You're now on the archive server. Commenting has been disabled.
The Inability To Microsteal Or Nanosteal Is Absolute Armageddon For Buysiders
Another topic for the SEC to debate as it provides an "objective" and about 10 year overdue evaluation of market structure. We hope the SEC will rely on more than just Goldman Sachs' blockbuster ($49.95 on Amazon, straight to Kindle) tomes full of self-serving propaganda when determining who, how and why gets impacted by Sigma X and NYSE's SLP controlling the bulk of covert and exchange-based traffic.
From Themis Trading:
A month or so back we pointed out an article where a firm has
developed the tools to measure latency for time-stamping in nanoseconds
for HFT firms. So… milliseconds = thousandths of a second,
microseconds = millionths of a second, and nanoseconds = billionths of
a second. Got it…
Just a few days ago cPacket introduced a product to “measure one way
latency” at sub-microsecond accuracy. Amazing technology! We realize
how crucial latency is to the Information Arbitrage/ Latency Arbitrage Risk-Free Profit Extraction Modules
(ie stealing) of the HFT firms, so this is an amazing step! We are
excited for the HFT firms, retail investors, mutual fund investors,
pension fund investors, 401k account holders, who can all co-locate and
invest in the common technology (anybody can do it, after all) to play this game!
And play this game they had better: according to Tabb Group’s Bob
Iati, over 30% of buy-side shares in the U.S. are now executed by
algorithmic trading platforms, and that latency as little as 10
milliseconds could cause a firm to lose up to 10% of its revenues.
“It’s a real, hot issue.”
If not being able to steal at 10 milliseconds is so damaging, I
guess not being able to microsteal or nanosteal is absolute armageddon.
»
- 3677 reads
- Printer-friendly version
- Send to friend
Similar Articles You Might Enjoy:
- Goldman's $4 Billion High Frequency Trading Wildcard
- HFT Is Now In Business Of Frontrunning Each Other's Regulatory Capture
- Guest Post: “Large Trader Tag” by the SEC Insulting and Unconstitutional?
- Latency Arbitrage: The Real Power Behind Predatory High Frequency Trading
- Senator Kaufman Reminds Most HFT Issues Still On Table; Notes Rising Market Structure Concern By Regulators And Market Participants
Makes you wonder, why only 30% so far? I suppose the upper limit might be around 50%,given the need for a counterparty (i.e., sucker "investing" in the market as if it's some sort of legitimate enterprise). It's certainly wonderful that HFT technology has advanced to the point where the robots can extract profit more or less like grizzlies extract salmon from a rushing stream.
I think the solution to this problem is in regards to the stock exchanges...lets blow them up so that this colocation issue will be put to rest.
You shouldn't say things like that. Janet Napolitano might take you seriously.
The Nuclear Cold War is over, welcome to the Financial Arms Race!!!
If I can add to the panic, you have to consider the task scheduler latency in your computer operating system. Unix like systems default to 10ms. Any yield push the response to 20ms. Unless you know how to set to operate in real time and all that.
Given the timing you are quoting, I assume you mean microseconds rather than milliseconds when you say "ms", since crappy Pentiums for a decade ago could easily beat 10 milliseconds.
Nope, ms as in millisecond. 10ms is the default time slice in most systems; less than that and you have context switch trashing. Try it yourself: you won't get reliable output in the less than 10ms to 20ms area unless you change that task scheduling class.
On any recent machine with a reasonable linux kernel, lmbench will show context switch times measured in a small number of us (i.e. microseconds).
This isn't particularly new. I just googled for a second and came up with some random guys machine in 2003 at under 3us.
http://74.125.93.132/search?q=cache:25SBbIDvHeIJ:lkml.indiana.edu/hypermail/linux/kernel/0311.0/0639.html+lmbench+context+switch+time+linux+us&cd=1&hl=en&ct=clnk&gl=us
Now, one could argue that lmbench isn't accurate - but it's not off by 3 orders of magnitude.
On a 3GHz processor, a 10ms context switch time that you quote would be approximately 30 million instructions - quite a long cycle.
I have seen Sleep() on Windows machines switch out for 15ms regardless of how low of a parameter is passed in, but I can routinely sleep for periods measured in microseconds in my Linux code.
On a Mac Mini (i.e. a piece of junk dual core 2.0GHz running an unmodified Ubuntu kernel), I attempt to sleep for 5 microseconds in a block of code and it doesn't come back for 80 micro-seconds... but even that is a far cry from the 10 milliseconds you are quoting....
Ok, my last intervention.
You should't measure it at the sleep/usleep because that's what yields the process out of context. Try real work in a loop getting results out with precise timing under 10ms. If you still can get it with cpu at 30%-50% (real workload; order processing?) then by all means co-locate your Mac Mini and beat the crap out of GS.
You can do it in real time mode, batching actions in a single time slice, but that's not for retail.
1) Anyone running software this latency sensitive will be running SLERT or RH-MRG. Which are both real time.
2) Using boost timers in C you can get beyond the 10ms quite easily.
3) Most of the time it doesn't matter. You don't need a timer to fire to process the messages, you just do them as fast as you can whenever you get them. It's all event driven using call backs.
Why not enact a new tax on "ultrashort-term capital gains," say 50% on gains from positions held less than 1 hour and 100% on positions held less than 30 seconds.
I don't see how HFT can be anything other than sophisticated theft.
sure, and we all know that driving fast creates more pollution and burns more fuel, so lets tax fast drivers more. Lets tax any firm using a high speed internet line more than a dial up, because speed kills. Use just in time delivery, sorry - you get taxed more too - as you are simply too efficient for the mom and pop store trying to compete.
Classic. Stupid. Themis is retarded by the way
Way to completely miss the point, Anon.
Hey, have you noticed that there are these things on the roads called speed limits?
They're there because people who drive too fast endanger themselves and others.
Have you ever considered that people who trade too fast might be endangering someone too?
Speed limits are there to keep people driving safely at reasonable speeds and ensure that individuals don't get greedy at the expense of society.
Which is exactly the dysfunctional situation we have in the markets right now.
you completely missed my point. Try making your argument against just in time delivery systems that absolutely killed mom and pop retailers. They could not compete with the technology and efficiency of the Walmart style inventory distribution. Is that a bad thing?
Those on the front of the information curve, those who break technological boundries get paid. Those who are late may participate a little, but the returns diminish. Those who fail to adapt die. Its the same everywhere in every business.
Another analogy - fast food. MCD spends huge dollars in setting up kitchens that produce food faster than anyone else. That of course puts mom and pop burger stand out of business....but are you complaining?
Reacting to supply and demand and market levels faster than participants is nothing new, unless you are Themis and 5 - 10 years behind the curve re technology
I would, but this is a completely different ball game.
Have you noticed that the stock market is not just for corporations, but for individual investors?
And that ordinary individuals are encouraged to put their money there (not least by CNBC), with the expectation that they'll be able to do so without being continually assraped by high-frequency traders?
So, what you are saying to me is, "Because you're a lone trader and you haven't set up an HFT platform yet, it's my right to rip you off."
Fuck that.
No, because yet again you're using a flawed analogy. Mom and Pop are not expected to put up a burger stand that competes with McDonald's.
They most definitely are expected to be able to place trades fairly on the stock market.
Let me see if I hear you correctly. You're saying, "I have the right to steal money from Grandma Jones every time she makes a trade on the stock market, because she didn't bother to set up cutting-edge HFT platforms."
Is that what it's come to?
Seriously, it's no wonder so many individual investors are keeping their money in money-market accounts and T-bills instead of the stock market.
People aren't stupid, and they'll stay away until we do something about HFT.
If you think mom and pop are getting a fair shake using financial advisers and mutual funds to access the market - even if HFT was banned or taxed to death - then you are absolutely clueless.
If you think the general public isnt getting hosed by having their 401k company pay a firm like Themis a big mark up just to execute in a market in which 5 mils for execution is totally commonplace, then you are ignorant to this rigged game.
If you think HFT should be illegal or taxed because they are parasites, then if you have any intelligence you will also see that brokers, advisers, fund managers - everyone charging a markup/commish should be taxed to death as they are all parasites and providing close to zero value.
What does the general public get in return for paying an asset manager 1 - 3% per year on their money? Last year, they got a dagger in their back. They dont get risk control, they get "asset allocation" which is duplicated so many times over that there is really no diversification. They get put in giant pools of billions of dollars where even if a manager wanted to sell their positions he couldnt because he would move the market too much or his dumb bylaws would prevent him from doing what he thought was right.
The whole game is rigged, and will likely bleed to death for the next decade. I am not pro HFT, I am just saying that they are no worse or better than anyone else in the game. For the record, I am not a HFT trader, and in fact if HFT was banned it would help my business. But, that doesnt fill me with rage or hatred or prevent me from using basic logic in making my arguments.
What's all that got to do with anything we were talking about?
You're clearly trying to drag the conversation off the subject here.
If you really need to bring the incompetence of brokers and money managers into the argument to try to compare it to HFT and say, "Oh, but mom and pop are losing money anyway, that's just the way it works," that indicates to me that you've run out of real arguments.
Hooray for complacency!!!
Glad to hear that you, like me, are not filled with rage or hatred.
I am, however, filled with frustration at your inability to respond to my points with valid, rational arguments.
Yes, I'm not sure exactly what it is that's stopping you on that front. Care to explain?
And if you're really going to make the argument that "faster is better" and "whiz-bang technology always serves the betterment of society," then no. Shove it, punk.
That's a preposterous argument and you know damned well that you're just making excuses for the not-yet-criminalized theft which is HFT.
If I build a car that can go 900 MPH, what's the purpose? None, because a car like that can only endanger people.
If I build a TV that can show 10 trillion pixels, what's the use? None, because the human eye doesn't have enough receptors to even see that many.
HFT serves the bottom line of HFT trading firms, period.
It does not serve the market or the ordinary investor.
If the argument is that it "provides liquidity," there are far better ways to provide liquidity -- and I mean reliable liquidity, that can't be unplugged at a moment's notice -- than HFT.
ALL companies make products that they plan on selling for a profit. Of course they wont do the 900 mph car or 10 T pixels because there would be no return. But, BA may make a plane that goes 1200 mph because they might be able to make money on that.
Everything that increases speed in useful products is a good thing.....its results in productivity gains. They speculated and used their money to try and create a product that they could sell for more than they bought it for. HFT firms have speculated using their own money and if they create a better wheel then they will get paid. Its all speculation - its all business - and the better one biz is relative to others the more they are likely to make. Some will call that being a parasite to others (MCD stealing from mom and pops....HFT stealing from mom and pop) - point is that no corporation is in it to help mom and pop - - they are all hoping to take as much of mom and pops money as they can. Where do you draw the line? give me a detailed proposal of exactly how your tax would not blur major lines
OK, finally we are getting to the core of the argument.
No question that corporations aren't in it to help mom and pop.
However, the government does have that obligation, as specifically laid out by the founding fathers. They have explicitly been granted the ability to regulate commerce.
As a conservative, I hate to be among those calling for more regulation, but it needs to be up to the government to draw the line.
Trading practices which
should be regulated out of existence.
+1000
/signed
If anyone can explain what societal value is created via trades that have a complete round-trip (buy/sell) in only a few seconds or less and somehow make a profit more than 50% of the time, please go right ahead.
If your point/endgame is to tax or eliminate every career/job that does not create value for society then I think you need to realize that > 50% of the population would be unemployed.
Why is a long term fundamental investment any more sophisticated or any more ethical than an analysis of supply and demand? I think the last 12 months in these markets demonstrate just what a load of crap the Ivy League fundamental forecasting is
Risk Free Profit Extraction? Where do I sign up?
The guys at Themis believe that HFT is risk free (which it is not - each individual trade likely has a win rate of just over 50%, but the law of large numbers makes the aggregate trading day profitable in the common case).
I retort that the only risk free profit extraction on Wall St. is to get paid a commission for each share moved - namely, the business that the boys at Themis are in.
So, if risk free profit extraction from trading is your goal, go work at a brokerage house and enjoy your risk free commissions.
BINGO - the only risk free set up is the boys getting paid commission (Themis) and the boys who get management fees regardless of performance (Pimco).
I love how this site gets all worked up against those who actually take risk and successfully make money while it says nothing against those who just charge for passing along services that are a net zero gain.
Are you equating algo trading and HFT trading?
PeterPeter,
The guys at Themis believe that HFT is risk free (which it is not)...
Read what information arbitrage is. Read Jeffries's Paper and then weigh in again. They see what the quote will be in the future. It is this practice, with their speed, that provides a risk free arbitrage. Really read that paper.
HFT is here to stay Duncan and Schumer have decided.
When it comes tax time do these HFT firms report all of their zillions of trades to the IRS? And if so, does the IRS sort through this data avalanche to verify the capital gains/losses these HFT firms stated on their taxes.
Seems to me they could easily cheat the IRS out of millions if not billions of dollars on their taxes by overwhelming the IRS with data.
I know a thing about ticks and fleas.
Let's just call these HFT and insider traders like GSacs what they are, parasites. From Wikipedia:
Parasitism is a type of symbiotic relationship between organisms of different species where one organism, the parasite, benefits at the expense of the host.
Parasites reduce host fitness in many ways.....Parasites increase their fitness by exploiting hosts for food, habitat and dispersal.
Parasites evolve in response to defense mechanisms of their hosts.
_______________________
You can defend HFT if you like, but the thing to remember is the parasite can't live without the host, but the host can live without the parasite.
Who defends the parasite's right to live and says American's shouldn't reach for their de-worming medicine? The parasite will be worse off, but the hosts will thrive and keep all their energy to themselves.
HFT traders defenders would say we are so much worse off having gotten lice under control. Maybe the somebody in the lice-industrial-complex has lost business; but besides benefits accrued by a select few epiparasites, parasites add nothing useful to the ecology and will not be missed.