there was a presentation on this last summer at Defcon. apparently, in order to get the fastest trade times, they run direct fiber links, get the office building as close as they can, and strip out EVERYTHING AND ANYTHING that might add latency to the system. that includes firewalls. and Antivirals. and encryption.

supposedly the fiber is point-to-point. but no one actually knows for sure, except the ISP.

here's the whitepaper and video

Here's a link to the paper written by Cliff and Northrop. It is quite good...and worrisome unless you happen to have a lot of gold and ammunition at your house.

Well even the experts only understand a subset of the system they are working on. Most are really bad at documenting what they know and once the document is written, it is out of date. IT people do not know what developers are doing and developers are usually wondering what they hell is going on with their sysadmins. Then the DBAs have the double blind secret that mystifies everyone.

Cubansaltyballs: I like how the stock trader shills blame the computers. It's not the systems that are to blame, it's the stock traders... just like it isn't the cards that take all your money, it's how the three-card Monty dealer deals the cards.

Um no - thanks for playing. The problem is complexity. Doesn't matter if its human or computer. Systems and processes are so complex and intertwined now that very few people actually understands how it all works let alone can intervene in the case of an unforeseen event.

/spend my days working to simply such bullshiat

just like "one man, one vote" we should have "one click, one trade!"

While I do not have a problem with computer trading, I do however have a problem with "autonomous computer trading." Eliminating human responsibility is not a wise thing and unfortunately IMHO will lead to potentially some very bad things...

Cubansaltyballs: No.

It is not too complex to fix. It is too profitable to leave in place.

Ahhhh - you're so cute! Money has nothing to do with it. Its lack of proper governance into building the systems and lack of proper technical talent into design and management of it.

/dealing with this very situation for the last 12 months - it has nothing to do with money as its costing us a fortune - it has everything to do with leadership - which they lacked when they built it

Cubansaltyballs: It is not too complex to fix. It is too profitable to leave in place.

It's not even all that profitable. Here's the thing, business models are like organisms. The economy is like the ecosystem. Some organisms are well adapted to the ecosystem, and they produce offspring (imitators). Some aren't, and they usually die out. But each organism occupies a very specific niche in the ecosystem.

These automated fast traders aren't terribly good for the ecosystem, but they occupy a niche that's very lucrative- it's difficult for invaders to compete with them, and it's difficult to cut them out without having massive unforseen consequences. I think that per-share or per-transaction taxes would probably destroy the financial system. That's not necessarily a bad thing, but it would be a catastrophic thing. Fiddling with timings and trade frequency might work, or it might create entirely new ways to game the system.

Like an ecosystem, the entire thing is very non-linear. Small changes over here could have giant results over there.

Balchinian: Here's a link to the paper written by Cliff and Northrop. It is quite good...and worrisome unless you happen to have a lot of gold and ammunition at your house.

But if the markets asplode how will you know what gold is trading at?

/aspirin, toilet paper and vacuum packed rice

If a stock is bought and sold in under 1 day, capital gains taxes are set at 95%.

Tax every transaction and toss in random, arbitrary delays with a distribution centered around the amount of time it takes a photon to travel halfway around the planet as part of the stack.

/drtfa

You could ask the IT guy to fix this, but he'd tell you to fark off and retreat back to his lair deep within the cubicles, where he's rumored to eat nothing but Cheerios out of the box and watch Family Guy DVDs 24/7.

Why fix it? When it works they make money. When it breaks and they lose money they cancel the trades and get a do over. Win-win for them.

Eddie Adams from Torrance: ZAZ: 20 minute delay on orders, .1% tax on trades, no nudity allowed.

You only need a tiny delay to effectively end most of the nonsense. The key is to make it non deterministic. Add a random delay of 1-10 seconds. And clothing optional.

It will never happen. Not when the markets themselves make billions off selling their feeds at the lowest latency possible. Then there's the aftermarket of feed resellers at higher latency. An entire company can go under if it has 5 MS more latency than its competitor, for the same feed. Tell NYSE, NASDAQ, and all the others they need to force in a latency on their feeds. See how the markets themselves, not market indicators or market indices, but the actual stock markets, like losing hundreds of millions per year.

Can I ask an honest question?

Why do people think buying and selling a stock/security/whatever in a short period of time is a bad thing? Who, exactly, is the victim?

Don't Troll Me Bro!: namatad: Brontes: If a stock is bought and sold in under 1 day, capital gains taxes are set at 95%.

this would be good and bad

if the whole reason for the markets is to invest in companies / provide captial for companies, this would help

but this would be bad because it would reduce the liquidity of the markets causing larger price fluctuations not less

I don't understand this. Please help me out.

Liquidity is thought to be a good thing, and largely a result of having many many transactions taking place. With high liquidity, when YOU need to buy, there will be lots of sellers, and in a competitive market, this means you will get a good price. With low liquidity, you will want to buy, but since no one is selling, you'll only be able to buy from Old Man Potter, and he is going to rip you off.

Same thing when you want to sell. With high liquidity there will be lots of buyers so you can sell at the competitive rate, presumably for what the stock is worth. With low liquidity if you need to sell, the only buyer will be Old Man Potter and he is going to give you a terrible price.

If one day capital gains really were set to 95%, that would presumably eliminate much of the motive to buy/sell on a one day basis and so eliminate a lot of the buyers and sellers now who are eager to trade quickly.

Sure there might be some problems with having such eager flippers in the market, but one benefit is they provide high liquidity. Maybe.

Fark_Guy_Rob: Can I ask an honest question?

Why do people think buying and selling a stock/security/whatever in a short period of time is a bad thing? Who, exactly, is the victim?

The people who buy and hold are jealous of the people who made more than 5% this year.

Evil Twin Skippy: And when is the last time someone said "gee it's a shame there are no more T-Rexes around?"

All the time? Because t-rexes are awesome?

There was a short science fiction story about a guy who crashes his ship and teaches the natives how to protect themselves from the emipire that will try to take over their planet through legal means. It culminates in a courtroom scene where the lawers for both sides are putting stacks (literally) of relevant data and cases into a computer, to see which one is right - because the system is too complex.

I wish I could remember the story title or author, but this reminds me of that story.

Ohh.....Sarah Connor's not gonna be happy about this.

namatad SmartestFunniest 2011-12-31 12:41:59 AM


jpo2269: just like "one man, one vote" we should have "one click, one trade!"

While I do not have a problem with computer trading, I do however have a problem with "autonomous computer trading." Eliminating human responsibility is not a wise thing and unfortunately IMHO will lead to potentially some very bad things...

but in theory the automation helps create an arbitrage free market. in theory this serves the markets by setting true prices

True, but in theory, "free love" makes everyone happy, well that is until someone comes down with an STD...

Evil Twin Skippy: Fark_Guy_Rob: Can I ask an honest question?

Why do people think buying and selling a stock/security/whatever in a short period of time is a bad thing? Who, exactly, is the victim?

The ethics boils down to, anyone can buy a stock and see it appreciate over time. Only a select few people, with an in, can narrow that time down to milliseconds. You end up with two stock markets, one for everyday chums, and one for the sharks. The sharks hold all the cards, and their actions can move the slower market by orders of magnitude by the time a real person can say "I'm going to be eating dog food for retirement."

I truthfully don't know much, if anything, about how it all works - but can't anyone buy and sell stock in a few seconds? Or is there something that prevents regular people from buying and selling in a short period of time?

Evil Twin Skippy: Let me put it another way. Imagine you are playing a big game of poker. You ante up, are dealt your cards, but before you can even react the bet is at $50M, because 2 of the players had a special round of betting that took place while you were blinking.

P.S. Those other two are also Rain-Man style card counters who have a pretty good idea of what's in everyone's hand already.

If you don't like the way the game is played go to a different table.

The_Time_Master: There was a short science fiction story about a guy who crashes his ship and teaches the natives how to protect themselves from the emipire that will try to take over their planet through legal means. It culminates in a courtroom scene where the lawers for both sides are putting stacks (literally) of relevant data and cases into a computer, to see which one is right - because the system is too complex.

I wish I could remember the story title or author, but this reminds me of that story.

Sounds like a Stanislaw Lem story.

Fark_Guy_Rob: Evil Twin Skippy: Fark_Guy_Rob: Can I ask an honest question?

Why do people think buying and selling a stock/security/whatever in a short period of time is a bad thing? Who, exactly, is the victim?

The ethics boils down to, anyone can buy a stock and see it appreciate over time. Only a select few people, with an in, can narrow that time down to milliseconds. You end up with two stock markets, one for everyday chums, and one for the sharks. The sharks hold all the cards, and their actions can move the slower market by orders of magnitude by the time a real person can say "I'm going to be eating dog food for retirement."

I truthfully don't know much, if anything, about how it all works - but can't anyone buy and sell stock in a few seconds? Or is there something that prevents regular people from buying and selling in a short period of time?

You need to redefine your understanding of "short period of time." Algo trading is done on the order of milliseconds. Your three seconds break down into 3000 milliseconds. That's 3000 opportunities for them to trade, against your one.

It's the scum sucking bottom feeders you morans. Not the computers.

Your three seconds break down into 3000 milliseconds. That's 3000 opportunities for them to trade, against your one.

I routinely make market order trades on a liquid stock from my home computer that are executed faster than you can blink.

So, basically, a bunch of traders are setting up rules they don't understand, computers are executing the rules exactly as they're supposed to, and the traders are blaming the computers for the screwed up results instead of their own damaged logic?

People misusing computers and then blaming the tool for the results... must be a day ending in y.