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Aussie Telco Lays New Fiber For Microsecond Trading Boost

samzenpus posted more than 2 years ago | from the we-can-make-it-faster dept.

Australia 212

schliz writes "Australian data center and telecommunications provider Vocus has installed two new underwater fiber links across the Sydney Harbor in a bid for the lowest connection latency between the city's financial district and the Australian Securities Exchange's recently opened data center, north of the CBD. The project involved 1.6 kilometers of custom, 312-core single-mode optical fiber cable, and was expected to deliver a route that is 400 meters shorter than existing links. RTFA for pretty installation photos."

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looks like a.. (0)

Anonymous Coward | more than 2 years ago | (#40333007)

waste of cash?

Re:looks like a.. (1, Insightful)

cbope (130292) | more than 2 years ago | (#40333011)

Not according to the politicians who were bought.

Re:looks like a.. (3, Informative)

Anonymous Coward | more than 2 years ago | (#40333043)

This is a privately owned cable.

Re:looks like a.. (5, Insightful)

_merlin (160982) | more than 2 years ago | (#40333299)

Definitely. Everyone who really cares about low latency is renting rack space colocated with the stock exchange at the site in Gore Hill. There is no point shaving 400m off the link to the CBD, as it will still be far poorer latency than running colocated. There's nothing in the CBD of significance that would make you want to run an application there vs in the colo.

Re:looks like a.. (2)

edgr (781723) | more than 2 years ago | (#40333393)

This is really for connecting the two exchanges in Sydney, the ASX and Chi-X. Plenty of stocks trade on both exchanges so the advantages to knowing sooner what is happening on the other exchange are obvious.

Re:looks like a.. (3, Interesting)

_merlin (160982) | more than 2 years ago | (#40333889)

Not really. Chi-X is at Global Switch in Pyrmont and there are already dedicated fibre links to the ASX colo at Gore Hill from there. This link appears to run to the CBD. Besides, there's very little volume on Chi-X so no-one trades there. It's a bit of a catch 22 - no volume there, so no-one trades there, so there's no volume. I reckon it's just used for re-reporting negotiated trades as it's cheaper than reporting on ASX. There definitely isn't enough going on there to make any money out of arbitrage or for executing hedges or anything like that.

High-Frequency Trading (5, Insightful)

Anonymous Coward | more than 2 years ago | (#40333015)

Is there anything positive about high-frequency trading (which I assume is the reason for this link)? It seems HFT it is really only benefitting large banks and introducing a whole lot of stability problems in stock markets. And what exactly is the economical purpose of investing your capital in a company for a few milliseconds?

CAPTCHA: breakage

Re:High-Frequency Trading (5, Insightful)

drsmithy (35869) | more than 2 years ago | (#40333063)

Is there anything positive about high-frequency trading (which I assume is the reason for this link)?

On the grand scale ? No. It completely perverts the whole idea of "investing" and encourages nothing but speculation.

Re:High-Frequency Trading (5, Insightful)

michelcolman (1208008) | more than 2 years ago | (#40333165)

Speculation? No, not at all. Speculation is at least on the seconds scale, not microseconds. Unless you mean "speculating that your algorithm doesn't contain any bugs". In that case, yes, it's pure speculation.

Re:High-Frequency Trading (1)

ongelovigehond (2522526) | more than 2 years ago | (#40333249)

Yes, the benefit is that stock prices will stay nicely synchronized between different locations, and that the average Joe doesn't have to worry about it.

Re:High-Frequency Trading (1)

michelcolman (1208008) | more than 2 years ago | (#40333301)

Yes, the benefit is that stock prices will stay nicely synchronized between different locations, and that the average Joe doesn't have to worry about it.

which would be impossible to achieve if trades took one second instead of a few microseconds...

Re:High-Frequency Trading (1)

ongelovigehond (2522526) | more than 2 years ago | (#40333407)

In that case, synchronization would take seconds instead of microseconds, which would also open up the window where the high frequency trader would be vulnerable to external news that could upset the stock price. Admittedly, the benefits are small (measured in cents or fractions thereof), but the cost is small too.

Re:High-Frequency Trading (1)

michelcolman (1208008) | more than 2 years ago | (#40333441)

which would also open up the window where the high frequency trader would be vulnerable to external news that could upset the stock price.

In one second? Really?

The news still has to be processed by a human, right? Can those people read a news item and feed info to their algorithms in less than a second?

Re:High-Frequency Trading (2)

mwvdlee (775178) | more than 2 years ago | (#40333607)

The news still has to be processed by a human, right? Can those people read a news item and feed info to their algorithms in less than a second?

The more advanced algorithm do this already. Statistical analysis of text works quite well on spam mail, it'll work even better when millions of dollars are involved.

The whole idea of those high speed traders is to respond before the rest of the world. If the rest of the world starts reacting sooner as well, you need to go even faster.

Iterate a few times and you end up with the current situation where computers make all the decissions and economics have nothing to do with it; just mathematics.

It'd be quite fascinating were it not for the very real chance of bankrupting random companies due to a minor bug.

Re:High-Frequency Trading (2)

michelcolman (1208008) | more than 2 years ago | (#40333809)

It would be funny to send out news bulletins like "Bernanke refrained from not announcing an end to quantitative easing" and then watching all the HFT algos trade in different directions, then :-)

Re:High-Frequency Trading (2)

semi-extrinsic (1997002) | more than 2 years ago | (#40333645)

It is well known that the algos read news themselves, without human intervention.

However, the main argument in support of HFT is not "synchronization", but rather an increase in liquidity. Pro-HFT people claim that HFT fulfills a market-making function where it matches up a buyer and a seller very rapidly, while pocketing a small fraction of the bid-ask spread. They don't tell you that they use e.g. quote stuffing to artificially increase this spread, thus earning more money. Have a look at this graph [nanex.net] from Nanex (they do a lot of very interesting analysis of HFT algos). Note that the entire width of the graph is 200 milliseconds.

Re:High-Frequency Trading (4, Informative)

neyla (2455118) | more than 2 years ago | (#40333463)

Not really. Stock-exchanges should either just enforce once-a-minute matching (with lottery determining which trades to fulfill if there's several takers), or they should just set some minimal fee for every non-filled order which stands for less than a minute, 1% of the order-value would be plenty, probably even 0.1% of the order-value would be enough to stop HFT dead.

They're taking steps, some of them, but it's baby-steps. For example the Norwegian stock-exchange is adding a $0.01 fee for every trade - for those traders who file more than 70 orders for every *one* that goes trough, only orders which are withdrawn before 1 second has passed, are counted.

This is an *extremely* timid step. Make it $1, one in ten, and 1 minute rather than 1 second, and we're talking.

Re:High-Frequency Trading (1)

KreAture (105311) | more than 2 years ago | (#40333825)

Finally!
For every cent these HFT-basters make, a cent is lost to the normal investor, money fund or long time invested hopefull.
They claim they are making values but the values come from someone else. What they are is abusing a system that was never ment to do this in the first place.

Re:High-Frequency Trading (1)

Bengie (1121981) | more than 2 years ago | (#40333663)

The positive thing is that they'll lay all of this redundant ultra-low latency fiber, go bust at some point when it's finally regulated, then everyone will make use of lower pings.

Re:High-Frequency Trading (1)

Anonymous Coward | more than 2 years ago | (#40333807)

No, it'll get bought by a big ISP and then it'll go dark. Once potential competition is stifled they'll raise prices for everyone.

Re:High-Frequency Trading (1)

Anonymous Coward | more than 2 years ago | (#40333699)

People completely misunderstand HFT. The main people who are on the losing end are big banks that were formerly the main "market makers". Now, it's small tech firms that are filling most stock orders. For the average customer, the price they pay for the stock is LOWER than before, especially for "market" orders. It's called arbitrage, and it reduces the inefficiencies of the market.

The main reason HFT are giving a bad rap is because they are taking all the market share away from the big trading houses.

Re:High-Frequency Trading (4, Insightful)

fredrated (639554) | more than 2 years ago | (#40333781)

High Frequency Trading is the equivalent of 'shaving', the practice of shaving a small amount from gold coins, then passing the coins on. It produces nothing, it only steals from the flow of wealth.

Re:High-Frequency Trading (1, Informative)

Anonymous Coward | more than 2 years ago | (#40333947)

I used to work for an algo-trader, and so AC. I should point out that I was tech-support, so not a trader, not an algo programmer and generally didn't get anywhere close to the "real" knowledge of how the company or it's various parts worked in detail. However...

The one I used to work for identified the "race to the bottom" and seemed to generally avoid it. They did co-locate in some exchanges (but by no means all - there are sometimes advantages to *not* being in the exchange), and generally did some of everything you can think of. They also did vast amounts of other things at the same time, so whatever your beef is with algo-traders, they did some of it, but most of their business was doing other stuff.

IMHO, the only algo-traders causing instability are the bad ones. The good ones have algos that specifically scale back when things go crazy, but the bad ones say their being responsible because they "turn everything off when things go crazy". Turning off is probably the worst thing you can do in a crisis, and actually, the good algo traders make money out of the most volatile situations. Turning off means you cancel all your open orders, which removes liquidity from the market, which means crazy prices for things can occur. If you have lots of liquidity (even shrewd liquidity) then you may not get what you think is a great price, but it won't be an off-the-chart bad one.

So how's all this good for the world at large? Well, I'm honestly quite mixed about it, but what I do know is:
- Algo traders provide liquidity. This really does help all of us that want to invest (long term) for our pensions or just to do something other than trust banks credit interest.
- No stock exchange in history has ever been "about long term investments". They have all, without exception been about a way for companies to raise money, and for everyone else to try to make some money from time to time. If you want to invest, then go buy some stock (maybe privately - no exchange required) and sit on your investment for a few years. What happens in the meantime is irrelevant, and thus so are the algo traders. If you think you're being smart by setting a stop-loss or whatever, then all you're doing is a speculative trade, and if you're doing that, you're no different from the algo traders, except they're better at it than you. Also, if your chosen stock doesn't pay dividends by policy, then you have to wonder what kind of trade this is - is it investment or speculation?
- Algo traders spend *vast* sums of money on technology. This is also "liquidity provision", but at Dell rather than the stock exchange. They push tech to new levels, which as we've seen from space exploration and F1, helps everyone eventually.
- Algo traders spend a lot of money on other stuff too - be it travel, food, office space, whatever. They're by no means a charity, but they do spend money in their local areas.
- Algo traders grow little-to-zero marketing or sales people. For the average techie, this probably seems like a good thing ;-)

One other thing I'd like to debunk is the myth that they hold onto things for microseconds - that's not really true (although there are times that they might). They might buy on one exchange and sell on another in almost the same moment, but that's subtly a different thing (and the electronic equivalent of buying things cheaply in another city and selling them in your own). There's no speculation in the buy/sell method, and as algo traders will tell you... don't take any risk you're not getting paid for. Buying something in the hope it'll go up and then selling it again doesn't make a great deal of money unless you hold onto it for a while, so microseconds make no sense.

Also, one last thing, for which I'll climb onto my soapbox. For anyone who's lost money on a stock exchange and blames the algo-traders: If you weren't up to the task, you shouldn't have played the game. I won't be at Wimbledon this year because whilst I can play tennis, I'm not very good at it. I might play against my wife, or maybe in the local pub league, but won't be going to Wimbledon. If you don't really know what you're doing, then don't go playing on an exchange with pro players on it. Likewise, even if you're a pro-baseball player, then don't play at Wimbledon. The rules aren't what you're expecting, and so they'll trip you up when you aren't expecting it. Every exchange has different rules, and you should know then before you play there. I'll bet a tiny fraction of people that lost money on stock transactions ever read the summary of exchange rules, much less the actual rules before they placed their trade.

Re:High-Frequency Trading (0)

Anonymous Coward | more than 2 years ago | (#40333953)

it increases liquidity and thereby reduces the risk of market participants. .. but then again, trying to explain the inner workings of financial markets has become impossible on Slashdot.
Ignorance is now held high, as a badge of honor, whenever financial matters are discussed.

!Length (2, Insightful)

Anonymous Coward | more than 2 years ago | (#40333021)

The speed of the link isn't due to the shorter length but bypassing all the other parties along the line and dedicated bandwidth. Bypass the queue.

Re:!Length (2)

Bengie (1121981) | more than 2 years ago | (#40333723)

Are you sure? 400m in fiber is about 2.67 usec for light.

299,792,458m/s/1,000,000usec=299.792458m
400/299.792458m=1.3342563807926081983023068578997
Light in fiber is closer to .55c, which is close enough to .5
1.33*2=2.67us to travel 400m

Queuing time would be in addition to the shortening.

Not surprising (4, Informative)

ducomputergeek (595742) | more than 2 years ago | (#40333033)

I have a friend who is a developer for a hedge fund where they pay him and a few others north of $250k each per year (it is NYC) to try and and shave milliseconds off transactions. They spend big bucks trying anything to reduce a transaction time from 4ms to 3ms or lower.

Re:Not surprising (-1, Offtopic)

Errol backfiring (1280012) | more than 2 years ago | (#40333057)

"The problem with socialism is eventually you run out of other people's money" - Thatcher.

I think the current recession proves that it is the capitalism at the stock exchange that has caused other people's money to run out.

Re:Not surprising (1)

Theophany (2519296) | more than 2 years ago | (#40333099)

I think the current recession proves that it is misguided to think it is all down to one sector of the economy.

Re:Not surprising (5, Insightful)

kanto (1851816) | more than 2 years ago | (#40333369)

I think the current recession proves that it is misguided to think it is all down to one sector of the economy.

The current recession was effectively created by the financial sector, otherwise it'd be over already. What they did was they leveraged some crappy loans into a global crisis and then they insured themselves by betting against those loans. The biggest heist in history was the fact that bailing out the insurance companies was basically the same as bailing out the institution who'd caused everything.

Atm. you cannot trust the financial sector, that's why we're still in this mess.

Re:Not surprising (1, Insightful)

Theophany (2519296) | more than 2 years ago | (#40333641)

Just because you don't trust them doesn't mean that they are entirely to blame.

Or are we sweeping the rampant profligacy of governments over the past 20 years under the carpets because it doesn't gel well with this hang-a-banker sentiment?

If you want to blame everything on a bunch of guys who were acting inside the rules and regulations they were told to abide by, that's fine. But the real damage was done by incompetent legislators and regulators who failed to pay attention and adequately oversee the industry they were charged with.

And that's not even touching the mass market of morons who thought there was nothing intellectually challenged about taking on a mortgage several times their salary to pay for a house and then several credit cards to pay for all the amenities that were far beyond their modest means. It cuts both ways. Banks and the financial industry are by no means blameless, but the argument that they are entirely to blame for the world's current economic woes is not only specious, but a blatant scapegoat that the uninformed masses have been happy to bleat about for long enough now.

Re:Not surprising (1)

Anonymous Coward | more than 2 years ago | (#40333657)

Is this the line of logic that goes "It's government's fault for not sufficently regulating and overseeing the industry, therefore we should have less government regulation!"? Because I'm getting kind of tired of that one.

Re:Not surprising (1)

Hentes (2461350) | more than 2 years ago | (#40333719)

Just because something is legal doesn't make it moral. Of course, noone is questioning the responsibility of the governments, but this story is not about them.

Re:Not surprising (3, Informative)

MRe_nl (306212) | more than 2 years ago | (#40333113)

"The problem with the world is eventually you run into people like Thatcher". - MRe_nl

All money is other people's money: my expenditure is your income and vice versa.
Thatcher was a whip used on the lower and middle-classes in the UK. Her continued praising leaves me baffled.

Re:Not surprising (0)

Anonymous Coward | more than 2 years ago | (#40333271)

They're *TORIES*
They can't admit they've made mistakes.

actually, strike that, they're POLITICIANS. They can't admit they've made mistakes.

Re:Not surprising (2)

SuricouRaven (1897204) | more than 2 years ago | (#40333321)

"Her continued praising leaves me baffled."

She was very good with one-liners. Powerful weapons in politics.

I still remember her by one line: "Thatcher, Thatcher, School Milk Snatcher!"

Re:Not surprising (0)

Inda (580031) | more than 2 years ago | (#40333571)

I remember her by another line.

"That thieving bitch"

I think my old man made it up though. I do remember the hardship she caused my family when I was young. She didn't give a shit about people. I will celebrate the day she dies.

Profit isn't all bad (1)

OeLeWaPpErKe (412765) | more than 2 years ago | (#40333439)

All money is other people's money: my expenditure is your income and vice versa.

No it's not. Profits (if they result from actual new value, like in a car company, as opposed to taxes and de-facto taxes like the phone company) aren't other people's money. They're "new" money that didn't really come from anywhere. That money can support taxes without any impact to the economy.

Everything else, which is the large majority of money even in a capitalist economy, yes, that's other people's money.

Of course, it is not impossible to have profits in a communist economy. It's just less likely. Capitalism forces innovation, and forces efficiency increases. That sucks really badly, of course, for those who can't increase efficiency, but the alternative is a slow descent to the point where the state can no longer support keeping it's citizens alive, and either revolution or mass murder has to follow that point.

Re:Profit isn't all bad (0)

Anonymous Coward | more than 2 years ago | (#40333501)

Profits (if they result from actual new value, like in a car company, as opposed to taxes and de-facto taxes like the phone company) aren't other people's money. They're "new" money that didn't really come from anywhere

So if your car company fails to sell a single car, they can still have "Profits"? This is a new and unique definition I have never heard of.

With or without the tax middleman taking a cut of everything, you appear to be arguing against the "velocity of money" theory, an extraordinary claim which is going to take extraordinary proof on your part.

Re:Profit isn't all bad (2)

meglon (1001833) | more than 2 years ago | (#40333847)

Capitalism doesn't force innovation. If it did, we'd be out innovating everyone in the world.. we're not. We have a bunch of corporations trying to buy the system of regulations it wants to shut down the innovations of others. We have other corporations using everything they can do eliminate competition, not through innovating new items, but by trying to block the use of old or common items through a disaster of a patent system.

Need forces innovation. If someone needs something that doesn't exist, guess what happens....

Soviet Russia wasn't capitalist, but they sure as hell got into space before us. That took innovation.

Re:Not surprising (1)

LordLucless (582312) | more than 2 years ago | (#40333467)

I think the current recession proves that it is the capitalism at the stock exchange that has caused other people's money to run out.

And I think that quote proves that people no longer know what capitalism means, and see it as a synonym for "making money".

Re:Not surprising (1)

Charliemopps (1157495) | more than 2 years ago | (#40333643)

This is definitely not capitalism.
Driving up the price right before someone wants to buy a stock is basically highly sophisticated price gouging.

Re:Not surprising (5, Informative)

Datamonstar (845886) | more than 2 years ago | (#40333127)

There was a good talk at Defcon about those networks. They can't afford to run any security, even as an afterthought and they are completely open with nothing but a dust-thin layer of obscurity covering them. All in the name of the dollar.

Re:Not surprising (2)

michelcolman (1208008) | more than 2 years ago | (#40333205)

So what are the hackers waiting for?

Re:Not surprising (2)

Saint Fnordius (456567) | more than 2 years ago | (#40333305)

Ah, more evidence that the financial industry has been overtaken by the gamblers and card sharps. Only instead of counting cards at the blackjack table, they are gambling that milliseconds of latency will give them an edge over the rubes.

Re:Not surprising (1)

Stargoat (658863) | more than 2 years ago | (#40333431)

Only $250k for that work? Ridiculous. These people can make the company billions of safe reliable dollars. They aren't out there with the kind of risks that come from other forms of investment. Good technologists should be seeing the kind of money that traders make. Not what amounts to minimum wage in the most expensive city on the planet.

Interesting Risk Assessment (5, Insightful)

Anonymous Coward | more than 2 years ago | (#40333035)

From the article:

“It’s great to have [multiple paths], so if something did happen to the Harbour Tunnel, we’d be one of the carriers with capacity,” Spenceley told iTnews.

“It’s a one-in-a-million-year event but you just have to have it.”

But for nuclear power plants it's ok to only plan for 1 in 10'000 year tsunamis or so. But god forbid that trading link went down.

More money from the real into the virtual economy (5, Insightful)

Errol backfiring (1280012) | more than 2 years ago | (#40333051)

Microsecond trading should be downright illegal. Instead of market fluctuations leading towards a stable price, market fluctuations are used to pump money out of the real economy into the virtual one. Nothing of value is added by such trade. Only real people are prevented from adding any value.

Re:More money from the real into the virtual econo (0)

jibjibjib (889679) | more than 2 years ago | (#40333117)

Where's this "virtual economy" money is being pumped into? Doesn't the profit from HFT go to the owners of the HFT company, who then invest or spend it? It's not just disappearing down a black hole, it's part of the same economy as the rest of us.

Re:More money from the real into the virtual econo (1)

gl4ss (559668) | more than 2 years ago | (#40333147)

Where's this "virtual economy" money is being pumped into? Doesn't the profit from HFT go to the owners of the HFT company, who then invest or spend it? It's not just disappearing down a black hole, it's part of the same economy as the rest of us.

yes, they invest it.. into silly things like shortening the route 400 meters.

trickle down economics doesn't really count here, as no new wealth is created - but old wealth(resources) is used for this.

Re:More money from the real into the virtual econo (1)

OeLeWaPpErKe (412765) | more than 2 years ago | (#40333621)

Besides adding value to the stock market. You mean letting people that actually *know* what something is worth price it correctly ? That's called insider trading, and will land you in jail !

First rule society places on a casino is that everybody is equally likely to loose money.

Re:More money from the real into the virtual econo (1)

Bengie (1121981) | more than 2 years ago | (#40333743)

It does cause temporary jobs and adds infrastructure. Too bad that infrastructure is pretty much reserved for more of this crap.

Re:More money from the real into the virtual econo (0)

Anonymous Coward | more than 2 years ago | (#40333951)

A company had to manufacture these fibers, workers at that company are happy that someone invested into that silly thing because it means they have a job
Workers, divers had to lay down the fiber, they're happy that someone invested into that silly thing because it means they have a job
I'm all against HFT because of a) the instability they create and b) they are not actual investments but just a mean for some guy to put money in their pocket that I think they don't deserve, but let's not see everything black and white, money is never lost, and when it's used to improve infrastructure, the less wealthy also enjoy a part of it.
When the HFT guys buy big yachts or $1M sport cars, I think they totally don't deserve it and I hope it sinks/crashes, but at least the money was used for something, some manufacturers have a job thanks to it. That's not perfect, that's not even "good-enough" from my POV, but it's not wasted money.

Re:More money from the real into the virtual econo (0)

Anonymous Coward | more than 2 years ago | (#40333151)

By that argument, you might as well levy a share trading tax, and send the moneys to a company that employs people to continuously hop around the Sydney Opera House. Reduces unemployment.

Re:More money from the real into the virtual econo (0)

Anonymous Coward | more than 2 years ago | (#40333153)

Exactly, just like those takings from all those robberies gets spent on drugs, thus perpetuating the cycle of money.

Re:More money from the real into the virtual econo (3, Insightful)

next_ghost (1868792) | more than 2 years ago | (#40333231)

It's not just disappearing down a black hole, it's part of the same economy as the rest of us.

Actually, that's not true anymore. Take a look at how much consumer goods people buy all the time. Now think for a while how many people actually make all those consumer goods and where. The thing is, it takes just a few thousand people to manufacture enough units of the same goods for the whole world.

So yes, from our point of view, money is disappearing down a black hole. The black hole just contains a significant part of the world economy (in terms of money, not people). Some money leaks back from the black hole through employee wages but those money leaks are not as evenly distributed across the world as money suction. Do you still think that some areas can't be sucked dry?

Re:More money from the real into the virtual econo (1)

OeLeWaPpErKe (412765) | more than 2 years ago | (#40333651)

That's what's really happening here. All the people that actually work, including those that do useful things without getting paid, total, is ~ 2 billion, and dropping fast. And if you killed off the other 4 billion, keep in mind that a few hundred million of those 2 billion are essentially employed to babysit the 4 billion "useless" people.

Re:More money from the real into the virtual econo (3, Insightful)

Rogerborg (306625) | more than 2 years ago | (#40333339)

"Trickle down" is fine in theory. In practice, the smart new money goes where the smart old money went: appreciating assets like old art, old land, old bricks and mortar.

That's mostly a closed loop where the same goods go round and round for higher and higher prices. People rarely "cash out" and spend the profits on new things that drive demand.

Re:More money from the real into the virtual econo (4, Insightful)

Saint Fnordius (456567) | more than 2 years ago | (#40333399)

If only it were true, but it ends up going into the bank accounts of the traders, who use it not to purchase goods and services but hoard it as a way of keeping score. A lot of the financial industry is only interested in competition on who can collect the most dollars.

Re:More money from the real into the virtual econo (1)

OeLeWaPpErKe (412765) | more than 2 years ago | (#40333705)

Which is exactly what you'd want. You see most money in existence (> 90%) is such "hoarded" money. You can pretend that money doesn't exist (and in fact you have to) if you are a government. So what did we do ? Ah simple, governments (through banks) printed 10x more money than is needed to run the economy.

The problem is, of course, given that banks and governments can (at best) back 10% of the money they claim to have ... is what happens if something happens that makes banks and or governments lose 10.00000000001% of their assets. Given the fact that governments "roll-over" loans, and increase their own debt burden to pay back interest "in the short term" (riiight), they are extremely sensitive to interest rate changes, and those rates are a function of human feelings ...

Re:More money from the real into the virtual econo (0, Offtopic)

roman_mir (125474) | more than 2 years ago | (#40333209)

Microsecond trading should be downright illegal.

- no it shouldn't.

What should be illegal is government preventing competition in exchanges, preventing companies from going IPO before they complete various government requirements (by which time the IPO has no way to go but down, similarly how the US gov't prevented FB from public trading when it was still at 2-4 bucks and by the time it complied with all the nonsense it was way overvalued).

It should be possible for anybody to open their own exchange and to set their own rules and then there would be competition in exchanges, some could then have their own rules, like no automated trading, etc.

Making something specific illegal with gov't legislation is only another way to prevent competition, and it's about as useful in today's world of technology as trying to invent a workable DRM solution that cannot be circumvented by some coder.

Re:More money from the real into the virtual econo (1)

Anonymous Coward | more than 2 years ago | (#40333235)

The lack of enforcement of well established regulations on the banking industry created the financial meltdown we are recovering from. Regulation of the stockmarkets provides brakes yes, and prevents worse snake oil being peddled.

Re:More money from the real into the virtual econo (1)

fabeetz (1784788) | more than 2 years ago | (#40333969)

It should be possible for anybody to open their own exchange and to set their own rules and then there would be competition in exchanges, some could then have their own rules, like no automated trading, etc.

Right. A thousand Bernie Maddofs would be better for investors than just having one.

Re:More money from the real into the virtual econo (1)

ongelovigehond (2522526) | more than 2 years ago | (#40333279)

No. HFT used for arbitrage only stabilizes the prices. For speculation, it doesn't make much difference whether a trade is done in 1 ms or in 1 minute.

Re:More money from the real into the virtual econo (0)

Anonymous Coward | more than 2 years ago | (#40333343)

Similarly for arbitrage it shouldn't matter if it's 1 or 1.1 ms as there can be no actual market swings large enough to need stabilising. But I guess the meagre income that poor, misunderstood arbiters can scratch out of the dirt is worth beating other poor, misunderstood arbiters by a fraction of a second. Isn't it great to live in a world were mere scraps, instead of just high level speculation, can do that?

Re:More money from the real into the virtual econo (1)

__Reason__ (181288) | more than 2 years ago | (#40333423)

Perhaps we should allow trades only by hand-written, wax sealed forms submitted by hand every Tuesday at 10am on the floor of the New York stock exchange. This could well reduce volatility - but would it really make for a fairer market? HFT isn't a bad thing. If anything, it benefits the market by increasing liquidity - more shares are changing hands, so it's easier for long term investors to buy and sell them.

Re:More money from the real into the virtual econo (1)

TFAFalcon (1839122) | more than 2 years ago | (#40333533)

How does it make it easier to buy and sell? The HFT won't buy shares unless there is already a buy order from someone else. So they create volume, but the supply/demand stay the same.

Re:More money from the real into the virtual econo (1)

Hentes (2461350) | more than 2 years ago | (#40333735)

If you are a long term investor you don't mind that you have to wait a few weeks to collect the number of shares you want. HFT only benefits other HFTs and perhaps daytraders who are even worse.

Re:More money from the real into the virtual econo (1)

u38cg (607297) | more than 2 years ago | (#40333693)

Willing seller, willing buyer. End of discussion.

If the NSA submarine cuts the line to tap it . . . (1)

PolygamousRanchKid (1290638) | more than 2 years ago | (#40333191)

. . . does that add more latency to the line? Can you measure actual versus expected latency to see if your undersea lines have been tapped?

Re:If the NSA submarine cuts the line to tap it . (2, Informative)

niftydude (1745144) | more than 2 years ago | (#40333335)

. . . does that add more latency to the line? Can you measure actual versus expected latency to see if your undersea lines have been tapped?

No - you can use something like a 1:99 optical splitter so they'll barely notice the signal drop, and will add about 5mm of optical fiber into the line, so they won't notice any additional latency (less than 20 picoseconds). Then run your 1% signal into an optical amplifier, say an EDFA [wikipedia.org] , and snoop to your hearts content.

Re:If the NSA submarine cuts the line to tap it . (1)

SuricouRaven (1897204) | more than 2 years ago | (#40333511)

With the need for ultra-low latency, I imagine they'll be running these links without encryption so you can read every transaction that way. You might even be able to squeeze your own frames in during idle periods and make false transactions. Oh, what fun an attacker could have!

Random delay legislation (3, Interesting)

MM-tng (585125) | more than 2 years ago | (#40333223)

It is time to make a global law. Every transaction should be subjected to a randomised delay between 1 and 2 seconds . Problem solved, smart people can start doing something useful again.

Re:Random delay legislation (5, Funny)

MichaelSmith (789609) | more than 2 years ago | (#40333297)

Every transaction should be subjected to a randomised delay between 1 and 2 seconds . Problem solved, smart people can start doing something useful again.

Yeah like modelling the random number generator.

Re:Random delay legislation (1)

arose (644256) | more than 2 years ago | (#40333349)

They'd probably just tweak their existing predictors to compensate. If you have enough to play with all you need it odds above 0.5, no matter how small. It'd be a good start though.

Re:Random delay legislation (1)

loufoque (1400831) | more than 2 years ago | (#40333415)

A global law? You mean from the world government?

Re:Random delay legislation (1)

Lehk228 (705449) | more than 2 years ago | (#40333613)

Transactions should be done in batches every 15 minutes, this gives people time to think rather than simply acting on impulse

Re:Random delay legislation (0)

Anonymous Coward | more than 2 years ago | (#40333733)

That's like advocating the return of the horse and buggy because cars are "way too quick." Anyone that is employed in the industry and has any knowledge of how the market works would not advocate putting in random delays. Besides it's both the feeds and the order execution that needs to be lightning quick, no point in order placement round trip of 2.5 millis if your data feed is 5 seconds behind.

The reason we need such fast execution is because in the span of those 5 seconds prices can move in dollar ranges. Exchanges typically circuit break when a price moves 10% during a 5 minute period. For google that means a price change of 59 DOLLARS in 5 minutes. That's 5900 pennies in 300 seconds. That is 2 dimes a second. That could take you from making a small profit to losing millions. If i'm trading with a 20 cent edge (very, very, very generous, most edges are in single if not fractions of pennies) i could loose all my profits in that 1 second. And another second can take me in the negative, big time. Obviously this is a worst case scenario, in a stock that will never see that much loss, unless google blows up an orphanage or something, but this is the market and things like this happen.

The typical investor does not care about individual trade edges or single millisecond trade times, they just want to see overall upward gains over long periods of time, a dollar down today doesn't matter if it's up 5 next week.

Re:Random delay legislation (0)

Anonymous Coward | more than 2 years ago | (#40333753)

Oh and i forgot to mention that most trades happen in full 100 lots, not partials, so a 20 cent price change means a $2,000 move. If i have a 1,000 shares, that's a $20,000 move in one second.

Re:Random delay legislation (1)

Hentes (2461350) | more than 2 years ago | (#40333751)

Even better, give every share a timestamp of 2 weeks during which time it can't be sold. This would allow for fast trade but only in limited quantities.

Re:Random delay legislation (0)

Anonymous Coward | more than 2 years ago | (#40333755)

It doesn't even have to be random. As the time span increases, so does uncertainness and HFT loses it's efficiency. Dividing trading in "slots" of 1 second would very significantly remove what is perceived by many as the 'unfair' disadvantage of HFT

Fiber for trading, good (2)

Wizarth (785742) | more than 2 years ago | (#40333243)

Fiber for stock trading is considered good by all the government departments that had to OK this. But according to (one half of) our government, fiber is a total waste for everyone else in the country, and we should never need more then the mobile (cell phone) networks can provide...

The dichotomy is impressive.

Re:Fiber for trading, good (1)

LordLucless (582312) | more than 2 years ago | (#40333503)

Yes, because the Liberal plan was all about relying on mobile infrastructure, and not rolling out entirely new, hi-speed wireless data...

Comment (0)

allen001 (2661985) | more than 2 years ago | (#40333259)

hey tell me more about installed fiber links, how they succeeded to get the whole thing done.

Neutrinos (2)

MichaelSmith (789609) | more than 2 years ago | (#40333283)

One guy on (IIRC) boing boing had a great suggestion about neutrinos. We can now transmit and recieve neutrinos and fire them directly through the Earth. If used to carry data, latency could be reduced by 3.14 (pi). A latency improvement of that magnitude would be important to some people, particularly between America and Europe.

But unfortunately, such a system could not send information back in time.

Re:Neutrinos (1)

michelcolman (1208008) | more than 2 years ago | (#40333325)

That kind of latency is still way too high. There's no way anyone is going to try HFT from the other end of the globe. The top HFT firms are actually buying server racks inside of the stock exchange building, with the racks closest to the transaction servers being the most expensive.

Re:Neutrinos (1)

Hentes (2461350) | more than 2 years ago | (#40333819)

Theoretically, you could also do HFT between two exchanges if you are halway between them. For that, neutrinos might provide a small boost, although an 1.57x speedup most likely wouldn't be worth the costs involved.

Re:Neutrinos (1)

neyla (2455118) | more than 2 years ago | (#40333493)

You'd only reduce latency by a factor of pi/2 because signals going around only have to traverse *half* the circumference of the earth to arrive at the other end. (yes, they do it again to get back, but that applies to the direct route too!)

Re:Neutrinos (1)

MichaelSmith (789609) | more than 2 years ago | (#40333535)

Yeah you are right, I was thinking of pi*D

A waste of brains (2)

indytx (825419) | more than 2 years ago | (#40333287)

Sigh. Like the new transatlantic cable for high speed trading, another project created solely to shave off time on automatic trades and thus print money. Does this do anything? Am I the only one who sees this as driving up transaction costs because you have "investors" who really don't invest in companies trying to take almost microscopic profit automatically? Where is the benefit to the financial system? What about the economy? I wonder how long people would stand for an extra layer being added to some other industry that does nothing but get paid for doing nothing?

These trades are like taxes, but they don't pay for any roads, health care, retirement, of national defense. They just make a few DBs who don't manufacture or invent anything rich. It will never happen, but I would like some politicians to get into an ethical debate on the socioeconomic benefits of this type of activity. Seriously. How defensible is this type of activity under Western Judeo-Christian ethical frameworks? Most American jurists publicly support natural law, at least while going through public confirmation hearings, so where exactly does this fit?

Re:A waste of brains (5, Insightful)

Rich0 (548339) | more than 2 years ago | (#40333357)

Yup. In the US it sounds like about 1 out of every 3 dollars in profit made is made by the financial services sector. That is a sector that basically does nothing but move money from point A to point B - they're the middle-men of the economy.

Don't get me wrong, efficient allocation of capital is valuable. However, can it really be said to be efficient if it consumes a full third of the entire US economy?

Re:A waste of brains (1)

roman_mir (125474) | more than 2 years ago | (#40333955)

US economy has this problem and many others, all created by the Federal reserve and Treasury, and thus by Congress and Senate and the White House starting from Theodore Roosevelt.

But of-course at the end of the road there is the mob, and it's the mob that decides to vote the politicians in who promise shit that is impossible to deliver without ruining the economy, given the fact that the people who end up promising this stuff are crooks, who themselves want to get into power to steal it and the money that is rotating around it. It's the people who elect the criminals to rule them, and that's the problem.

Democracy is a way to elect yourself out of your freedoms and rights and create a democratically elected tyranny that would then rule everything by force.

What I am saying is that the problem is much deeper than just an oversized financial sector, and the financial sector and is oversized because of how undersized the other sectors of the economy are, specifically those that manufacture and produce stuff, and this is a problem created by the oversized government sector, which is that big and powerful because it promised a bunch of stuff to ignorant fools and greedy bastards who were quite happy being promised all that nonsense.

Why fiber? (1)

aglider (2435074) | more than 2 years ago | (#40333359)

Why don't they co-locate the trading server in the same server room?
Or maybe in the same rack with the same switch?

really? do they know their market at all? (2)

snero3 (610114) | more than 2 years ago | (#40333377)

Any high frequency trader HFT, market marker, derivatives trader etc.... worth it's salt has already co-located with the ALC (ASX/SFE) data center in gore hill, if you are not interested in low latency trading with the ASX then why would you bother paying the extra $$$ for these lines when you can get a fiber line anywhere in sydney for $2K a month from pipe/TPG networks.

Re:really? do they know their market at all? (0)

Anonymous Coward | more than 2 years ago | (#40333997)

Sometimes there are advantages to *not* being in an exchange. I'm no expert, but playing both is probably an advantage too.

Aussies proud of new fiber (3, Funny)

__Reason__ (181288) | more than 2 years ago | (#40333389)

Strewth! This new cable sounds Bonza! Betcha it'll get that financial data across the drink faster than you can say "A dingo ate my baby"!

Gordon Gecko (1)

ThatsNotPudding (1045640) | more than 2 years ago | (#40333473)

Microsecond greed is better.

Move in upstairs (2)

clickclickdrone (964164) | more than 2 years ago | (#40333595)

In the UK, several banks spent millions building hugely fast data centres to allow high speed trading. Then one enterprising firm rented some rooms in the same building as the London Stock Exchange and essentially dropped a cable down through the ceiling from their servers to the Exchange servers. Made quite a bit of difference...

neutrino communications? (1)

arobatino (46791) | more than 2 years ago | (#40333857)

Eventually, to get a straight-line path, they'll either have to use neutrinos to communicate, find a way to lay a cable straight through the earth from one end to the other, or move everything into space.

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