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Australian Company Promises Switching Hardware With Sub-130ns Latency

timothy posted about 2 years ago | from the time-to-start-straightening-the-undersea-bits dept.

Networking 77

snowdon writes "The race for low-latency in finance and HPC has taken a major turn. A bunch of engineers from Australia have 'thrown away the air conditioning' in a traditional switch, to get a 10G fibre-to-fibre latency of less than 130ns! Way faster than more traditional offerings. This lady (video) would tell you that it's equivalent to just 26m of optical fibre. Does that mean we just lose money faster?"

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77 comments

Low latency post (5, Funny)

Anonymous Coward | about 2 years ago | (#40219415)

The trick was not reading TFA.

Re:Low latency post (2)

jamesh (87723) | about 2 years ago | (#40230315)

Remember what happened last time someone copied an Australian invention without paying the licensing fee! We own low-latency now.

Splendid (0)

Anonymous Coward | about 2 years ago | (#40219453)

We can extract even more money from the economy into our coffers.

Goldman Sachs will be pleased (2)

CanHasDIY (1672858) | about 2 years ago | (#40219463)

Now they can suck our economy dry with even more speed and efficiency!

Re:Goldman Sachs will be pleased (1)

Anonymous Coward | about 2 years ago | (#40219593)

Now they can suck our economy dry with even more speed and efficiency!

I'm sure they'll have some nice propaganda to tell us all about how this benefits the common man.

Enriching ourselves without producing anything of value is good for you, really! Now grab your ankles and prostrate yourselves before the financial machine again...there there... that's a good subject I mean citizen. Man financial slavery is much easier than the old way, why intimidate when you can brainwash? Now bust your ass at your low wage job to create more value for us, and be thankful you even have that much, mmmkay?

Re:Goldman Sachs will be pleased (1)

CanHasDIY (1672858) | about 2 years ago | (#40220049)

Now they can suck our economy dry with even more speed and efficiency!

I'm sure they'll have some nice propaganda to tell us all about how this benefits the common man.

They already do; it's called the 2012 Presidential Election. [opensecrets.org]

Donations to Barack Obama in 2008 - $1,013,091
2012 (reported thus far) - $80,224

Donations to Mitt Romney (2012, reported thus far) - $528,180


I believe this is what they in the finance 'industry' refer to as "hedging."

Re:Goldman Sachs will be pleased (0, Troll)

Anonymous Coward | about 2 years ago | (#40220095)

Now they can suck our economy dry with even more speed and efficiency!

I'm sure they'll have some nice propaganda to tell us all about how this benefits the common man.

They already do; it's called the 2012 Presidential Election. [opensecrets.org] Donations to Barack Obama in 2008 - $1,013,091 2012 (reported thus far) - $80,224 Donations to Mitt Romney (2012, reported thus far) - $528,180 I believe this is what they in the finance 'industry' refer to as "hedging."

It sure is easier when there's only two parties with a chance of winning. I mean if there were 4-5 or more parties that can win federal elections, why, they'd have to spend a lot more money! Clearly being one party away from total dictatorship and winding up with half-dictatorship is producing value. For America! *cue flag, fireworks, apple pie, maybe an image of a soldier who fights for "your freedoms" by blowing away some brown people who never were a threat to us...*

big deal? not really. (0)

Anonymous Coward | about 2 years ago | (#40219519)

So they've taken the idea from a couple of the low-latency 10Gb switching companies that failed and moved it to fibre switching MUX for the financial trading industry. yeah. Zzzz...

Call me in a year or so when this tech makes it's way into the general ODM pipeline and we can buy some in bulk.
Or perhaps folks like Cumulus will have this soon anyway?

130ns? (1)

Anonymous Coward | about 2 years ago | (#40219535)

Pfft, I can't win Quake matches with that latency.

Can't access "the lady" on youtube (1)

C_amiga_fan (1960858) | about 2 years ago | (#40219537)

Darn work and filtering. ;-) Oh well..... I'll bookmark and watch it when I get home 11 hours from now.

Re:Can't access "the lady" on youtube (0)

Anonymous Coward | about 2 years ago | (#40219841)

Oh, they actually have computers at the Foxconn factory, or do you all crowd around one of the defect iPads and stream from there?

Versus InfiniBand? (1)

Rostin (691447) | about 2 years ago | (#40219639)

Lots of HPC installations use InfiniBand. (Go here [top500.org] and select "Interconnect" or Interconnect Family" from the dropdown menu to see the stats.) According to its wiki entry [wikipedia.org] ,

The single data rate switch chips have a latency of 200 nanoseconds, DDR switch chips have a latency of 140 nanoseconds and QDR switch chips have a latency of 100 nanoseconds.

Can these numbers be directly compared to the "fiber-to-fiber latency" reported in the article summary?

lightspeed (0)

Anonymous Coward | about 2 years ago | (#40219673)

Useless factoid: Light moves pretty close to 1 foot per nanosecond in free space,
but it takes a special kind of imperial brain with metric-sized feet to appreciate this point.

Re:lightspeed (1)

vlm (69642) | about 2 years ago | (#40219857)

Good luck getting more than 8 inches/ns with real world cables and real world fiber. You can get darn near 11 inches/ns with ladder line and open wire and exotic RF stuff like that (yes it is easily possible to buy faster copper than fiber, if by faster you mean lower latency). Wake me when they switch to ladder line instead of fiber, that'll be the weird day.

The term to google for is velocity of propagation.

Re:lightspeed (1)

afidel (530433) | about 2 years ago | (#40220021)

Are you saying the medium is lower latency? Because I'd bet once you add all the advanced filtering and encoding schemes you'd need to get reliable 10Gb over the ladder line you'd end up with net more latency. I know this is true even with short distance copper sfp+.

Re:lightspeed (1)

Nethead (1563) | about 2 years ago | (#40220571)

The shortest wavelength I've seen used with ladder (twin lead) line is lower UHF (think TV antenna.) The velocity of ladder line is mostly used to determine tuning of an antenna, mostly in the HF realm. Coax also has velocity ratings, as does any electrical path.

I'm not sure of using ladder line for high speed data except for your DSL drop to your house from the pole. That is a type of ladder line. I guess you could call twisted pair a special case of ladder line.

HFT Should be illegal (3, Insightful)

the eric conspiracy (20178) | about 2 years ago | (#40219789)

This is not good news; it promotes a trend in a technological approach to making money in the stock market that should be flat out illegal.

Re:HFT Should be illegal (5, Insightful)

vlm (69642) | about 2 years ago | (#40220047)

This is not good news; it promotes a trend in a technological approach to making money in the stock market that should be flat out illegal.

Why? I know what it is, how it works, how it makes money, and I'm not overly concerned. So they make a market, and they make it really fast. Eh.

All I ever hear as a rationalization for dislike of it is "workers of the world unite" and "1% OWS" and "something bad happened to the markets, I don't like witches, so lets hang the witch because she has property I like that we can take from her" and "I hate the rich" and all that sort of stuff. I never hear a good moral or ethical explanation of why doing what you normally do, but really fast, is so wrong.

Another good question, is assuming you "make it illegal" how in the world would you enforce that? What would the reg look like? Like... your connection to the market must be this far away blah blah even if it means making a 1000 KM coil of fiber on the data center floor, or maybe all traders must connect to "the market" over geosync satellite links so the average latency is both long and more or less equal?

Please don't confuse conventional HFT with "Flash trading" which is basically window dressed up insider trading, corrupt as all heck. If you do insider trading and trade your own book etc thats just illegal, but if you do it really fast people like to pretend its just "flash trading" and not wrong.

The easiest way to "get rid of" HFT is to fix decimalization. Back when we traded on eights thats too wide to make money on a HFT strategy, and if we allowed millionth of a penny trading quotes that would narrow bid/ask resulting in too little money generated by HFT. Decimalization seems to be almost the perfect pricing system to result in massive HFT strategies, so if you really hate HFT (and WHY?) then just fix the pricing structure so its not profitable anymore. Rather than playing games with legal enforcement of favored or disfavored behavior, simply make disfavored behavior unprofitable. I suppose the opposite solution of going big would work just as well, fine we'll only trade stocks on dollar values now no fractions of a dollar.

Re:HFT Should be illegal (0)

Anonymous Coward | about 2 years ago | (#40220357)

There are more arguments against HFT. For instance, one could argue that trading started to happen because people wanted to connect people in need of money (companies) with people having a little bit of money (workers). It moved away from that, with "men in the middle" who thought they could put more pressure on the companies if they represented as many workers as possible ("The Whole Is Greater Than the Sum of the Parts"). This quickly led to making capitalism not about growth, or products, or production, or feeling good at work - just to make money. With no regards for anything else than the short term money - you could sink a company in 10 years, if you made a shitload of money in the beginning and left at the right moment, you're a good trader. Some people find this view not ethically right. It's fine to make money, but that should not be the first and only goal of a company - it should be to release products that will be of use to the customers.

Jump forward 50 years, and HFT does the same thing only much more efficiently. It's just plain mathematics, there's no concern for the people or the well-being (growth) of a country.

Re:HFT Should be illegal (2)

Nethead (1563) | about 2 years ago | (#40220435)

I never hear a good moral or ethical explanation of why doing what you normally do, but really fast, is so wrong.

The nuns back in grade school gave us moral reasons not to wash "down there" really fast. Although through much "scientific discovery" I concluded they were wrong (or just trying to keep a good thing for themselves.)

Re:HFT Should be illegal (0)

Anonymous Coward | about 2 years ago | (#40220437)

The problem with HFT is the "fake" orders placed. Computer trades typically will places tons and tons of buy AND sell orders for prices they really have no intention of executing on just so they can be first in the queue. The number of sellers and buyers at these fictional prices distorts any sense of what the market value really is. These computer trades will submit and withdraw constantly. Most of these are an attempt to trick other competing computer trading algorithms. You want to fix HFT? Put a small fee on each trade executed within a certain small fixed time. Make the fixed time be something a human could barely execute that trade in, and you've got a solution. The fee can be small too, like $0.05. HFT is executed so quickly, a fee like that would rack up millions upon millions while not costing anything for any actual human trades.

Re:HFT Should be illegal (2)

vlm (69642) | about 2 years ago | (#40221651)

The problem with HFT is the "fake" orders placed. Computer trades typically will places tons and tons of buy AND sell orders for prices they really have no intention of executing on just so they can be first in the queue.

Yeah, but why is that a problem? IF they get executed on they lose their shirt, if not who cares? Using "problem" as in ethical or moral dilemma that we should legislate out of existence, not "problem" as in "I don't personally like it, just like I don't like strawberry icecream, so men with guns should forcibly stop people from doing what I don't like". I need something more than its bad, because by definition its bad. A real world example with numbers.

AC you and I both think one internets (or karma point, or whatever) is worth about $10 and you have one internets for sale asking $10 and coincidentally I'd like to buy one internets and I toss in a at the market order for one internets.

A flaming squadron of HFT dumps a bunch of sell orders from 9.95 to 10.05 right before my order hits. So I end up with $9.95 for one internets. Whats your problem? You believe the value is $10 per internets so the HFT just got screwed out of five cents and I made a profit of 5 cents because I paid $9.95 for what we both think is $10 worth of internets. The latest price for one internets is now $9.95 but its worth $10 so you throw in a order to buy too, after all, whenever the price is less than the value, if you got cash you buy. Dumb HFT sells you something worth $10 for $9.95 so you just made money too. Dumb HFT wants to sell even more at 9.95 but it ran outta internets... well you'll sell the HFT internets at $10 a piece, after all you only paid 9.95 a piece. Ha Ha dumb HFTs they suck. Its very hard to make money off a HFT scheme. Its hardly a license to print money. I'm failing to see how its "wrong".

Re:HFT Should be illegal (0)

Anonymous Coward | about 2 years ago | (#40223023)

the stock market was meant to provide a way for people to invest in businesses.

that's how it's wrong. there's no investing here.

Re:HFT Should be illegal (1)

vlm (69642) | about 2 years ago | (#40224227)

the stock market was meant to provide a way for people to invest in businesses.

that's how it's wrong. there's no investing here.

So, the best way to invest in businesses is to make the spread between bid and ask prices as large as possible, and lower liquidity as much as possible. Hmm. Not really agreeing the goal meets the methods.

What is investing? Determining a value for a security, comparing it to the current price, and entering the appropriate market order. What is HFT? Same thing. Faster than traditional 1960s era trading, sure, but nothing different. That makes regulating it very hard.

Its kind of like arguing that free donuts in a brokers office should be illegal, because eating donuts is not investing, and anything not compulsory is forbidden and anything not forbidden is compulsory. However, if indirectly it makes a better market that is easier to invest in, then I guess both HFT and donuts are great ideas for investment.

To some extent its a symptom of failure in a centrally controlled non free market. The market has rules preventing price discovery more accurate than one cent. Well, it turns out we can price out a security more accurately than one cent and we will essentially trade in that realm, because its not a free market and the bad rules have screwed up the market, resulting in a "market within a market". Some people have an axe to grind although it has no impact on them or their trading. Oh wait, I know the solution to the screwed up rule! More rules! What could possibly go wrong, after all more rules always results in more freedom.

Re:HFT Should be illegal (1)

sjames (1099) | about 2 years ago | (#40261863)

Nonsense. You could rip out 100% of the HFT hardware right now, and guess what? Bid and ask would still come together and result in a trade just as they have always done. The only difference is that the cover charge keeping the 'riff raff' out will be greatly lowered.

To make it a genuinely fair market, set the time quantum at 10 minutes. No more HFT, no more rent.

Re:HFT Should be illegal (1)

TheLink (130905) | about 2 years ago | (#40223577)

The problems I have with HFT are:
1) At least at one point of time it was (is?) a front running scam - favoured HFT traders got to front-run others ( http://www.nytimes.com/2009/07/24/business/24trading.html [nytimes.com] )
2) When favoured HFT players screw up, the exchange rolls back their trades: http://money.cnn.com/2010/05/07/markets/explaining_wall_street_turmoil/ [cnn.com]

Even an idiot like me can make lots of money if the exchange keeps rolling back my biggest mistakes.

Call me cynical but all that HFT, fancy math and fancy systems (computer and financial) are just a "magician's smoke and mirrors" to disguise what is actually happening: the transfer of money from the nonfavoured to the favoured.

Re:HFT Should be illegal (0)

Anonymous Coward | about 2 years ago | (#40227677)

I'd like to point out that the first article is not about front running nor does it mention it. Front running is strictly prohibited by the SEC and believe it or not the SEC is quite aggressive about protecting customers and punishing HFT and even low frequency trading firms at even the slightest hint of malice. There are numerable stories of trading firms being fined in cases for simply having ominous sounding names for programs, having said something which when taken out of context can be construed in a negative light. Imagine receiving a question in an email from a coworker, walking over to answer in person and then later being named in a suit(and thus destroying your career in finance) because of your failure to reply appropriately.

http://en.wikipedia.org/wiki/Front_running

Likewise, many (if not all exchanges) have rules regarding 'obvious errors.' In the case of the ARCA and AMEX if a broker-dealer/market maker trades with a customer the customer will still get a very favorable price: www.nyse.com/pdfs/NYSEAmexObviousErrorRule.pdf (section 3c)

In general, the majority of trading firms go out of business within a few years, if not sooner. Competition is heavy and they are typically mud wrestling each other for a few basis points per share(http://en.wikipedia.org/wiki/Basis_points), whereas the typical customer won't notice 0.005-0.0015% difference in their transaction cost, especially when they are paying their broker orders of magnitude more for trade execution. Add to this that HFT trading tightens spreads and provides liquidity, which in turn reduces your cost.

An additional note, after doing a quick Google search for conflicting articles, this article is approaching the issue in a dishonest manner: http://www.thetrader.se/2012/02/10/the-tighter-hft-spread-lie/

Merely plotting spreads vs. percentage is dishonest in that the vast majority of stocks are barely traded compared top 10% of stocks by traded volume. High volume trading firms and HFT firms highly depend on each other for confidence in pricing as well as the ability to lay off risk at a low price should a trade go badly(providing more evidence HFT reduces trading costs), so they are relatively inactive in the majority of stocks. (Many stocks trade at rates of just a few trades per minute and the least active stocks at rates of a few trades per day if any). If the same study were run on a volume weighted basis the evidence would be overwhelming that reg NMS has had a profound impact on making markets fair across all venues, tightening spreads and increasing liquidity.

Yes, I'm an algorithmic trader.

Re:HFT Should be illegal (0)

Anonymous Coward | about 2 years ago | (#40227715)

Also, I want to point out that a lot of the 'fancy math' you're talking about involves trying to determine an instruments fair price given all the known variables. I for one trust models and well thought out fundamental valuations over a trader's(or your grandfather's) gut instinct. As a result, there are many stocks with extremely stable prices that respond to correlated assets so fast that any opportunity to make a profit via statistical arbitrage depends on raw speed or ever more detailed modeling. That means that when you go look at a stock, believe it or not, it's price is likely a way more accurate prediction than anything you could come up with yourself.

Re:HFT Should be illegal (1)

sjames (1099) | about 2 years ago | (#40262197)

You do realize that slavish adherence to those formulas is what created a systemic weakness resulting in the economic meltdown. The advantage of Grandpa's gut is that it introduces enough variability in the valuation to avoid those divide by zero moments.

It's funny how you speak of valuation as if it were some sort of objective truth based on universal constants or something.

Trading has increasingly abstracted away any sense of a good to be traded. As it does so, it more closely approaches casino gambling. The difference is that nobody is allowed to decline to play. Nice gig for the house.

Re:HFT Should be illegal (1)

sjames (1099) | about 2 years ago | (#40261779)

Beyond the rent seeking, a market flooded by insincere offers is no market at all.

If the HFT is so unprofitable and dismal like you claim, why are so many very rich financial institutions so willing to spend megabux just to get the network cables to their servers 3 feet shorter than the other guy's?

Re:HFT Should be illegal (0)

Anonymous Coward | about 2 years ago | (#40220625)

"make it illegal" how in the world would you enforce that?

You don't. You also don't have to make it illegal. You just have to tax it.

It is problem with a simple mathematical fix.
For every unit of time a stock/option is held tax capital gains at a percentage rate of 100-(time_unit*tax_unit).

Ex.
time_unit = 1 hour
tax_unit = 0.5%
capital gains tax = 100-(1*0.5) = 99.5%

time_unit/tax_unit is set by government policy/national banks

The problem with HFT is that it undermines the whole point of central markets and business investment into human endeavour, it is not a witch hunt, it is a manipulation of a broken system. Human endeavour is not measured in nanoseconds, it is generational. We just need to fix the loophole.

It requires global cooperation to implement.
The fix is simple, it just needs political will.

The political will is dragging because business shovels cash into the coffers of political interests to maintain the status quo.
We need a Robin Hood to pull this one off.

Re:HFT Should be illegal (2)

vlm (69642) | about 2 years ago | (#40222017)

The problem with HFT is that it undermines the whole point of central markets and business investment into human endeavour

Please advise me as to the purpose of "central markets" and "business investment" and then explain why increasing the bid ask spread and decreasing liquidity by the destruction of HFTs somehow helps achieve those goals. Or alternately, why lowering the bid ask spread and increasing liquidity somehow magically prevents the achievement of those goals. I strongly suspect you can't.

The problem with a tax is, from the retail non-HFT perspective, a HFT looks to them like a microscopic tiny transaction tax in the sub thousandth of a percent range. The solution proposed is always to smack everyone with a tax perhaps a thousand times higher, but more than a thousand times higher for HFTs in order to destroy them.

So lets say for the sake of experiment that on long term average when I sell a block of 100 shares of electric company stock, HFTs increase the sales price by a buck by improved liquidity and narrower bid/ask although they reduce the amount I take home by about a penny. So they gave me a buck but stole a penny from me. I disagree, but whatever, we'll roll with this "they stole my penny" thing. Anyway find me a tax proposal that won't simply result in the destruction of the HFT industry, and lower liquidity means I'll get an even lower sales price, costing me maybe $10, and the new tax means I'll pay the fedgov maybe $10 as a tax. So we've saved a penny of HFT loss at a cost of only $20 to my bottom line.

So with HFTs I make an extra 99 cents, would have been a buck but they stole a penny from me.
Without HFTs I'd have the baseline
With taxes designed to destroy HFTs I'd lose $20, but at least those nasty HFTs would be dead so I can dance on their grave, even in my poverty.

As a non-HFT investor, whats in it for me?

Re:HFT Should be illegal (0)

Anonymous Coward | about 2 years ago | (#40229807)

As a non-HFT investor, whats in it for me?

Cry me a river. Who cares if you make less from this fix. You are speculating to make a profit on the efforts of others without lifting a finger.
You sound like a self centered greedy jerk. The problem with the markets is it is full off assholes who think like this.

Re:HFT Should be illegal (1)

sjames (1099) | about 2 years ago | (#40262285)

As I've said before, bid and ask will continue to come together to result in a trade as they have for all time. The only people who actually NEED the sort of liquidity you're talking about are the speculators (casino gamblers). Investors think in terms of months to decades and trades happen plenty fast for them without HFT skimming off the top..

HFTs increase the sales price by a buck by improved liquidity and narrower bid/ask

[citation needed]. Furthermore, that would kinda suck if I want to buy 100 shares, then you jacked the cost up a dollar and ripped me off for a penny to boot!

Re:HFT Should be illegal (1)

erbbysam (964606) | about 2 years ago | (#40221111)

The easiest way to "get rid of" HFT is to fix decimalization. Back when we traded on eights thats too wide to make money on a HFT strategy, and if we allowed millionth of a penny trading quotes that would narrow bid/ask resulting in too little money generated by HFT. Decimalization seems to be almost the perfect pricing system to result in massive HFT strategies, so if you really hate HFT (and WHY?) then just fix the pricing structure so its not profitable anymore. Rather than playing games with legal enforcement of favored or disfavored behavior, simply make disfavored behavior unprofitable. I suppose the opposite solution of going big would work just as well, fine we'll only trade stocks on dollar values now no fractions of a dollar.

Don't forget that it was possible to game they system in different ways when they traded on fractions. Changing the decimal system seems a bit overkill(also, I'm still a bit confused how that wouldn't create further issues?) when a small tax on ultrafast trades/a small delay on the stock exchange end would solve the problem created by these HFT machines.

Re:HFT Should be illegal (1)

vlm (69642) | about 2 years ago | (#40221773)

also, I'm still a bit confused how that wouldn't create further issues?

The HFT idea is to "win" maybe 1% of time on a 50% of the bid ask spread times number of shares traded by retail non HFT investors.

Assume the non-HFT quantity remains the same.

Using penny level decimalization, the bid ask difference will tend toward... a penny. So 1% of 50% of a penny times a billion shares traded per day is $50K per day, optimistically (assuming you "win" as much as 1% of the time, probably much less). Times 200 stocks, that's $10M revenue per day well worth building the infrastructure to HFT

OK lets try billionth of a penny level decimalization. The bid ask difference will shrink, maybe not to a billionth of a penny. Lets say it shinks to a mere millionth of a penny. So 1% of 50% of a millionth of a penny times a billion shares traded per day is ... drum roll ... $5. Five dollars. Times 200 stocks, thats $1000 revenue per day. Kind of borderline to make it worthwhile. Maybe one guy could do this as a hobby?

Re:HFT Should be illegal (1)

erbbysam (964606) | about 2 years ago | (#40222121)

Wouldn't a penny "transactions fee" or "tax" solve this issue instead of just pushing it further down the line? Also, what's to stop somebody from doing even more transactions to make that $1000 into a much larger number?

Re:HFT Should be illegal (1)

vlm (69642) | about 2 years ago | (#40223935)

A penny per share tax is a buck on a round lot trade of 100 shares to kill HFTs. The problem is I don't lose a buck to HFTs but I would lose a buck to the govt. Its just a cheesy stealth taxation plan. Blame the HFTs, rich people suck, horray for the 99% we're gonna destroy HFTs, but the only real end result is the govt takes more of my money. So a transaction tax is a great way to cause a couple orders of magnitude more damage to the economy than HFTs could theoretically ever cause.

This still doesn't explain the fixation on killing HFTs. So they get a "sin" tax. On what sin, exactly? nobody knows.

WRT increasing transaction volume to make more than $1000... Remember that superman movie where Richard Pryor took all the fractional cents out of everyone paycheck, put them in a pile, and kept that substantial amount? Well HFT is like that in trades where a bunch of competing HFTs fight each other to, on long term average, determine the sub-cent price of a share priced in cents, and then, essentially, the HFT who skims off the least amount on top of the sub cent slice beats the greedier HFTs and keeps the extra skim. Well, in the movie, if Richard Pryor wanted more money, he'd have to make more transactions, make more paychecks. But Mr Pryor doesn't get to decide how many times paychecks are written per month (Weekly checks? Daily checks?), or how many people are employed... This tired old hollywood plot was recycled into Office Space, and probably many more movies. There's only like 50 movies, endlessly redone.

Think about making a competitive system to determine the sub cent fractional price of shares traded at cent rounded prices. Read the wikipedia article below. You pretty much end up reinventing HFT.

http://en.wikipedia.org/wiki/Simulated_annealing [wikipedia.org]

I like the idea of a lot of competing HFTs from a lot of companies fighting each other in a race to the bottom to rip me off the least. Worst case is we damage the HFT ecosystem just enough that two companies get all the fractional skim and have no limits on greed because the government helpfully destroyed all the competition for them. Yes. That would be bad. We (as a country) always make the worst possible decision, so this is probably what we'll implement.

Re:HFT Should be illegal (1)

erbbysam (964606) | about 2 years ago | (#40225431)

A penny per share tax is a buck on a round lot trade of 100 shares to kill HFTs. The problem is I don't lose a buck to HFTs but I would lose a buck to the govt. Its just a cheesy stealth taxation plan. Blame the HFTs, rich people suck, horray for the 99% we're gonna destroy HFTs, but the only real end result is the govt takes more of my money. So a transaction tax is a great way to cause a couple orders of magnitude more damage to the economy than HFTs could theoretically ever cause.

Who's to say this money would go to the government? Don't exchanges need to pay huge amounts of money for infrastructure to support this activity? Also, isn't there a clear segregation between "normal" traffic and this high speed traffic?

This still doesn't explain the fixation on killing HFTs. So they get a "sin" tax. On what sin, exactly? nobody knows.

Because financial engineering has just been so beneficial to society... /s http://en.wikipedia.org/wiki/High-frequency_trading#Effects [wikipedia.org] http://en.wikipedia.org/wiki/2010_Flash_Crash [wikipedia.org]

WRT increasing transaction volume to make more than $1000... Remember that superman movie where Richard Pryor took all the fractional cents out of everyone paycheck, put them in a pile, and kept that substantial amount? Well HFT is like that in trades where a bunch of competing HFTs fight each other to, on long term average, determine the sub-cent price of a share priced in cents, and then, essentially, the HFT who skims off the least amount on top of the sub cent slice beats the greedier HFTs and keeps the extra skim. Well, in the movie, if Richard Pryor wanted more money, he'd have to make more transactions, make more paychecks. But Mr Pryor doesn't get to decide how many times paychecks are written per month (Weekly checks? Daily checks?), or how many people are employed... This tired old hollywood plot was recycled into Office Space, and probably many more movies. There's only like 50 movies, endlessly redone.

Ya ya ya, we all know the old skimming scheme that's become possible because of electronics controlling money. Just because there is a way to manipulate a system, doesn't make it a good thing. 21 is a good (blackjack)movie, but will still get you thrown out of a casino. There's nothing to say that these HFT's aren't skimming money from regular investors and vice-versa. That said though, why does the market exist in the first place? It's not for a bunch of machines to race to the penny.

Think about making a competitive system to determine the sub cent fractional price of shares traded at cent rounded prices. Read the wikipedia article below. You pretty much end up reinventing HFT.

http://en.wikipedia.org/wiki/Simulated_annealing [wikipedia.org]

Instead of sending me to a generic NP-Hard problem, I find this - http://en.wikipedia.org/wiki/High-frequency_trading#Effects [wikipedia.org] far more interesting. Particularly the part where these machines submit orders and then instantly cancel them in order to find how high/low the market's machines are willing to go. I'm sure there is some very complicated algorithms(combination of networking and math) that go into finding the optimal way to beat others at this game...

I like the idea of a lot of competing HFTs from a lot of companies fighting each other in a race to the bottom to rip me off the least. Worst case is we damage the HFT ecosystem just enough that two companies get all the fractional skim and have no limits on greed because the government helpfully destroyed all the competition for them. Yes. That would be bad.

I do agree that the current competition scheme is better than an artificially created monopoly. I'm just confused why the HFT market needs to exist in the first place. Liquidity could come in from other ways(I believe). If not a tax(maybe not to the government) on only HFT, then why not a random delay (like say 10 second average)? Wouldn't that preserve the market while removing any possible gain that could be made this millisecond?

We (as a country) always make the worst possible decision, so this is probably what we'll implement.

Careful now, your republican is showing

Re:HFT Should be illegal (0)

Anonymous Coward | about 2 years ago | (#40221823)

HFT could be made rather useless with jubilee shares.

Re:HFT Should be illegal (1)

the eric conspiracy (20178) | about 2 years ago | (#40223035)

There are several reasons as to why HFT should be illegal. And it doesn't have anything to do with your stupid strawman arguments regards OWS etc, or front running which has been illegal for some time.

Some examples of the abuse that occurs are the practices of placing and rapidly cancelling limit orders to stimulate market orders on the other side, which are then executed at a less favorable price also placed by the HFT. In other words, HFTs are gaming the system to exploit sub-optimal behavior by slower traders. Another example is quote stuffing to map exchange network topologies to create arb opportunities.

Making it illegal is not hard. There are plenty of proposals on how to implement it. Micro taxes on financial transactions is one.

Re:HFT Should be illegal (1)

TheNinjaroach (878876) | about 2 years ago | (#40224269)

Another good question, is assuming you "make it illegal" how in the world would you enforce that? What would the reg look like?

That's really easy: Nobody (and I mean nobody) gets access to flash orders. No stock exchange should be allowed to let a third party inspect the details of a pending trade, and then make their own transaction before the initial trade is complete.

That is so painfully obvious I can't believe you would have to ask.

Re:HFT Should be illegal (0)

Anonymous Coward | about 2 years ago | (#40230835)

"I never hear a good moral or ethical explanation of why doing what you normally do, but really fast, is so wrong."

You have not been paying attention.

Money & speed: Inside the black box
http://www.youtube.com/watch?v=x8SMjyXdc3I

Re:HFT Should be illegal (2)

CanHasDIY (1672858) | about 2 years ago | (#40220103)

This is not good news; it promotes a trend in a technological approach to making money in the stock market that should be flat out illegal.

I always thought that if those losers in Anonymous (or anyone else sick of Wall St. and their economic stranglehold) wanted to actually do something meaningful, they would create and release an open source HFT program anyone can use, and help the populace beat the banksters at their own game...


nudge nudge...

Re:HFT Should be illegal (0)

Anonymous Coward | about 2 years ago | (#40220523)

The news post in question should show you why this is not feasible.

While HFT software could surely be made in an open-source way to the benefit of... the users? The hardware is simply not there for anyone but the Wall Street firms (and equivalent), who have computers sufficiently close to the actual market servers. This is in general not something you can do on anything but an extremely low-latency and high-capacity link, such that Joe Public is very unlikely to have it.

Re:HFT Should be illegal (1)

jbmartin6 (1232050) | about 2 years ago | (#40220659)

The bankster's game has nothing to do with HFT. Regardless, you aren't going to beat HFTs with software, you also need physical proximity to the exchange's gateways. And that isn't cheap.

Re:HFT Should be illegal (1)

CanHasDIY (1672858) | about 2 years ago | (#40221353)

The bankster's game has nothing to do with HFT. Regardless, you aren't going to beat HFTs with software, you also need physical proximity to the exchange's gateways. And that isn't cheap.

Well, if that's the case then I agree with OP's assessment that the process should be criminalized.

Re:HFT Should be illegal (0)

Anonymous Coward | about 2 years ago | (#40222203)

Why do you say that? How is hft different than any other business? I can't afford to build my own car from raw materials, but Pontiac could. I don't think you would suggest that car making should be illegal.

Re:HFT Should be illegal (1)

jbmartin6 (1232050) | about 2 years ago | (#40222789)

Why do you say that? How is hft different than any other business? I can't afford to build my own car from raw materials, but Pontiac can. I don't think you would suggest that car making should be illegal. You are free to open an HFT business if you can get the money together, just as you are free to start making cars if you can put the cash together.

Re:HFT Should be illegal (0)

Anonymous Coward | about 2 years ago | (#40220681)

Only organizations that can purchase computing with a direct link to the exchange can engage in HFT. The general public cannot engage in this kind of trading. It isn't like the NYSE has a REST API that you could operate from a distributed HFT bot network.

Re:HFT Should be illegal (1)

mikael (484) | about 2 years ago | (#40221175)

The banks choose cto locate their trading computer systems right next to (if not in) the co-location centers where the fibre-optic routers of the trading network are connected. The boxes being discussed connect those computers to the trading network. Everyone else gets the slow as molasses "Internet".

The trading algorithms work by making frequent future price bids and sales, then cancelling those if the price isn't right. Then they can pocket the difference. Because of their proximity and short "hop" distance they can do this as fast as new values come in.

Your home PC is going to be 10 or more routers away and only get a new price every few seconds.

Re:HFT Should be illegal (1)

Bengie (1121981) | about 2 years ago | (#40221301)

Don't even care about seconds. There is a noticeable difference between being a block away and in the same building. When you're talking about sub-microsecond difference a noticeable difference, then it's just getting insane.

Re:HFT Should be illegal (1)

gl4ss (559668) | about 2 years ago | (#40222827)

there's plenty of robo trading programs available for you if you wish..

the problem is that you'd need to get preferential fast access to the market too for them to be any good for you.

now - add the fact that it's the same entities providing the chance to trade these stocks which has that preferential treatment(bought with money, sure) and it does get a little fishy. they're running a business using information which at the point that they receive it is in fact insider information(obtained before others have access, due to latency) to push their trades to the trading systems faster than others. it could be reasoned to be bribed access to insider information - sure, it might be insider information only for 10 ms or so but that's why it's high frequency.

I personally have nothing against robot trading as such. it's just that everyone should have a chance at it -and at the very least it shouldn't be decided in financing company boards who gets to skin the milk- and because it's a bribe bid war to get access it can never happen without some legislation, as currently the network provider and the stock market running companies see value in it.

maybe the whole system should be run on 5 minute ticks, or thereabouts. if there's identical buy/sale offers then have a certified randomizer decide who gets the sale/buy made - not using who sent it first. that would leave enough time on it for it to not matter that much if your server is sitting in nyse basement or at some colo in baltimore, provided there's enough bandwidth to push your requested information to you. hft adds nothing real to the economy so there's no need to keep it possible for the sake of skinning money from others using the system. if the stock exchange wants a bigger cut they should just directly take it from the trades and not do it with this kind of shenigans which go against the spirit of fair trading.

Re:HFT Should be illegal (1)

makomk (752139) | about 2 years ago | (#40224969)

Even if they did create a HFT program that everyone could use, and even if it didn't require colocation in the exchange's server room thanks to the speed of light (which it does), and even if it did manage to outsmart the existing trader's software, the big traders would just find some way to have them arrested and convicted of fraud just like they did with the last group who tried that without inside contacts and political influence. You see, apparently it's fraud to do HFT in a way that confuses someone else's transing algorithms - but only if you're an upstart and they're an established player.

Would have helped FB IPO (1)

Dareth (47614) | about 2 years ago | (#40220335)

It would have helped in the Facebook IPO. All the investors with this level of link would have devalued Facebook stock faster than normal folks on DSL could have bought it.

http://www.google.com/finance?client=ob&q=NASDAQ:FB

Expand out the whole chart. Looks like a great design for a water slide at a kiddie park.

Re:HFT Should be illegal (1)

jmerlin (1010641) | about 2 years ago | (#40221985)

I say we postpone any decisions like this until after they figure out how to send information faster than the speed of light. Greed is a pretty powerful tool, it appears.

Now drains your purse faster.... (1)

mseeger (40923) | about 2 years ago | (#40219923)

Where you could previously only bailout one ot two banks per year, thanks to this technology about a dozen bailouts are now possible.... Isn't it nice.

Low latency in financial market trades (1)

aglider (2435074) | about 2 years ago | (#40220089)

Is like playing the Russian roulette game. With plutonium bullets. Close to a fuel tank.
Yes, we'll all loose money much faster!

Latency (0)

Alarash (746254) | about 2 years ago | (#40220099)

This is funny because all the banking companies, in the past, removed their firewalls on their intoconnection with trading places. Now that they've been hacked left and right, they are starting to put them back because of this. Firewall vendors are now starting a war with regards to latency (also keep in mind this is one-way latency).

Fortinet for instance announced [fortinet.com] a sub-9 microseconds firewall. That's 9000 nanoseconds. Check Point followed-up [checkpoint.com] with a sub-5 microseconds latency. Oh, this is with 64 bytes packets, pretty much the minimum size you can get on a link.

With such "bottle necks" I don't see the point of going to the 100's in the nano-second (but I'm not a layer 2-3 guy, I'm layer 4-7 all the way) given this.

A solution seems to be timestamping the financial requests when the order is sent, and when the server receives the packet it can back-order at the price of the stock when the order was given. I guess it's better not to buy stock than to buy it at the wrong price. But then again, I don't like high-speed trading very much and I'd rather have this concept die.

Re:Latency (1)

jank1887 (815982) | about 2 years ago | (#40220269)

"can back-order at the price of the stock when the order was given."

interesting, but if someone else already got that stock at that price, by what right can they give you someone else's stock at a price different than they were offering? where's that price difference getting made up?

Re:Latency (1)

Cassini2 (956052) | about 2 years ago | (#40221193)

The short-term trading reduces the average profitability of long-term trades. It is like purchasing goods direct from the manufacturer, versus purchasing goods via a variety of middle-men. The middle-men must extract a markup to pay for their time.

The big stock market traders have found a new variation on the centuries old system of middle-men. They speculatively execute trades designed to intercept profitable movements on the stock market. In short, they purchase from the seller before the long-term trader gets a chance too. This does have the advantage of improving market liquidity, however in cases of model or computer error, this isn't always a good thing.

The bigger problem for long-term traders is that the short-term trading steals some of the profit. In the absence of short-term trading, the long-term trader would have even odds of receiving a fair trading price. If the short-term traders are capable speculatively intercepting a profitable set (and only a profitable set) of trades, then that necessarily means that the long-term trader is less likely to get an equitable price distribution.

Re:Latency (1)

jbmartin6 (1232050) | about 2 years ago | (#40220699)

Citations please on 'hacked left and right'. I've never heard of any HFT getting hacked via interconnect with the exchange

Meanwhile... (5, Interesting)

bertok (226922) | about 2 years ago | (#40220421)

Even if a lot of research has been put into reducing the latencies of switching technology, the vast majority of real-world deployments are nowhere near where they should be. The result is corporations spending millions upgrading their core switching, and then the result is the same or worse than what they had with ordinary gigabit technology.

I've been to more than half a dozen sites recently with new installations of 10 GbE, but with terrible network performance. All too often, I'm seeing latencies as high as 1.3 milliseconds even for servers on the same switch. Read up on bandwidth-delay product [wikipedia.org] too get an idea of why this would severely nerf throughput. The odd thing is that at a number of these sites, older servers with 1 GbE connected to the same switching infrastructure get 100% of wire speed without issues.

I don't know exactly what the root cause is, but I'm starting to suspect that the extra latency is coming from somewhere that network engineers don't usually test, like CPU power management taking an excessively long time to wake up a core to respond to a packet. What I think happens is something like this:
- The fast network delivers a burst of data very quickly.
- The receiver CPU starts to slowly wake up from sleep mode, while the sender is waiting for an ACK packet, because it has finished sending an entire TCP window.
- The sender CPU goes to sleep, because it still has nothing to do.
- The receiver CPU finally gets around to the packet, which it processes quickly and efficiently, sending the ACK back.
- The receiver OS sees that the CPU is "0.1%" busy, has nothing to do now, so it sends it to back to sleep.
- The sender CPU starts to slowly wake up, while the receiver is also asleep, waiting patiently for more data.
- The cycle repeats, with more waiting at every step.

With slightly slower networks or CPUs, the CPUs never get a chance to be idle long enough to enter a sleep state, so everything is always ready for more data. I've seen 3x improvements in iPerf TCP throughput by simply running a busy-loop in a background process!

Re:Meanwhile... (3, Interesting)

Cassini2 (956052) | about 2 years ago | (#40220961)

The number of interrupts per second that a modern processor can handle has stayed relatively fixed for a large number of years, and network response time is a strong function of interrupt performance.

It has been a while since I benchmarked interrupt response on a variety of processors with the same block of code. However, when I last did it, a 32 MHz 8-bit PIC18 series microcontroller (MCU) was capable of processing a real-time interrupt at 10,000 times per second. A much faster 3 GHz x86 CPU could manage 70,000 interrupts per second under Real-Time Linux. This wasn't much of an improvement, considering the x86 CPU is theoretically 100 times faster, was capable of executing multiple instructions per clock, and the little 8-bit PIC MCU has a hard limit of around 8 MIPs.

Why does this happen?
For a variety of factors including:
1. The amount of data a modern CPU must flush on an interrupt is huge. Most of the cache needs to be flushed and replaced, and this means a great deal of memory bus bandwidth.
2. Main memory latency in the modern PC is huge. Modern compiler designers assume it to be on the order of 100's of clocks.
3. Modern operating systems have to reload the page tables for every user/kernel mode transition. This takes time, and possibly more interrupts.
4. The I/O response time of the PCI bus is terrible relative to the cycle time of the processor. This means that most of the network traffic is transferred via DMA. However, this optimization only helps in terms of bandwidth, not latency.
5. Multiple cores don't really help. Synchronization overhead is a killer. Tricks like software transactional memory can help, however typical I/O devices lack the ability to support software transactional memory. Even simple techniques, like giving each core its own I/O and thus eliminating synchronization overhead, are often not implemented. Linux is still trying to eliminate the "Big Kernel Lock".

In short, the interrupt response latency in modern processors has really not improved much. This was a big discussion in some of the Ethernet working groups, because some of the simulations pointed out that 10Gb Ethernet performance might be limited by interrupt response time on the processors.

Re:Meanwhile... (2)

Bengie (1121981) | about 2 years ago | (#40221579)

There is hope around the corner, Netmap claims to share no locks among established TCP connections. It also claims to scale extremely well with many cores. A 950mhz single core CPU can saturate a 10Gb interface. It can also attach a given connection a to a given core and have the NIC forward the data to the L2 cache so it's ready to be processed. It is also capable of handling send/receive events on different cores for the same connection.

Should make for some fast routers. It is being ported to Linux and is in FreeBSD 10 Head.

Modern OS's tend to use DPC(deferred procedure calls, or something) in place of many interrupts. This keeps the CPU from cache-thrashing. Not great for firewalls, but great for user-mode programs.

Re:Meanwhile... (2)

joib (70841) | about 2 years ago | (#40223373)

Some additional points:

- FWIW, Linux finally got rid of the BKL in the 3.0 release or thereabouts.

- Many (most?) 10Gb NIC's are multiqueue, meaning that the interrupt and packet processing load can be spread over multiple cores.

- Linux and presumably other OS'es have mechanisms to switch to polling mode when processing large numbers of incoming network packets.

That being said, your basic points about interrupt latency being an issue still stand, of course.

Re:Meanwhile... (3, Interesting)

bertok (226922) | about 2 years ago | (#40226143)

That's similar to what I'm seeing.

I found a "DPC ping" tool which queues a simple Kernel task from User mode, and measures the response time as if it was an actual network ping.

I found it interesting that it was well correlated with both ping times and tested network throughput, and that the DPC ping time wasn't consistent. Some fast CPUs had terrible DPC pings, and some older slower models were much faster. The operating system also contributes significantly, I found some combinations where the average was OK, but there were regular spikes of high latency.

Now that I've done more benchmarks across more sites, I've been recommending jumbo frames much more often. Previously I though it was a nice-to-have, but these days I'm starting to be of the opinion that without it the money spent on "10 GbE to the server" is just wasted.

Re:Meanwhile... (1)

gramty (1344605) | about 2 years ago | (#40230233)

As mentioned interrupt processing / context switches can add latency and jitter. As a 10G LAN has a very small round-trip delay (RTD), TCP can calculate the re-transmit timeout (RTO) to be a very small number. which makes it very sensitive to small amounts jitter, and can result in packets incorrectly being flagged as lost, this causes re-transmission and for the TCP window size to be zeroed (killing throughput) (some congestion control tuning can help here). The problem can become severe with 10G networks to a VM over a software bridge, but to the jitter introduced by the bridge. (SR-IOV can help here). There is a lot you can do to TCP to improve its performance in such circumstances, increased window buffers, use a modern congestion control algorithm, interrupt coalescing, SR-IOV. For very low latency applications (like HFT) people generally don't use interrupts, they configure their NIC to kernel bypass (user space library with direct access to the NIC hardware, to avoid context switching), map to the optimum NUMA space for the core handing network events, keep their application in CPU cache, align data-structures to cache lines, turn off all hyper-threading and power saving and assign a core to busy spin checking for network events, not very green.

Side Effect (1)

Yvan256 (722131) | about 2 years ago | (#40221483)

Unfortunately, their hardware has the unfortunate side-effect of flipping all bits upside-down.

Re:Side Effect - Doubles the profit (1)

N Monkey (313423) | about 2 years ago | (#40221863)

Unfortunately, their hardware has the unfortunate side-effect of flipping all bits upside-down.

This is actually to the benefit of their sales department because you always have to buy them in pairs. :D

Not a switch -- a mux (0)

bee-17 (893779) | about 2 years ago | (#40223025)

This is not a switch, it's a fan-out device for one-to-many and many-to-one communications. It does not do L2 forwarding, MAC address learning, security, multicast, QoS, or congestion control. It's only use is for a SINGLE host to exchange low-latency lightweight messages with a bunch of other hosts. 10GE is used for its low latency properties only. In fact, if you actually tried to send any sort of high traffic volume through this mux, it would fall on its face.

HTF (0)

Anonymous Coward | about 2 years ago | (#40226937)

High Frquency Taxes on that market would be a consequent development.

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