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Somebody Stole 7 Milliseconds From the Federal Reserve

Soulskill posted 1 year,26 days | from the time-flies-when-you're-making-billions-of-dollars dept.

The Almighty Buck 740

An anonymous reader writes "Three to seven milliseconds before the fed moved interest rates, billions of dollars of trades were input that took advantage of the changed rates, reaping huge profits. According to a report at Mother Jones, 'Last Wednesday, the Fed announced that it would not be tapering its bond buying program. This news was released at precisely 2 pm in Washington 'as measured by the national atomic clock.' It takes 7 milliseconds for this information to get to Chicago. However, several huge orders that were based on the Fed's decision were placed on Chicago exchanges 2-3 milliseconds after 2 pm. How did this happen?'"

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Uh... (-1)

Anonymous Coward | 1 year,26 days | (#44952171)

Can someone explain this to me in idiot? I don't see what the problem is, nor why I should care.

Re:Uh... (5, Insightful)

daniel.garcia.romero (2755603) | 1 year,26 days | (#44952219)

Can someone explain this to me in idiot? I don't see what the problem is, nor why I should care.

If you don't see a problem, then no amount of idiot will make you care.

Reason: Two Words... (2)

Anonymous Coward | 1 year,26 days | (#44952325)

Goldman Sachs

wrong two words (-1, Troll)

stenvar (2789879) | 1 year,26 days | (#44952353)

Obama administration.

Yes, sleazy corporations may be taking advantage of this, but ultimately it's the administration that is responsible for leaking this information.

Re:wrong two words (3, Insightful)

P-niiice (1703362) | 1 year,26 days | (#44952557)

No leak would allow someone to time those trades so precisely. there may have been a leak, but there was also something done to make it possible.

Re:Uh... (5, Informative)

mythosaz (572040) | 1 year,26 days | (#44952231)

Can someone explain this to me in idiot? I don't see what the problem is, nor why I should care.

FTFA

There would seem to be three possibilities: 1) Some trader was extraordinarily lucky, placing a massive bet just before a major announcement that would make that bet highly profitable. 2) There was a leak, either by a media organization with early access to the data or even someone at the Fed. Or 3) The laws of physics have been violated as the information traveled from Washington to Chicago faster than the speed of light.

Re:Uh... (5, Funny)

Russ1642 (1087959) | 1 year,26 days | (#44952311)

I'm pretty sure it was a speed of light violation. We should announce to the rest of the world this marvelous discovery.

Re:Uh... (1)

mythosaz (572040) | 1 year,26 days | (#44952389)

Here's hoping!

Re:Uh... (0)

Anonymous Coward | 1 year,26 days | (#44952497)

Nah, it couldn't be that. We would have gotten our space cash by now.

Re:Uh... (1)

Anonymous Coward | 1 year,26 days | (#44952481)

Or 4) Somebody actually spoofed the source address and the trade was placed in DC, and reached Chicago on a higher QOS level internet link.. Literally packages competing with each other in the interface queses bit buckets.
Or it could just be a flaw in the forwarding mechanism in some really big router on the way that preferred packets from one source than packets from another.

This is a much more plausible explanation.

Re:Uh... (0)

Anonymous Coward | 1 year,26 days | (#44952509)

4) Information leading to financial gain travel at speeds faster than the speed of light.

Another possibility (4, Interesting)

MickLinux (579158) | 1 year,26 days | (#44952563)

Another possibility is that it was a big player like Buffet or Sachs, counting on profiting one of two ways: a) precede the market b) bet wrong but cause the market to reverse, triggering massive losses to those who told their broker to trade according to the news, with a stop-loss protection.

To carry out B, you have to be able to place a second bid greater in magnitude but opposite sign to the first, about ten minutes after the news breaks. You also have the liquid assets to do it. since the bailouts doubled the national debt and gave it to banks in interest free loans with no set date of repayment, then yes, itmay be possible that investment banks did it.

Re:Uh... (0)

Anonymous Coward | 1 year,26 days | (#44952581)

4) Someone released the information after 2pm like the rules say, but they released it from a server in Chicago at 2pm, so it beat the news leaving New York at 2pm by enough milliseconds to make someone a huge profit.

Re:Uh... (2)

dgatwood (11270) | 1 year,26 days | (#44952621)

Or, more likely, 5. The clocks weren't quite synchronized and the trade actually occurred several milliseconds later.

Re:Uh... (1)

Frobnicator (565869) | 1 year,26 days | (#44952593)

Also FTFA:

It was "as much as $600 million dollars in assets changed hands in the milliseconds before most other traders in Chicago could learn of the Fed's September surprise"

Sure that is a lot of money, but smaller than the "billions" promised in the Slashdot story.

I suppose you can measure anything on the "billions of dollars" scale. I make a small fraction of billions of dollars every day.

Re:Uh... (5, Informative)

larry bagina (561269) | 1 year,26 days | (#44952233)

Big money interests are engaged in insider trading.

In idiot: Bad men do bad thing. Touch you in bad place.

Re:Uh... (0)

Anonymous Coward | 1 year,26 days | (#44952259)

Someone had inside information, and placed trades in order to gain a profit using that information that others didn't have access to.

Re:Uh... (2)

OhSoLaMeow (2536022) | 1 year,26 days | (#44952539)

Someone had inside information, and placed trades in order to gain a profit using that information that others didn't have access to.

GREAT SCOTT!!!

Re:Uh... (1)

boristhespider (1678416) | 1 year,26 days | (#44952301)

The Federal Reserve announced a change in interest rates at a particular time - 2PM, Washington time. Trades were placed in Chicago 2ms after 2PM. It takes about 7ms for news to get from Washington to Chicago. As a result we can say two things:

1) Someone has been dabbling in insider trading, or has a loose mouth. Either way, if they become known, they're in deep shit.
2) Slashdot editors don't proof-read their submissions, given that the summary states it takes 7ms for a message to get to Chicago, that 2-3ms after 2PM trades took places on the Chicago exchanges, and 7-2=5ms, not the 7ms we were promised was stolen.

The alternative of course is time travel, which I'd much rather was true. A couple of years back we had a couple of crackpot papers on the arxiv that can be interpreted as saying that the Higgs boson was travelling back in time and sabotaging attempts to observe it. Perhaps this is evidence that the Higgs is getting more subtle.

Re:Uh... (1)

Anonymous Coward | 1 year,26 days | (#44952363)

Furthermore, the 7ms is wrong.

Re:Uh... (1)

Anonymous Coward | 1 year,26 days | (#44952419)

Re:Uh... (1)

rthille (8526) | 1 year,26 days | (#44952567)

That assumes the fiber travels in a straight line. This is not the case, though people have been blowing holes thru mountains to straighten the routes to make trades faster...

Re:Uh... (1)

boristhespider (1678416) | 1 year,26 days | (#44952619)

Haha that assumed I intended Washington, Tyne and Wear - which doesn't loom very large in the British pysche - and gave me a value of 20ms.

Re:Uh... (1)

boristhespider (1678416) | 1 year,26 days | (#44952597)

Yeah someone else pointed that out (or perhaps it was you in another comment) :) This is quite a silly story in the first place - insider trading is serious, but the summary doesn't seem to have been checked particularly thoroughly and this being Slashdot I've not bothered reading the article.

Re:Uh... (0)

mrego (912393) | 1 year,26 days | (#44952393)

uh, Chicago is on Central time, so 2PM Washington (Eastern) time = 1PM Chicago time, so 2PM+2ms Central time = 3PM + 2ms Eastern time...

Re:Uh... (1)

boristhespider (1678416) | 1 year,26 days | (#44952577)

That doesn't justify the 7-2=7 thing. (Let's assume time changes are implicit, being a thoroughbred European as I am I might be forgiven one or two lapses on US timezones.)

Re:Uh... (0)

durrr (1316311) | 1 year,26 days | (#44952543)

Someone made a lot of money by being a very productive member of society. He was in fact too productive, thus breaking several productivity laws set in place to give an illusion of productivity being fairly distributed and productive.

Re:Uh... (2)

Austrian Anarchy (3010653) | 1 year,26 days | (#44952579)

Inside job. Someone knew in advance what the news would be and programmed a set of trades to happen immediately before the news was announced.

What, you thought this was a fair market? (5, Funny)

smitty_one_each (243267) | 1 year,26 days | (#44952177)

Looks like you picked the wrong week to stop sniffing glue.

Time Travel! (1)

Anonymous Coward | 1 year,26 days | (#44952179)

Now we have proof!

Corruption (0)

Anonymous Coward | 1 year,26 days | (#44952189)

Its because the powers who make up these Fed changes are in it for the money, they tried to get their friends billions and they hoped no one would notice the few milliseconds.

Re:Corruption (2)

i kan reed (749298) | 1 year,26 days | (#44952271)

Yes, because when I have insider information, I act with only milliseconds of warning compared to the public.

Re:Corruption (3, Insightful)

h4rr4r (612664) | 1 year,26 days | (#44952309)

Perhaps they thought it would make it less likely that they would be caught?

Re:Corruption (5, Interesting)

jandrese (485) | 1 year,26 days | (#44952357)

The Insider in this case would have the information well before it was announced in DC. He has the trades all setup and ready to execute, and then set the timer to have it happen at exactly 2PM. He forgot about the speed of light delay however and accidentally outed himself. After a decade or so the FTC might slap him with a couple of thousand dollar fine or something to make sure he never abuses insider information to make a billion dollars in a millisecond again.

Re:Corruption (0)

Anonymous Coward | 1 year,26 days | (#44952575)

Some might have bought even more time:

http://www.rollingstone.com/politics/blogs/taibblog/16-major-firms-may-have-received-early-data-from-thomson-reuters-20130905

I do not understand why this is a story (5, Funny)

kruach aum (1934852) | 1 year,26 days | (#44952203)

Or why it is framed as 'banks break physics' rather than 'someone talked and then fraud happened'.

Re:I do not understand why this is a story (4, Insightful)

i kan reed (749298) | 1 year,26 days | (#44952241)

If someone talked, why would they need to wait until 2? They could "speculate" ahead of the curve.

Re:I do not understand why this is a story (5, Insightful)

kruach aum (1934852) | 1 year,26 days | (#44952349)

That would give away their predictive edge to other traders.

Re:I do not understand why this is a story (4, Informative)

Samantha Wright (1324923) | 1 year,26 days | (#44952359)

They probably couldn't count to 7 and figured no one would notice; I bet no one would know about any of this if they'd waited 2 or 3 more milliseconds. The less of a lead time, the less time others have to react, and the less time your assets spend locked up waiting.

Re:I do not understand why this is a story (5, Informative)

Lord Kano (13027) | 1 year,26 days | (#44952379)

By waiting until the information was public, they weren't engaged in insider trading.

LK

Re:I do not understand why this is a story (5, Interesting)

green is the enemy (3021751) | 1 year,26 days | (#44952573)

Correct. Now the question is: Can they be prosecuted for insider trading? This is an interesting situation where the speed of light may factor into the legality of their action.

Re:I do not understand why this is a story (5, Insightful)

jandrese (485) | 1 year,26 days | (#44952383)

Because then they would get busted for insider trading. This guy set his timers so that he wasn't doing the trade until after it was officially announced, but forgot about the speed of light delay and got busted anyway. Not that the FTC gives a damn about insider trading anyway, it's hilariously and blatantly rampant but they're powerless to do anything about it.

Re:I do not understand why this is a story (1)

alvinrod (889928) | 1 year,26 days | (#44952397)

That would make it far too obvious. What they were likely hoping to do is get the trades in as close to the borderline as possible, at which point in time there's no way to prove that they're not legitimate.

Re: I do not understand why this is a story (0)

Anonymous Coward | 1 year,26 days | (#44952441)

No they couldn't. To keep it legal they need to do it after 2 pm, and they did. Thing is since the law doesn't care about the speed of light the 2 pm is 2 pm everywhere, meaning they acted on the information after it was officially publicly know.

Re:I do not understand why this is a story (5, Insightful)

MozeeToby (1163751) | 1 year,26 days | (#44952443)

Lets list the facts:

This type of insider trading is illegal.
The leak that allowed this is a firing offense and also illegal.
Trades were executed in Chicago after the change was announced in Washington D.C. in a classical physics sense.
Trades were executed in Chicago before the change was announced in Washington D.C. in a relativistic physics sense.

What does all that imply?
Someone at the Federal Reserve leaked the information before it was announced.
Someone else wanted to use this information but also not get caught.
That someone doesn't understand relativistic physics.

Re:I do not understand why this is a story (2)

Sir_Sri (199544) | 1 year,26 days | (#44952467)

This is I think part of it. If someone knew... 15 minutes in advance, they could have places a series of bets that looked like well, bets.

Knowing a small number milliseconds in advance is a very very odd thing (in this case 4-5). It's possible someone knew very well in advance, and was able to try and program the trades to beat everyone by a small number of milliseconds and hoped no one would notice, and that seems the most likely case.

Any other scenario creates a lot of very tricky technical problems which would seem very odd. Did someone in the locked shielded room manage to leak the information a few seconds in advance? For this level of speed you're really talking about computer processing time, is it possible the document to be released was placed on a scanner early or the scanner had a very slight clock drift and was running 10 ms ahead of where it should have been? Why would you even bother trying to do releases like that at exactly 2pm atomic clock time... wouldn't it make more sense to just have the announcement and release the paperwork several minutes later? Maybe not obviously, but when you're talking about 5 ms advanced notice there is just a huge array of equipment that might be involved in automated trading that could just be very slightly off on its timing.

It's not possible for someone to have manually made a bet 5 ms in advance, 5 minutes sure, and then tried to hide it. If it's not a person deliberately hiding things, the technical possibilities for a 5 ms error are just enormous.

Re:I do not understand why this is a story (5, Insightful)

mythosaz (572040) | 1 year,26 days | (#44952547)

The information was widely available about 5 minutes in advance:
http://www.zerohedge.com/news/2013-09-24/tip-box-fed-made-it-possible-many-people-leak-it [zerohedge.com]

Someone had the order all queued up, and was waiting for word. He got word of the interest rate move, and keyed in his order, which his computer would execute at 2:00:00:002, forgetting that such an order was impossible without giving away he was cheating by having gotten the announcement early.

Re:I do not understand why this is a story (1)

saleenS281 (859657) | 1 year,26 days | (#44952479)

Because waiting until 2pm makes it non-obvious unless someone is looking VERY closely. You can claim you made the trade after you found out if you time it just right. Obviously they misjudged their timing.

Re:I do not understand why this is a story (0)

Anonymous Coward | 1 year,26 days | (#44952495)

Because it would make it even more obvious that someone might be dealing with insider information.

It's just like the start of an Olympic run; the gun fires, everyone starts running towards the goal line. You start running before the start signal, you obviously stand out. If you knew exactly the moment the gun would fire, and started at just that moment rather than the milliseconds it would take for the sound to reach your ears and registers in your brain, well, you went at the start of the gun, everything's right, right?

Except that even track and field governing bodies are aware of physics, and have even codified it into the rules of the sport [wikipedia.org] . In this case, computers are much faster and more responsive than humans... but they still hit up against physics.

In this case, there's enough evidence to warrant further investigation of a 'false start'.

They might have only barely had enough time. (5, Informative)

mozumder (178398) | 1 year,26 days | (#44952553)

From: http://www.cnbc.com/id/101056168 [cnbc.com]

"Inside a room on the top floor of the William McChesney Martin, Jr. building, Fed officials instructed reporters not to send information about that decision to the outside world before precisely 2 p.m. as measured by the national atomic clock in Colorado.

The doors were locked at 1:45 p.m., and Fed staffers handed out copies of the statement at 1:50 p.m., allowing reporters a few minutes to digest the complicated document before reporting on its contents. At 1:58 p.m. television reporters were escorted out of the room to a balcony where cameras had been prepositioned. The Fed's security rules dictated that television reporters were not allowed to speak before precisely 2 p.m. Print reporters were told they were allowed to open a phone line to their editors at headquarters offices a few moments in advance of the hour, but not allowed to interact with people on the other end of the line until exactly two p.m."

So many hacked communications channels are still possible from this. The print writers can signal the editors when making phone calls before 2pm, without talking to them. For example, the editor can instruct the reporter to call them on landline if it's a sell, or his mobile number if it's a buy. The TV reporter can wear a jacket if it's a sell, or remove it if it's a buy, so someone across the building can monitor the balcony for pre-release signals... etc.

Also, from the http://www.nanex.net/aqck2/4436.html [nanex.net] :
"It wasn't just gold. It was everything that traded. In fact, the 1/100th of a second after 2pm was the most active 10 milliseconds in the history of the U.S. Stock an Futures markets."

This was a major, major hack, and they waited as late as they could wait, without signaling their competitors.

But.... (5, Funny)

Anonymous Coward | 1 year,26 days | (#44952205)

they STILL didn't get first post, did they?

Re:But.... (2)

rthille (8526) | 1 year,26 days | (#44952617)

No, but all your base are belong to them anyway.

"based" on the decision (0)

i kan reed (749298) | 1 year,26 days | (#44952217)

If you have inside information, you can act surreptitiously claiming to guess what the board is going to do. The timing wouldn't matter. If you lacked inside information, you could still have an algorithm waiting to trigger new buy/sell values based on anticipated activity levels after any fed announcement.

There isn't any story here at all.

Re:"based" on the decision (1)

Anonymous Coward | 1 year,26 days | (#44952469)

There most certainly *is* a story here. Someone was TRYING to act surreptitiously but failing. They thought they timed their trades to occur just after the public announcement, but they timed it wrong. They were several milliseconds too fast, revealing that they were acting on privileged information.

Re:"based" on the decision (5, Interesting)

Dahamma (304068) | 1 year,26 days | (#44952493)

Of course there is a story here.

And of course it doesn't have to involve breaking the speed of light. It has to do with the Fed failing to properly enforce a supposedly very complex information lockdown and the information likely being either leaked or pre-loaded on remote servers, resulting in (according to the article) over $600M in trades via high-speed computer trading in the few milliseconds after the information was released - and now the Fed is investigating.

It's both related to technology and possibly involving criminal activity (or at the very lease a failure in information security). Sounds like a relevant story to me...

As a HA consultant... (0)

Anonymous Coward | 1 year,26 days | (#44952225)

I have a hunch, but I'm not about to tell you! The speed of light says it is possible, I'll leave it at that! The gov spends lots of money in their lockups to make sure cheating doesn't happen...

Re:As a HA consultant... (1)

MickyTheIdiot (1032226) | 1 year,26 days | (#44952305)

Quantum computing will first be used by traders, in other words.

LOL (4, Informative)

Adult film producer (866485) | 1 year,26 days | (#44952235)

They didn't steal 7 milliseconds.. they had the information minutes or more likely a few hours before everybody else. Don't try blaming this on some simple technological advandage.

Re:LOL (3, Informative)

earlzdotnet (2788729) | 1 year,26 days | (#44952361)

This. To give a few more details as to what the article says though. Basically, even assuming they have some genius computer that can parse the announcement made at 2pm and execute these trades within 1 millisecond or less, it would be physically impossible for the news to have been received that quickly. The trades in Chicago were executed 2ms after 2PM. The speed of light dictates that the news (assuming no barriers or other latency) would take at least 7ms to actually reach Chicago from where it was announced.

So, in summary, no matter what these crooks try to say to fool a jury with favorable circumstances, it is physically impossible that they did not know about this news before 2PM

Re:LOL (2)

mythosaz (572040) | 1 year,26 days | (#44952445)

"Everyone else" has this information too. It wasn't a secret among well informed sorts.

"Everyone else" just waited until after 2:00:00:002 to execute their orders.

HFT is not new (1)

cyberpocalypse (2845685) | 1 year,26 days | (#44952251)

High Frequency Trading isn't new... http://en.wikipedia.org/wiki/High-frequency_trading [wikipedia.org] This past June, a news article caused a $28million dollar gain: "If you’re a high-frequency trader, a few milliseconds is a big deal. And in this case, a 15-millisecond head-start meant that $28 million in shares traded hands before the number was even published, http://qz.com/91242/the-15-millisecond-head-start-that-led-to-28-million-in-trades/ [qz.com] " This shouldn't come as a surprise that companies in the business of making money will do everything that they can to (drum roll...) make money

yes it is news (2)

stenvar (2789879) | 1 year,26 days | (#44952429)

High Frequency Trading isn't new..

This isn't high frequency trading, this is either a violation of physics or insider information.

This shouldn't come as a surprise that companies in the business of making money will do everything that they can to (drum roll...) make money

No. And it shouldn't even come as a surprise that corrupt government officials provide insider information to greedy businesses.

But while it may not be a surprise, it is still an outrage.

Of course, the deeper problem is that the fed attempts these kinds of manipulations of the economy to begin with; if the fed couldn't do that, there wouldn't be insider trading on this kind of information in the first place.

Re:HFT is not new (0)

Anonymous Coward | 1 year,26 days | (#44952537)

You're an idiot. This isn't about HFTs, it's about illegally gaining inside information about the exact time which the Federal Reserve is planning on changing interest rates.

Once again (5, Funny)

jbeaupre (752124) | 1 year,26 days | (#44952253)

I'm pretty sure it was Billie Ray Valentine and Louis Winthorpe. They did this previously and managed to bankrupt Mortimer and Randolph Duke in the commodities market.

Re:Once again (0)

Anonymous Coward | 1 year,26 days | (#44952399)

Apparently no one gets this reference. Bravo, this demonstrates why youth is stupid, they have no experience.

Re:Once again (1)

Russ1642 (1087959) | 1 year,26 days | (#44952417)

Turn the machines back on! Turn the machines back on!

Automated traders (0)

Anonymous Coward | 1 year,26 days | (#44952281)

How did this happen? The big firms have trading algorithms that handle trading automatically. They're sophisticated enough to detect patterns, and survey enough information and websites to detect a false tweet about an attack on the White House that they brought down the stock market about 5% in a few seconds just last January.

You think the NSA conducts mass surveillance? They only have paranoia and government budgets to sustain them. Wall Street has profit and the potential for unlimited profits to motivate them. Based just on motivations alone, who do you think has the better technology?

Re:Automated traders (1)

Xaedalus (1192463) | 1 year,26 days | (#44952337)

I'd be willing to bet that no human had a direct hand in this, and that no fraud was involved. After all, that money was made because an algorithm took the opposite bet--that rates would change.

can I once again point out... (5, Insightful)

MickyTheIdiot (1032226) | 1 year,26 days | (#44952283)

...that if the timing is down to milliseconds then the system is broken. It's automatically an unfair playing field tipped towards the largest competitors that have the computing power and programing to operate on that time scale.

Of course nothing about Wall Street is about fairness anymore and usually they don't care about the law, either.

Re:can I once again point out... (4, Insightful)

h4rr4r (612664) | 1 year,26 days | (#44952347)

They consider that a feature not a bug.

7ms? less than 3.6ms. (1, Informative)

joostje (126457) | 1 year,26 days | (#44952289)

Washington to chicago by road is 1100 km [google.com] , that's 1100 km/300000 km/s = 3.6ms, so in a straight line it would be less than 3.6ms.

Re:7ms? less than 3.6ms. (1)

cyberpocalypse (2845685) | 1 year,26 days | (#44952341)

Not if you're driving a Prius it isn't!

Re:7ms? less than 3.6ms. (5, Insightful)

Anonymous Coward | 1 year,26 days | (#44952461)

Light doesn't propagate through fibre as fast as it does through a vacuum.

Re:7ms? less than 3.6ms. (0)

joostje (126457) | 1 year,26 days | (#44952603)

Yeah, through fiber it's slower. So if you're in a hurry (and traders are), why send the signal through fiber if you can send it though the air?

Re:7ms? less than 3.6ms. (5, Informative)

Pseudonym Authority (1591027) | 1 year,26 days | (#44952585)

Light only travels about 200000km/s in fiber optic cable, which means 5.5ms to travel that distance. With routing delays and stuff, it's probably about 7ms away.

Re:7ms? less than 3.6ms. (0)

Anonymous Coward | 1 year,26 days | (#44952591)

Washington to chicago by road is 1100 km [google.com] , that's 1100 km/300000 km/s = 3.6ms, so in a straight line it would be less than 3.6ms.

The speed of light in a cable, on a circuit board, etc is less than the speed of light in free space. See http://en.wikipedia.org/wiki/Wave_propagation_speed for an introduction the the concept that the universe isn't governed by a single constant velocity.

Re:7ms? less than 3.6ms. (1)

twotacocombo (1529393) | 1 year,26 days | (#44952625)

There is no cable pulled taught directly between Washington and Chicago. You will have curves, elevation changes, etc. Even more important, there is going to be switching/routing hardware in between the two end points, which adds a certain amount of delay as well.

Just a minor timing error (2, Insightful)

Anonymous Coward | 1 year,26 days | (#44952299)

Insider gets info early, writes code order trades at 1:00:00.008 pm Chicago time. PC clock isn't perfectly synced with the atomic clocks, runs a little fast for some reason.

The real thing to look out for are all the trades made before 2:00:05pm Eastern time, because it will take around 5 seconds for any human observer to read, notice, decide, and click a macro trigger. It is very safe to assume that all trades within 5 seconds of an announcement are suspect and worth investigating in more detail.

Re:Just a minor timing error (2)

TCQuad (537187) | 1 year,26 days | (#44952423)

A human doesn't need to read/decide. You just need to program your algorithm to look for "no taper" (or some combination of words to that effect) in the text that's coming in.

Re:Just a minor timing error (1)

Давид Чапел (3032005) | 1 year,26 days | (#44952475)

Insider gets info early, writes code order trades at 1:00:00.008 pm Chicago time. PC clock isn't perfectly synced with the atomic clocks, runs a little fast for some reason.

The real thing to look out for are all the trades made before 2:00:05pm Eastern time, because it will take around 5 seconds for any human observer to read, notice, decide, and click a macro trigger. It is very safe to assume that all trades within 5 seconds of an announcement are suspect and worth investigating in more detail.

The article implies that a rush of orders was expected exactly at 2:00:00.007. Presumably this announcement was made in machine readable form and macros were expected to be triggered automatically.

If true, a smart inside trader (0)

Anonymous Coward | 1 year,26 days | (#44952303)

If you have insider information well ahead of the announcement, you schedule your move not days, hours, or minutes before, but a few milliseconds before, and hope nobody notices. The smaller the advance time, the less likely it is detectable.

There are a lot of assumptions in the facts of the situation, though. Are the clocks really that well synchronized and such low latency that 2ms of difference can't possibly be explained other ways? Or maybe someone just took a huge but honest gamble and it paid off? It certainly deserves investigation, but there are probably plausible alternative explanations besides something nefarious.

Obvious answer: (3, Informative)

ericloewe (2129490) | 1 year,26 days | (#44952307)

Information was leaked and the whole thing setup to look somewhat legitimate. 3ms is the absolute fastest anything can get from Washington to Chicago, so the information was there before the official announcement.

Re:Obvious answer: (0)

Anonymous Coward | 1 year,26 days | (#44952527)

And as such, there should be an investigation into every single trade and the people that benefited. There'll be a common set of people.

Idiotic summary (0)

Anonymous Coward | 1 year,26 days | (#44952333)

"Three to seven milliseconds before the fed moved interest rates, billions of dollars of trades were input that took advantage of the changed rates"

Do you have any idea what you're talking about? The decision to taper or to continue the bond purchasing has absolutely nothing to do with the federal funds rate, which remains at the zero lower bound, where it has been for years.

Possible explaination (5, Insightful)

PPH (736903) | 1 year,26 days | (#44952335)

Several large orders betting the other way may have been placed a few milliseconds after 2:00 PM as well. But there is a 'feature' in on-line trading that allows high frequency traders to cancel or abort trades that they claim were made as a result of 'system errors'.

Another Possible Explanation (2)

SirGarlon (845873) | 1 year,26 days | (#44952409)

NSA chairman's broker is based in Chicago. :-)

The info was already distributed (5, Informative)

carlcmc (322350) | 1 year,26 days | (#44952339)

http://www.zerohedge.com/news/2013-09-24/tip-box-fed-made-it-possible-many-people-leak-it

Who is on the other end of that trade? (2)

feenberg (201582) | 1 year,26 days | (#44952371)

It would seem foolish to trade within milliseconds of 2pm without knowledge of the Fed decision, since the other party could be in DC and in legitimate possession of the information. So it is surprising that the criminal got a counterparty to accept the trade. This trick will probably only work once. There was a time when this sort of information was released after the close of markets.

Seven milliseconds? (2)

0123456 (636235) | 1 year,26 days | (#44952377)

Did they use TCP/IP over neutrinos?

Re:Seven milliseconds? (2)

gestalt_n_pepper (991155) | 1 year,26 days | (#44952499)

You meant "tachyons," No?

3.757 ms (2)

Saethan (2725367) | 1 year,26 days | (#44952395)

3.757 ms is the time it takes light to travel from DC to Chicago(throw in a couple mirrors on balloons to get over that whole curvature problem, keep in mind I'm basing this off of 700 mi which is actually a driven route so I'm sure straight-line is shorter), so it -could- have happened without insider info... and some really cool lasers attached to really fast computers. (hah!)

Wasn't this the plot of a James Bond movie? (1)

taustin (171655) | 1 year,26 days | (#44952405)

One of the one's that sucked, that is.

Just the tip of the iceberg (5, Insightful)

EMG at MU (1194965) | 1 year,26 days | (#44952411)

If people knew half the shit that Wall Street does they wouldn't like it. I think articles like this actually make it harder to have a productive conversation about the fairness of Wall Street because it makes it seem like this type of abuse is the exception rather than the norm.

There is a revolving door between Wall Street, Corporate board rooms, and the Fed. Not only do people go through that revolving door but so does information, so does hits about what might happen in the markets or what might come out of the Fed. Go watch Wall Street, either one, it's dramatic but its accurate enough for the average person to get a idea of what goes on behind those closed doors.

Sooo Simple (1)

Anna Merikin (529843) | 1 year,26 days | (#44952413)

Since the briefed reporters entered the room with the cameras in it for the press conference two minutes before 2:00:00.00, their appearance might have contained the information. F'rexample, eyeglasses off = no taper, eyeglasses on = taper; arms crossed over chest = higher rate, hands in pocket = lower rate, arms at side = no change.

OTOH, it wouldn't surprise me if corporations (and the NSA, CIA and DIA) had made breakthroughs in information transmission vs, time, either.

All "trading" is crooked (0)

Anonymous Coward | 1 year,26 days | (#44952447)

that is all

faster connection and automated transactions (1)

BetaDays (2355424) | 1 year,26 days | (#44952449)

I don't see a probem here I figured someone had a faster internet connection and with that their automated transcation systems just did the job they were to do. The following article even mentions the need for speed: "Those cables could reduce the Internet's latency by about 60 milliseconds between those two points That's an imperceptible lag for the average Internet user, but it's an eternity for high-speed stock traders. They can make or lose millions of dollars in that span of time" So nothing got stolen just someone was faster as far as I would think. http://money.cnn.com/2012/03/30/technology/internet-cable/index.htm [cnn.com]

western banking cartel and friends in wall street (0)

Anonymous Coward | 1 year,26 days | (#44952459)

they have the government in their pockets, they rule your world. any questions?

Could this have just been a lucky guess? (1)

RendonWI (958388) | 1 year,26 days | (#44952463)

What is not clear to me, and I even rtfa is did traders know the fed was going to be releasing information at 2PM? If so this could have just been a really good guess that the fed was going to continue the current course. So could traders have known an announcement was coming?

Re:Could this have just been a lucky guess? (0)

Anonymous Coward | 1 year,26 days | (#44952611)

they announced that their would be an announcement way ahead of time. everyone knew they where going to announce something at 2.

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