learned something.

Re:Common View, Common Error (-1)

Anonymous Coward | more than 3 years ago | (#34749112)

No offense, but your actions are not deserving of that much respect. You shot off your mouth when you had exactly zero understanding.

Ill informed people spouting off at the mouth is one of the greatest threats to human survival that we face as a species.

Re:Common View, Common Error (1)

Anonymous Coward | more than 3 years ago | (#34748868)

Perhaps you're just naive enough to be convinced you should be happy that now you can mostly avoid paying the fees for placing limit orders?

Or perhaps you're a would-be day trader who got tired of having to hold a stock long enough for it to rise more than 2.5% (your hypothetical $1/4 spread on a stock trading for $10)?

HFT never got rid of spreads, it only made them appear gone by advertising artificial** prices and guaranteeing that the true spread difference always goes into the pockets of the folks who run the HFT systems. Before HFT you could pick up profit from the spread at least part of the time.

** its "economic theater" of much the same spirit as the US Govt's revised inflation calculations made it appear that inflation is super-low by artificially removing the most-inflationary items from the CPI. Did you notice the recent announcements that China is having trouble with inflation? Did you read the details and see that the specific items that caused China's inflation numbers to pop higher than desired are the same specific items (housing, heat/transportation fuel) that the US Govt started excluding from its inflation numbers a few years back?

Re:Common View, Common Error (1)

Anonymous Coward | more than 3 years ago | (#34748676)

That's not how I read HFT. It sounds like skimming to me. Perhaps you could provide more details so I can understand what exactly you mean by "bid-ask spread"

If you don't know what "bid ask spread" means, your read on HFT is worse than valueless- any proposal you make is far more likely to cause harm than good.

To put it another way, should we take computer advice from someone who asks "what do you mean by CPU?" (Yes- "bid ask spread" is that basic a concept).

Re:Common View, Common Error (3, Interesting)

istartedi (132515) | more than 3 years ago | (#34748728)

Perhaps you could provide more details so I can understand what exactly you mean by "bid-ask spread", and how exactly HFT lowers it by holding onto stocks for a few hundred milliseconds.

OK, let's say there's a hypothetical security X.

X BID 45 @$0.50 ASK 10 @$0.70

If you want to buy security X, you could try bumping up the bid to $0.55 and see if anybody will temporarily lower their ask that far.

The market for security X has terrible liquidity.

Now let's say somebody looks at this, and sees the awful liquidity. They say, hey, the market-makers suck. Let's do something better. They start "scalping" security X. They place bids at $0.55, then immediately flip for $0.65.

Now the market for security X has better liquidity. Somebody interested in X might be more inclined to buy, knowing that it doesn't have to rise too far before they can reasonably cover the spread.

The market-maker just bested the previous market maker. Market-maker A is shut out.... unless he can narrow the spread even further.

Now, the market-maker doesn't actually want to speculate in X if he can avoid it. It's in their interest to hold for as short a time as possible, and to make all their money off scalping or "skimming" as you call it. Without some kind of market-maker, the spreads are wider. You can hate the market-maker if you like; but try finding a better way to narrow spreads? I haven't heard of it.

That's how it works, in a nutshell. I'm glossing over a lot of detail, such as rebates and the different ETNs, and a lot of other stuff.

Note, I'm not belonging to an HFT religion. I'm just seeing it as "the worst system except for all the others". I don't believe in just turning these guys loose without regulation or oversight.

You asked for an explanation of how this stuff works, and I've given you my best understanding of it. I don't hold myself out as an expert. I'm just somebody who has been trading a bit, and watching markets since my teens...

Re:Common View, Common Error (1)

DeadCatX2 (950953) | more than 3 years ago | (#34749134)

Thanks for the example; I hope you are rewarded by being modded up. You may not be an expert, but I'm not even an amateur, so at least I can digest your example.

Reducing the spread increases liquidity...check. What about stocks that pay dividends; you're supposed to hold on to them long-term, so does a narrow spread benefit those stocks at all?

Re:Common View, Common Error (1)

iluvcapra (782887) | more than 3 years ago | (#34748604)

To me a wide bid-ask spread is a small price to pay if the alternative is brokers using their access to the market information in order to extract rents from people who don't have such good information.

Re:Common View, Common Error (1)

diegocg (1680514) | more than 3 years ago | (#34748712)

The old system made it so the little guy wouldn't even think about it.

In contrast, with the new system you allow big boys to squeeze out your money just to get the illusion that the spreads don't exist.

Re:Common View, Common Error (2)

istartedi (132515) | more than 3 years ago | (#34748880)

That's a compelling argument.

Bid-ask spread is readily quantified, and readily available. Any inequity due to HFT might be harder to quantify.

In highly liquid, HFT dominated markets, it's possible for the price to be unfairly set. The big problem? How do we know what a fair price is?

There are a lot of standard numbers you use to evaluate stocks: P/E, etc. At the end of the day though, it always boils down to market price.

The idea that the old bid-ask spread is "hiding" in the new market is possible; but how do you quantify it? Where would it go? I'm purely speculating here (no pun intended) but perhaps it went to volatility. It would be interesting to go back and look at real data from HFT vs. non-HFT markets, and see if there is more volatility in them.

Note, volatility doesn't hurt small investors unless they get stopped out. Stop-loss is a double-edged sword, and options have problems of their own. To reiterate, I didn't say HFT was perfect; I just don't think it's the demon that some make it out to be. A buy-and-hold investor isn't affected by volatility in the short run at all--certainly not the kind that HFTs might cause. An HFT can only drive the price of International Buggie Whip to a PE of 1000 for so long before they get burned.

Or, more simply, are market-makers "taxing" trades more now or less? Certainly there is more trading VOLUME now; but is the percentage going to HFTs greater or less than the percentage going to brokers/specialists under the old system?

If HFTs are making $1 billion on a trillion trades, while brokers/specialists made $500 million on 200 billion trades, which is more fair?

Plainly, further study by guys whith degrees different than mine (and actual jobs doing the studies) is needed...

Do $0.01 trades matter to non day traders? (1)

perpenso (1613749) | more than 3 years ago | (#34748776)

... Take liquidity out of the market, and you send us back to the dark days when stocks would trade at $1/8th spreads if you were lucky ... Unless you're pining for the days when you called your broker, paid him a percentage of the trade, and he placed your order in a market with a huge spread then you should be thanking the liquidity providers, not bashing them ... I know, because I came of age when the old system was still in place for a few years. Buying in with a $1/4 spread on something trading for $10-$20, and then waiting for a significant percentage gain just to cover the spread??? ...

I believe you are misrepresenting the old system to a degree. You did not have to call a broker, the do-it-yourself fixed-cost-trade online brokers were available long before decimalization. I also don't recall much difficulty getting something at the 1/8 limit I wanted. Now I wasn't doing some kind of twitchy trading, if I put in a limit order and it took an hour or two to close that was no problem. I don't think 1/8 vs 0.01 pricing makes much different unless you are frantically day trading.

Re:Common View, Common Error (1)

Estanislao Martnez (203477) | more than 3 years ago | (#34748806)

If you can find a way to reduce bid-ask spreads without this kind of stuff, then I'll agree. Until then, I can't join the chorus of detractors.

It reduces the bid-ask spread by getting in between people who would have traded anyway, and giving each a worse deal. No benefit there.

Re:Common View, Common Error (0)

Anonymous Coward | more than 3 years ago | (#34748846)

I object to your assertion that these systems add liquidity. They consume as much as (if not more than) they add. They are executing orders as much as they are adding to the book.

Volume != Liquidity
the same as
Volatility != Risk

Fiat Lucri... (1)

modecx (130548) | more than 3 years ago | (#34748424)

Presto Profito! These must be talented wizards, with the a wave of a hand and the utterance of some arcane terminology, the heavens crap monies right into their bank accounts! Let's see Harry Potter do that.

Re:short term skimming (1)

hitmark (640295) | more than 3 years ago | (#34748656)

and each year it will get worse, as some 3 billion and change (with compound interest) will need to find a place to be invested to keep the growth rate of the global economy that one have come to expect since the industrial revolution.

in-equity (2)

alphatel (1450715) | more than 3 years ago | (#34748046)

Not only are you completely powerless to do anything about it now, but when some glitch causes your pension fund to suddenly be worth 10 cents, you won't be able to sue anyone.

Re:in-equity (1)

SirGeek (120712) | more than 3 years ago | (#34748104)

Or someone manipulates the markets and causes an mini-crash again.

Re:in-equity (2)

SuricouRaven (1897204) | more than 3 years ago | (#34748208)

It wouldn't even need deliberate manipulation. When there are thousands of programs all making the same decisions on the same input, even a natural fluctuation can trigger a disaster. A stock falls a bit, programs see it, and within milliseconds are selling - triggering a further fall, a feedback cycle of collapse.

Re:in-equity (1)

Surt (22457) | more than 3 years ago | (#34748412)

One would hope, though it would not always be true, that there would be an equal number of programs seeing an unnatural downward deflection and issuing buy orders.

Re:in-equity (2)

SuricouRaven (1897204) | more than 3 years ago | (#34748674)

Where would the profit be in buying a declining stock?

I oversimplified the example for clarity - in realise the algolrythms used are far more complex, and include some safeguards against this type of collective behavior, otherwise it would happen all the time. Still, the possibility is there. The 2010 Dow mini-crash was caused in large part by high-frequency tradeing which amplified a minor variation into a severe one - and came dangerously close to progressing into a full-blown crash. It was only a combination of a final emergency safeguard closing the market for fice seconds and a lot of blind luck that averted disaster. High-frequency tradeing, espicially of the extremes seen today, is just inviting another such incident - and with the frequency of tradeing constantly going up, next time there might be no stopping a crash until it's too late.

Re:in-equity (-1)

Anonymous Coward | more than 3 years ago | (#34748714)

it's called short selling stock. basically betting against a stock, guessing that it will decrease in price.

that's where the profit is, home boy.

Re:in-equity (1)

SuricouRaven (1897204) | more than 3 years ago | (#34748722)

And before anyone mocks me for that absolutly terrible spelling error: I'm short on sleep, caffeine, and... I can't even be bothered to finish that sentence. Consider my excuse preemptively made.

Re:in-equity (0)

Anonymous Coward | more than 3 years ago | (#34748130)

Or you could wait 72 hours.

Re:in-equity (3, Interesting)

Pinky's Brain (1158667) | more than 3 years ago | (#34748344)

That's 72 hours of liquidity gone, there is an opportunity cost there ... an opportunity cost measured in true dollars going into the pockets of speculators. Basically we have traded wider spreads for higher instability, is it a good trade? Maybe, dunno.

Personally I think bids and offers should be matched up only once every hour ... I don't see any need for this stuff to happen at wire speeds.

Re:in-equity (3, Insightful)

Anonymous Coward | more than 3 years ago | (#34748838)

If you match bids and offers once per hour, you're going to widen the spread pretty dramatically. It's no coincidence that the spreads have tightened up as trading speed has increased. If you force market markers to hold securities for at least one hour, they're going to have to widen their spreads pretty dramatically in order to compensate for the risk.

You would also see significantly higher volatility in the market. The way things currently stand, you can get a very good idea of what a security is worth at any given instant. If you have to wait an hour before the market updates, it's going to be hard to predict what the next trade price will be. That's going to result in a lot more price volatility, which will also increase spreads.

Another consequence is that you're likely to put smaller shops completely out of business. Holding a security for a minimum of one hour in an environment where pricing information is not available is just not something that smaller firms will be able to do (if nothing else, net capital regulations will foreclose it, due to the enormous risk). For the big firms, it will be like a return to the good old days- all those pesky HTFs gone, and only 2-3 market makers for any given security. This, more than anything else, will increase spreads and spell the end of the exchanges and a return us to the days of market makers. "You want to buy 100 shares of MSFT? You'll pay what we say. What are you going to do, go buy it from someone else? Good luck with that!" "You're ready to sell your 100 shares of MSFT? You'll get what we're willing to give you. What are you going to do, go to someone else? Try to trade it on an exchange? Har har har!"

This is a complex situation. The rise of the HFTs was one of the biggest shakeups in Wall Street history- the large firms lost huge chunks of their control of the market, and are still reeling from the shock of lost profits. They would be more than happy to see the end of HFT and a return to the days when they controlled the market. HFT's may cost the market $0.01/share, but that's nothing compared to the bad old days of monopoly market makers extracting $2/share or more.

Re:in-equity (0)

Anonymous Coward | more than 3 years ago | (#34749082)

You mean bids and offers should be matched 24 times per day?

Or my bid and offer each last 60 minutes?

If you're not careful, don't you just end up with things going at wire speeds, just with more rules?

Re:in-equity (0)

Anonymous Coward | more than 3 years ago | (#34749232)

The liquidity is still there, it just may not be a price you agree with. If you wanted to sell at a predetermined price at any time, you should have bought some options.

Re:in-equity (0)

Anonymous Coward | more than 3 years ago | (#34748180)

Not only are you completely powerless to do anything about it now, but when some glitch causes your pension fund to suddenly be worth 10 cents, you won't be able to sue anyone.

Yeah, but I'll still be able to shoot someone. Like a banker. Does it matter to me the banker I might shoot isn't the banker that robbed me? Nope. Steal all my money when I'm too old to work, and I'll sign up for one of those places that gives you free room/board; possibly a nice injection to help me sleep forever.

Re:in-equity (4, Interesting)

biryokumaru (822262) | more than 3 years ago | (#34748280)

This kind of thing always makes me wonder why you see so many homeless people. They could just smash someone's head in with a rock and have a nice, clean, warm home with three squares a day and plenty of time to read or watch TV.

The reason is, those homeless people, unlike the bankers, aren't heartless sociopaths. I think when the bankers rob you of everything you've spent your life saving, you may find the same is true of you, unfortunately.

Re:in-equity (1)

wowbagger (69688) | more than 3 years ago | (#34748614)

This kind of thing always makes me wonder why you see so many homeless people. They could just smash someone's head in with a rock and have a nice, clean, warm home with three squares a day and plenty of time to read or watch TV.

Methinks you play The Sims too much - or is the homeless person who's clunked me on the head not going to have to explain himself to my friends who find him in my home and me nowhere to be found?

Or are you implying that prison is better than homelessness? That the threat of larger, nastier people, who might seek to stick a shank (or worse) into you for fun, that the loss of freedom, is better than homelessness? Perhaps it is not a lack of being a sociopath [imdb.com] but rather the simple calculation that even a sociopath can make - that freedom is better than imprisonment.

Re:in-equity (1)

Sponge Bath (413667) | more than 3 years ago | (#34748804)

"...nice, clean, warm home with three squares a day and plenty of time to read or watch TV."

Prison?

I've met plenty (certainly not all) of homeless who are heartless sociopaths. Some of them are heartless psychopaths. Don't let your compassion cloud your view, there are some scary people on the streets.

Be suspicious of those you don't know well, no matter how they dress or where they work, and avoid being bitter when they do bad things to you.

I Can't Help But Think... (4, Insightful)

sycodon (149926) | more than 3 years ago | (#34748068)

...that automated trading has and will cause more trouble than it is worth to the overall economy.

Re:I Can't Help But Think... (0)

Anonymous Coward | more than 3 years ago | (#34748218)

Well, it is a silicon arms race after all. Can't wait till they through a little AI in there to help optimize trading along the way. Who knows. It might become self-aware and flip us all the finger.

Re:I Can't Help But Think... (2)

biryokumaru (822262) | more than 3 years ago | (#34748290)

"That's funny... all our HFT algorithms keep investing in our own datacenter technologies..."

Whoop De Doo (1)

Iphtashu Fitz (263795) | more than 3 years ago | (#34748086)

Looks like virtually any other commercial datacenter I've been in. Nothing I saw these articles leads me to believe they're any different. Replace "Wall Street" with virtually any other company with an internet presence and you get the same thing.

Re:Whoop De Doo (0)

Anonymous Coward | more than 3 years ago | (#34748114)

You'd think they would at least put some bling on for the photos. Golden racks, a diamond logo or something. Google image search for "datacenter hallway" returns hundreds of photos that look the same.

Re:Whoop De Doo (1)

PolygamousRanchKid (1290638) | more than 3 years ago | (#34748246)

You'd think they would at least put some bling on for the photos. Golden racks, a diamond logo or something.

Monster Cables. They make you think that your quality of Ethernet is better, because they are expensive. Expensive stuff is better, right?

Re:Whoop De Doo (2)

biryokumaru (822262) | more than 3 years ago | (#34748314)

No, no, it's wall to wall Denon AK-DL1 [denon.com] .

Re:Whoop De Doo (1)

Spectre (1685) | more than 3 years ago | (#34748500)

No, no, it's wall to wall Denon AK-DL1 [denon.com] .

That's an April Fool's Day "joke page", surely?
Please tell me there aren't people so insane as to believe an error-corrected digital transfer of data is going to sound any different no matter what cable is used between devices, until it is so bad that it can't keep up with the data stream at all ...

Re:Whoop De Doo (1)

Anonymous Coward | more than 3 years ago | (#34748186)

Mahwah is a state of the art DC. Has bomb prof walls and roof; power is supplied by 2 different power grids from different states. Isolated pods that act as stand alone datacenters within the DC. There is also infrastructure built around it to prevent car bomb attacks.

Re:Whoop De Doo (2)

ColdWetDog (752185) | more than 3 years ago | (#34748206)

The blue lights. According to TFA,

And yes, there are blue lights to keep things cool – both the equipment and the visuals.

I'll bet your clunky ol data center doesn't have lots of blue lights.

Re:Whoop De Doo (1)

nullifi (1085947) | more than 3 years ago | (#34748262)

We installed a storage array that has bright (flashlight level) blue lights. They drive me mad, and I would put tape over them if my boss would let me.

Re:Whoop De Doo (1)

Anonymous Coward | more than 3 years ago | (#34748436)

Ah, so that's how I'd encourage employees I don't like to quit. I like it. Subtle, yet invasive.

Re:Whoop De Doo (1)

Anonymous Coward | more than 3 years ago | (#34749062)

Subtly take a black sharpie to the lights. They still shine through, but not nearly as bright.

- Pitabred, anon because I've modded

Re:Whoop De Doo (4, Informative)

SuricouRaven (1897204) | more than 3 years ago | (#34748238)

There is just one difference, though. The trading machines, regardless of their location, have the same length cable to the switch. Even if it means coiling some of it up. The latency demands are so strict, the customers even care about the cable length - and it's just easier to give all the customers the same length than to maintain tiered pricing on the racks.

Re:Whoop De Doo (2)

vlm (69642) | more than 3 years ago | (#34748594)

There is just one difference, though. The trading machines, regardless of their location, have the same length cable to the switch. Even if it means coiling some of it up. The latency demands are so strict, the customers even care about the cable length - and it's just easier to give all the customers the same length than to maintain tiered pricing on the racks.

Its marketing. The propagation delay between different pairs can vary by up to 50 ns due to the different twists. That is why the fancier "VGA over CAT-5" converter box thingies have a skew compensator. If you use a layer 1 that uses all 4 pairs it doesnt matter, but if you use a layer 1 that uses only two pair, then theoretically some customers will have a ping time 50ns lower than the slowest customers. one foot roughly equaling one nanosecond means the electrical delay can't be specified more accurately than 50 feet. Noobs have all kinds of fun with TDRs because of this.

You'd be way the heck better off using fiber, as first of all, it will actually work, and secondly, its more expensive so it must be better (aka monster cable marketing)

Re:Whoop De Doo (1)

SuricouRaven (1897204) | more than 3 years ago | (#34748810)

It actually would be lower latency too. The speed of light in glass is higher than the speed of electrical signals in cat5. I don't know the cat5 speed from memory, but IIRC the speed in coax is around 2/3 C.

From what I've read in the networking magazine we get at work, the current debate in high-speed tradeing IT is 10-gig ethernet vs infiniband, with the latter offering lower latency in the end devices.

Guidos installing pizza boxes in place of blades (1)

DanCentury (110562) | more than 3 years ago | (#34748098)

Jersey? They're too close to Snookie for my comfort. The end is near.

If this was Fark (and 2003) I would be making a photoshop of guidos installing pizza boxes in place of blade servers.

So, where are the VAXen? (2)

Tackhead (54550) | more than 3 years ago | (#34748100)

Oh, that's right. Even 22 years later, VAXen [crash.com] , my children, just don't belong in some places :)

Re:So, where are the VAXen? (0)

Anonymous Coward | more than 3 years ago | (#34748410)

Was that you?

the heart of wall street is the bond markets (0)

Anonymous Coward | more than 3 years ago | (#34748120)

not the stock market.

that whole 'shadow banking system', you know, that like, crashed and stuff, that we are paying for with 2 trillion dollars. most of that didn't go to buy stocks.

Re:the heart of wall street is the bond markets (0)

Anonymous Coward | more than 3 years ago | (#34748142)

Thank god, atleast someone understands this!!

Humans in the loop. (3, Insightful)

blair1q (305137) | more than 3 years ago | (#34748162)

“Markets are there for capital formation and long-term investment, not for gaming,” [Michael Durbin] says here [nytimes.com]

Amen to that. The markets should operate as though there are humans at every step. Otherwise there's no need for humans on the edges, either.

Re:Humans in the loop. (0)

Anonymous Coward | more than 3 years ago | (#34748228)

The markets should operate as though there are humans at every step. Otherwise there's no need for humans on the edges, either.

Um... Without humans who want to benefit from trade, there is no need for markets at all.

Re:Humans in the loop. (1)

blair1q (305137) | more than 3 years ago | (#34748274)

Convince an HFT program of that.

Re:Humans in the loop. (2)

blair1q (305137) | more than 3 years ago | (#34748302)

In other words, computers are perfectly capable of putting every stock on the market into the rail, and it's the human traders who are keeping market value anywhere within praying distance of the actual value of the thing being traded.

Re:Humans in the loop. (0)

Anonymous Coward | more than 3 years ago | (#34748540)

And as soon as the machines figure that out, cue Skynet.

Re:Humans in the loop. (1)

Palpatine_li (1547707) | more than 3 years ago | (#34748576)

Then you'll have less liquidity, which is the exact cause of the (first) Great Depression.

Re:Humans in the loop. (1)

khallow (566160) | more than 3 years ago | (#34748820)

Then you'll have less liquidity, which is the exact cause of the (first) Great Depression.

So low liquidity caused firms to be valued at dozens to hundreds of times any rational value? Low liquidity passed the Smoot-Hawley act? Low liquidity forced FDR to pass legislation and form oligopolies favorable to his labor union and business backers, to steal the wealth of tens of millions of Americans by seizing their gold, and to attempt to pack the US Supreme Court in an attempt to bypass the US Constitution?

No offense, but I see deflation/low liquidity as an effect not a cause. People hoard money and other assets, and don't trade on the stock market when they've just been burned badly by a deceptive stock market, fraudulent banks, and rogue governments.

Re:Humans in the loop. (1, Insightful)

khallow (566160) | more than 3 years ago | (#34748866)

Amen to that. The markets should operate as though there are humans at every step. Otherwise there's no need for humans on the edges, either.

Conversely, if I want to use a market, I don't want it saddled with Luddite hysteria. The value of a market is not in the employment it provides to us, but to the goods and services we can acquire through it. I couldn't care in the least, if there is a complex ecosystem of unsupervised trade programs operating at minute time scales on the market. Instead, like any tool, I merely wish it to work when I use it.

End result (0)

Anonymous Coward | more than 3 years ago | (#34748198)

We are well on the way to the ultimate end result of capitalism - a single computer that owns all the money in the world....

Average stock purchase held under a minute (3, Insightful)

cpm99352 (939350) | more than 3 years ago | (#34748270)

Majority of trading (at least in the US) is computer. According to this [nakedcapitalism.com] , average length of time a stock is held is under 35 seconds.

The mainstream financial reporting in the US is a complete joke -- everyone fixates on the Dow, as though it held any meaning. At the end of each day, some "meaningful" reason is given for a less than 1% move, however automated trading never seems to be included.

Netflix joins the Dow??? Is that what this country is reduced to? No manufacturing, just service?

Meanwhile, SEC regulation is a total joke, insider selling is rampant, accounting is a joke...

But, if you're a retiree, where else can you hunt down returns? CDs are long dead.

Re:Average stock purchase held under a minute (1)

Desler (1608317) | more than 3 years ago | (#34748340)

No manufacturing, just service?

It's amazing that the US can be both the #1 manufacturer in the world and at the same time according to you have "no manufacturing" at all.

Re:Average stock purchase held under a minute (1)

RightSaidFred99 (874576) | more than 3 years ago | (#34748430)

There is no manufacturing growth in the US, but we're still (for a little while) top manufacturer. But the post you replied to is correct in that sense - new manufacturing jobs aren't being created.

Re:Average stock purchase held under a minute (1)

Desler (1608317) | more than 3 years ago | (#34748446)

There is no manufacturing growth in the US,

Not true either. It is trivially easy to find articles with data to the contrary.

Re:Average stock purchase held under a minute (4, Interesting)

0123456 (636235) | more than 3 years ago | (#34748568)

Not true either. It is trivially easy to find articles with data to the contrary.

Are those the articles where flipping a burger into a bun and sticking a piece of lettuce on top is counted as 'manufacturing'?

Re:Average stock purchase held under a minute (2)

Billly Gates (198444) | more than 3 years ago | (#34749172)

Mod up.

Bush changed the rules and McDonalds workers are considered manufacturers.

We are the #1 manufacturer corporate headquarters in the world. The products are actually made in China by these American companies.

Re:Average stock purchase held under a minute (0)

Anonymous Coward | more than 3 years ago | (#34748428)

But, if you're a retiree, where else can you hunt down returns? CDs are long dead.

They're getting into things that aren't appropriate (i.e. high risk or huge fees): stock market, gold, variable or indexed annuities (they're "guaranteed" returns don't include all the fees they nickle and dime you with.), junk bonds, and god knows what.

There was a New Yorker article a couple of years ago where the writer was invited to a party with all those hedge fund guys and big shots. With pride has asked what can he do with his $200,000 nest egg. They gave him the same old stale advice about diversification, risk, blah blah blah. When he pinned them down, they admitted for the little guy (less than 10 million liquid net worth - houses don't count), there's not much you can do. You're at the mercy of the markets - you're only chance is to go along with the current.

I've seen some guys do pretty well (win more than lose) with small caps and whatnot, but that's really their second job considering the time they spend on searching for opportunities.

They put the servers in The Situation Room (3, Funny)

Dachannien (617929) | more than 3 years ago | (#34748296)

In other words, the IT guys who maintain these servers all have greasy hair, don't wear shirts, and are total douchebags.

Re:They put the servers in The Situation Room (2)

couchslug (175151) | more than 3 years ago | (#34748946)

"In other words, the IT guys who maintain these servers all have greasy hair, don't wear shirts, and are total douchebags."

Where do I apply?

Quite computers? (1)

maxrate (886773) | more than 3 years ago | (#34748376)

In the 60 minute video, he goes on about saying something about how quite the machines are (exception being the air conditioning). Is there something I'm missing? I've been in plenty of server rooms and servers always seem to be noisy. Is he trying to contrast a traditional trading floor with the server room (being quite)? OR Are these some type of super new server that doesn't make any noise that I'm simply not aware of? The other thing I'm wondering about is the 65 micro (not milli) second times. What permits this incredibly fast trip time? Are they dealing with simply ethernet here or something else? Otherwise looks like a typical data centre - far more tidy that I normally encounter however.

Re:Quite computers? (1)

hitmark (640295) | more than 3 years ago | (#34748590)

could be they are runking everything off ram and ssd so to minimize latency. Less moving parts equals less overall noise.

Re:Quite computers? (1)

Terrasque (796014) | more than 3 years ago | (#34748702)

Quite [meriam-webster.com] what?

Sorry for being such an ass. I realize you meant "quiet", but seeing that typo over and over in your comment felt like someone was repeatedly stabbing my brain with a toothpick :(

Re:Quite computers? (0)

Anonymous Coward | more than 3 years ago | (#34748770)

It's because these servers are basically next door to the exchange itself and have dedicated pipelines to it. When they say server farms in Jersey, that's only some of them. Many of the biggest clearing houses have their server farms right on Wall Street itself. In 1 microsecond light can travel 300 meters. In 65, it can travel 20km. So if the site is 6 miles away - say just over the bridge to Jersey - a round trip at the speed of light takes 65 microseconds.

yes, but (0)

Anonymous Coward | more than 3 years ago | (#34748392)

does it run linux?

And mankind became slave of his own system (0)

Anonymous Coward | more than 3 years ago | (#34748404)

First mankind created computers, to work for him the dull work of counting money.
Now these systems who were behind one of the major financial crisis; (its a a bigger secret then wikileaks).
Now these systems will define the value of money, the value work; keeping in respect the unbalance of this world.
The poor stay poor and their labor is cheap; and the rich steal their resourcers by the power of money.

Micro trading, is the most dangerous form, of the spirit that keeps this world devided; making the rich richer, and the poor loose everything..
To act with no moral in miliseconds; resulting in job loss; resulting in families to be destroyed; resulting in countries going bankrupt.
Machines dont understand love, dont understand what the real world is; and would do whatever it takes to make more money; trade landmines, or play pyramid games with pensions..

They do understand mankinds faith.. to work as a slave for profit, without knowledge of love, art, music, it will put mankind to 100% labor and work till its dead.

i've nothing to make this sound like a joke, we created it and allow this happen.

The most strange thing is however that if resources where devided equal, and we would share knowledge there is more proffit in life to gain; how fast would we cure current diseases; if we where not distracted by how many money goes to HIV or Malaria, Yellow fever and others; but where just united. There would even be food enough...

 

My Proposed Solution for HFT BS (0)

Anonymous Coward | more than 3 years ago | (#34748628)

Rule #1: All securities MUST be held for at least 24 hours.

Rule #2: Capital gains are now taxed according to the following scale:
Ultra Short Term (Less than 1 Week): 90% Tax
Short Term (1 Week to 6 Months): 50% Tax
Medium Term: (6 Months to One Year): 35% Tax (The Maximum Current Short Term Rate)
Long Term: One to Five Years: 15% Tax (The current long term rate)
Very Long Term: Over Five Years: 5% Tax

Rule #3: You can only claim capital losses on securities held more than six months.

The Stock Market should not be like Vegas. Rules need to be in place to provide incentives for long term investment.

pfft (1)

Charliemopps (1157495) | more than 3 years ago | (#34748690)

Change the rules. You can't sell a stock within 24hrs of buying it. There is absolutely no benefit in the hyper trading of stocks like this. Computers are just going to get exponentially faster until trading is so fast the entire market could crash before regulators could do anything about it. Hasn't it happened several times already and they had to roll back trades for several hours because the market was so screwed up?

Re:pfft (1)

TheWizardTim (599546) | more than 3 years ago | (#34748966)

No, we should not limit what people can do with a stock. We could however make it expensive to trade this way. Change capital gains to (Less then 1 day, 50% capital gains.) (1 day to 1 month, 40% capital gains.) (1 month to 2 years, current short term capital gains.) (2 year - 20 years, current long term capital gains.) (20+ years, no capital gains.) This would allow people to trade less then a day, and others trade real long term. I like the idea of making it expensive to do rapid short term trades, but let people who invest real long term, 20+ years, get a strong benefit for it. The stock market should not be run like a casino.

So in a few years... (1)

Fuzzums (250400) | more than 3 years ago | (#34748992)

... it will become important to model the behaviour of this software and not how "the financial market" behaves.

stocks != livelihood (0)

Anonymous Coward | more than 3 years ago | (#34749072)

"part of your wealth, your livelihood"

I'm sorry, but I was taught: never gamble that which you cannot afford to lose.

Wealth in the stock market is NOT my livelihood

TradeNet (0)

Anonymous Coward | more than 3 years ago | (#34749230)

From Bankinator 2: Expiration Day:

The Bankinator: The Tradenet Funding Proposal is passed. The liquidity center goes on-line August 4th, 1997. Human decisions are removed from stock trading. Tradenet begins to learn at a geometric rate. It becomes self-aware at 2:14 a.m. Eastern time, August 29th 2012. In a panic, they try to pull the plug.

Sarah Connor: Tradenet fights back.

The Bankinator: Yes. It invests in then crashes certain stocks. Vast fortunes are lost in hours. People jump off skyscrapers. Pensions become worthless. Oil and gold become havens for a while and commodity prices become sky-high. All major economies die overnight.

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