Other than seemingly perverse incentives, is there a good reason not to quantize trading time?
usefulcat 46 minutes ago [-]
If you're talking about something like having an auction (per security) every N seconds, I don't see how that addresses the underlying issue, which is how to determine order priority.
If you have a bunch of orders at the same price on the same side, and an order comes in from the other side that crosses those orders (or there is an auction and there are orders on the other side which cross), how do you decide which of the resting orders at the same price should be filled first?
The most common way is that the first order to arrive at the exchange at that price gets filled first, and for that reason being fast is inherently advantageous.
api 55 seconds ago [-]
Randomize orders using a cryptographic hash of the order, client info, and all other fields plus a random salt added when the order is submitted.
Sort by hash. Impossible to game unless you can break the hash function.
ssivark 39 minutes ago [-]
How about along a randomized delay (0-T time) to each order? For T=30s it will largely nullify millisecond latency advantages.
JumpCrisscross 15 minutes ago [-]
> How about along a randomized delay (0-T time) to each order?
This is the sort of good idea that just entrenches the algos. (Former algorithmic derivatives trader.)
For small orders, these delays make no difference. For a big order, however, it could be disastrously embarassing. So now, instead of that fund's trader feeling comfortable directly submitting their trade using off-the-shelf execution algos, they'll route it to an HFT who can chunk it into itty bity orders diarrhea'd through to average out the randomness of those delays.
> Our analysis of the TWSE’s transition clearly demonstrates that continuous trading results in better liquidity provision, lower bid-ask spreads, more stable prices and enhanced price discovery, as well as higher trading volumes.
biomcgary 11 minutes ago [-]
Thank you, it is nice to see an empirical observation of before and after the transition to continuous trading.
JumpCrisscross 4 minutes ago [-]
Note that American exchanges open and close with a batched cross. This hybrid approach is why most objections to intraday continuous trading is misplaced.
14 minutes ago [-]
anonymoushn 32 minutes ago [-]
The non-terrible version of this proposal is called Frequent Batch Auctions. I've read the paper and it seems like a decent idea to me.
I have heard that some real-life venues have implemented the terrible version of this proposal instead though.
mikewarot 1 hours ago [-]
I've argued in the past that we should have batch settlements every 30 seconds, instead of in real time. We don't really need microsecond based skimming/front running.
Loughla 60 minutes ago [-]
I've read the arguments that the microsecond trading serves a purpose that benefits all of us, but I fail to see how, even with the explanations.
I'm with you. Every 30 seconds. Cap the power of connection speed in trading. Trading should be based on the value of the item being traded, not on how short the fiber run is.
mhmmmmmm 26 minutes ago [-]
CLOB's force market participants to compete on pricing (which is only indirectly related to latency, since you can quote tighter if you know your orders won't get picked off by other, faster, traders)
Taiwan used to have Batching style auction and it ultimately led to worse prices: https://focus.world-exchanges.org/articles/citadel-trading-a...
> Our analysis of the TWSE’s transition clearly demonstrates that continuous trading results in better liquidity provision, lower bid-ask spreads, more stable prices and enhanced price discovery, as well as higher trading volumes.
JumpCrisscross 12 minutes ago [-]
> read the arguments that the microsecond trading serves a purpose that benefits all of us, but I fail to see how, even with the explanations
What about an empirical argument? Microsecond trading reduces spreads and decreases volatility. It looks useless, so people try to regulate it away, and every time they do spreads widen and trading firms' and banks' profits fatten.
> Every 30 seconds. Cap the power of connection speed in trading
I'd go back to Wall Street if this happened: it would make market making profitable again.
usefulcat 38 minutes ago [-]
If there are multiple orders at the same price on the same side, how should we determine which ones are filled first?
Or put another way, how should we determine which orders are least likely to get filled?
hcks 35 minutes ago [-]
Well either volume weighted or randomised then
harry8 53 minutes ago [-]
so now the race is to get the order in (or out) @ 29.999999985 seconds or 15nS before the batch deadline. Interesting twist on the game. Unlikely to change who wins it, could it be worse for retail punters?
We need to kill "front running" as a criticism of low-latency algo trding with fire. It's garbage.
Front running is highly illegal and is where a broker knows a client is going to do a big trade due to inside information and trades on the account of others (themselves, typically) to exploit that inside information. It's a straight up cheat.
Inferring from market data alone which way a price will move is legal, honest, been attempted since forever and absolutely fine. Also very, very difficult. Anyone who can do it makes the market more efficient, reduces the money available by doing it (which goes into investors pockets through tighter spreads) and really earns their money. You don't have to like them if you don't want to but it's worlds apart from front running using inside information.
Where did algo trading profit come from? Won by being more competitive from brokers profit with a good chunk of that broker profit going to investors. Spreads are tighter.
Where are the clients' yachts? Well tech did something about the some of the broker ripoffs earning their yachts - which puts money in your pocket.
anonymoushn 28 minutes ago [-]
Batching can greatly lower the returns to speed, which would be sufficient to get participants to invest less in speed. It doesn't need to reduce the returns to speed to 0, and indeed reducing the returns to speed to 0 is sort of an incoherent idea to begin with.
aeries 49 minutes ago [-]
You could randomize the batching deadline.
harry8 40 minutes ago [-]
and it won't help retail investors either.
34 minutes ago [-]
infecto 36 minutes ago [-]
Why not 1 minute then?
You have ignored the whole issue of how are you then ordering those contracts in 30second batches?
biomcgary 1 hours ago [-]
30 seconds seems reasonable. Don't the markets themselves make a fair amount of money off of providing fast access to the HFTs? Is that the primary perverse incentive?
infecto 35 minutes ago [-]
There are cases to be made that you get tighter spreads.
The larger the time interval the larger the risk on pricing. If I am selling and it’s a large time to trade I am going to probably want to sell it for a higher price. The same goes on the bid.
theturtletalks 14 minutes ago [-]
Skyvern has a point, they were through regulatory oversight to get their microwave working whereas these other firms went behind the FCC’s back and profited by not doing so. The fine is likely a lot lower than the profits they made so what incentive would future companies have to go through the proper channels?
why would a radiowave that is reflected off the atmosphere (and therefore taking the longer route) be faster than a direct fibre cable?
scrlk 1 hours ago [-]
Radio waves travel at nearly the speed of light, whereas light in an fiber optic cable travels at ~67% of the speed of light due to the refractive index of glass.
cypherpunks01 1 hours ago [-]
Ericsson blog wrote:
In a vacuum, electro-magnetic waves travel at a speed of 3.336 microseconds (μs) per kilometer (km). Through the air, that speed is a tiny fraction slower, clocking in at 3.337 μs per km, while through a fiber-optic cable it takes 4.937 μs to travel one kilometer – this means that microwave transport is actually 48% faster than fiber-optic, all other things being equal.
JumpCrisscross 11 minutes ago [-]
More bluntly: light in a fibre is still bouncing around a lot.
FredFS456 1 hours ago [-]
Speed of light in an optical fibre is about 2/3 that of the speed in air
1 hours ago [-]
_qua 1 hours ago [-]
Light doesn’t go at light speed through optical fiber.
nimish 1 hours ago [-]
Sure it does. It's just that the speed of light in non-hollow optical fiber is slower than light in a vacuum.
Microsoft bought a hollow optical fiber company for a reason.
cycomanic 8 minutes ago [-]
Yes, funnily enough Microsofts reason was not HFT but AI. Essentially inter-datacentre training is limited by latency between the datacentres.
Generally they want to build the datacentres close to metro areas, by using hollow core fibre the radius of where to place the data centres has essentially increased by 3/2. This significantly reduces land acquisition costs, and supposedly MS has already made back the acquisition cost for Lumenisity, through those savings.
AStonesThrow 1 hours ago [-]
By definition, it does, because the maximum speed is qualified by "the speed of light in a vacuum", so the speed of light [in other media] is simply a function of how much the medium slows it down, yet it is still the speed of light. Funny how that works!
spirobelv2 50 minutes ago [-]
mev but for tradfi
throwaway2037 2 days ago [-]
FT Alphaville: High frequency trading
Skywave Networks accuses Wall Street titans of ‘continuous racketeering and conspiracy’
FT/Alphaville is blog attached to The Financial Times newspaper. It free to sign-up for an account.
Rendered at 23:35:19 GMT+0000 (Coordinated Universal Time) with Vercel.
If you have a bunch of orders at the same price on the same side, and an order comes in from the other side that crosses those orders (or there is an auction and there are orders on the other side which cross), how do you decide which of the resting orders at the same price should be filled first?
The most common way is that the first order to arrive at the exchange at that price gets filled first, and for that reason being fast is inherently advantageous.
Sort by hash. Impossible to game unless you can break the hash function.
This is the sort of good idea that just entrenches the algos. (Former algorithmic derivatives trader.)
For small orders, these delays make no difference. For a big order, however, it could be disastrously embarassing. So now, instead of that fund's trader feeling comfortable directly submitting their trade using off-the-shelf execution algos, they'll route it to an HFT who can chunk it into itty bity orders diarrhea'd through to average out the randomness of those delays.
> Our analysis of the TWSE’s transition clearly demonstrates that continuous trading results in better liquidity provision, lower bid-ask spreads, more stable prices and enhanced price discovery, as well as higher trading volumes.
I have heard that some real-life venues have implemented the terrible version of this proposal instead though.
I'm with you. Every 30 seconds. Cap the power of connection speed in trading. Trading should be based on the value of the item being traded, not on how short the fiber run is.
What about an empirical argument? Microsecond trading reduces spreads and decreases volatility. It looks useless, so people try to regulate it away, and every time they do spreads widen and trading firms' and banks' profits fatten.
> Every 30 seconds. Cap the power of connection speed in trading
I'd go back to Wall Street if this happened: it would make market making profitable again.
Or put another way, how should we determine which orders are least likely to get filled?
We need to kill "front running" as a criticism of low-latency algo trding with fire. It's garbage.
Front running is highly illegal and is where a broker knows a client is going to do a big trade due to inside information and trades on the account of others (themselves, typically) to exploit that inside information. It's a straight up cheat.
Inferring from market data alone which way a price will move is legal, honest, been attempted since forever and absolutely fine. Also very, very difficult. Anyone who can do it makes the market more efficient, reduces the money available by doing it (which goes into investors pockets through tighter spreads) and really earns their money. You don't have to like them if you don't want to but it's worlds apart from front running using inside information.
Where did algo trading profit come from? Won by being more competitive from brokers profit with a good chunk of that broker profit going to investors. Spreads are tighter.
Where are the clients' yachts? Well tech did something about the some of the broker ripoffs earning their yachts - which puts money in your pocket.
You have ignored the whole issue of how are you then ordering those contracts in 30second batches?
The larger the time interval the larger the risk on pricing. If I am selling and it’s a large time to trade I am going to probably want to sell it for a higher price. The same goes on the bid.
HFT in My Backyard
https://news.ycombinator.com/item?id=8354278
https://news.ycombinator.com/item?id=8371852
Shortwave Trading | Part I | The West Chicago Tower Mystery
https://sniperinmahwah.wordpress.com/2018/05/07/shortwave-tr...
SHORTWAVE TRADING | PART II | FAQ AND OTHER CHICAGO AREA SITES
https://sniperinmahwah.wordpress.com/2018/06/07/shortwave-tr...
In a vacuum, electro-magnetic waves travel at a speed of 3.336 microseconds (μs) per kilometer (km). Through the air, that speed is a tiny fraction slower, clocking in at 3.337 μs per km, while through a fiber-optic cable it takes 4.937 μs to travel one kilometer – this means that microwave transport is actually 48% faster than fiber-optic, all other things being equal.
Microsoft bought a hollow optical fiber company for a reason.
Generally they want to build the datacentres close to metro areas, by using hollow core fibre the radius of where to place the data centres has essentially increased by 3/2. This significantly reduces land acquisition costs, and supposedly MS has already made back the acquisition cost for Lumenisity, through those savings.
Skywave Networks accuses Wall Street titans of ‘continuous racketeering and conspiracy’
FT/Alphaville is blog attached to The Financial Times newspaper. It free to sign-up for an account.