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Equity Trading Technology

CalibratedConfidence's picture




 

John O'Hara is the managing director and co-founder of Taskize, a financial consulting group out of the UK.    They have released a 20-page document on the technology behind an equity trade.  In today's complex and fragmented market structure with 13 lit exchanges all using their own RLP's and internalizers to take advantage of low volume clients and front run the high volume ones, it can be confusing to follow the flow of your trade through the vacuum tubes and over the brokers internalizer to the exchange matching engine. 

And who has the most popular path for trade executions?  Not surprisingly, NYSE leads the global exchange group in Largest Value of Trades at $13 trillion while Indian NSE (the same one with the freak trade that set off price gyrations) takes the cake for Volume with 1.4 trillion trades... no surprise given the push by HFT into unregulated, emerging markets. 

Given the complexity of our system just to execute a trade, is it any wonder that CNBC has been on a push with Mila Kunis and Rachael Fox to bring back the seemingly low-brow retail investor who only gets into the market once his favorite TV actress says so?  As TV panders to the simple minded, the people who make financial market interaction their lifes work, have been busy creating a complex web of technology designed to help the creators and hurt the general public users.  How many Mom and Pop Scottrade/e*traders understand the trading schematics?

We start with:

 

and before you know it, the complexity grows to an unmanageable size:

 

Good luck human.

John OHara - The Technology Behind An Equity Trade

 

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Sun, 03/24/2013 - 18:07 | 3369751 Radical Marijuana
Radical Marijuana's picture

"Good luck human."

You are now the meat in the grinder of automated frauds, where their abstract numbers are nuts, and certainly do not care about anything related to flesh and blood, (unless those have been copyrighted.)

Sun, 03/24/2013 - 17:23 | 3369606 Misean
Misean's picture

Well, I never seen such honesty from thieves before...they call a whole piece of it "The Fix". That's almost Cricket of them...

Sun, 03/24/2013 - 16:55 | 3369455 shovelhead
shovelhead's picture

What's next?

Snoop Dog hawking weed futures?

Sun, 03/24/2013 - 15:05 | 3369095 Downtoolong
Downtoolong's picture

CNBC has been on a push with Mila Kunis and Rachael Fox

I find it hilarious they even try to play the celebrity card in this industry. It would be more believable that an accountant, money manager, or even Maria B. can act, sing, and dance. Watch out Mila, next thing you know you’ll be pushing reverse mortgages on cable channel commercials during Wheel of Fortune.

Sun, 03/24/2013 - 16:57 | 3369468 WmMcK
WmMcK's picture

I think Robert Wagner, the Fonz, and Thompson What's his Name already have that covered.  Better to be old and male for that gig, dotchaknow.

Sun, 03/24/2013 - 13:44 | 3368857 brown_hornet
brown_hornet's picture

Hey Mitt- They keep the costs low and the barriers to entry easy so they can steal from more people easier.

Sun, 03/24/2013 - 13:33 | 3368826 Iconoclast
Iconoclast's picture

Whilst I agree with the overall observation my trading edge has very little in the way of discretion, can be easily adapted to automate and can be exploited from a device no more powerful than a smartphone. IMHO individual investors don't need to familiarise themselves with something of the complexity of my desktop Autobahn platform, the likes of interactive brokers and mig bank, citi or dukascopy provide enough and the right depth of complication retail investors need to attempt to grind a profit from the market.

Sun, 03/24/2013 - 13:22 | 3368787 Nobody For President
Nobody For President's picture

Thanks for bring this to ZH.

Sun, 03/24/2013 - 12:09 | 3368545 ejhickey
ejhickey's picture

if Mila is all in, so am I.  Baaa!

Sun, 03/24/2013 - 17:39 | 3369661 lewy14
lewy14's picture

I'd hit that. Bid.

Sun, 03/24/2013 - 12:02 | 3368525 Stuck on Zero
Stuck on Zero's picture

This is an awesome set of slides.  It nicely summarizes the rapid data flow in equity transactions.  It also shows all the little points where the scoundrels of Wall Street insert themselves to screw everyone.

 

Sun, 03/24/2013 - 12:35 | 3368635 disabledvet
disabledvet's picture

front running...YOUR MIND. "and still the crimes go unacknowledged" let alone denied of existence. "the only way to win is not to play." all scientific and engineered processes have a "feedback process" or "loop" as it were. In other words if you read Rousseau's classic study on how "the study of science and the arts have in fact made us more barbaric" you understand that in order for the purpose to be betterment it must have a MORAL component. by definition science and the arts do not (though there may be protests or "communications" to said effect.) in other words "these are (obviously not mere) attempts at expressing reality and NOT passing judgement on said reality." nothing less...nothing more either. let us move to an actual example: HOW DATA IS IN FACT USED. what we know for a fact is that the internet was created by the GOVERNMENT first (SECURE communication system that could withstand a nuclear attack and still function.) to release said "tool" to the general public without giving them the "security key" simply put means "you're opening the ultimate can of sardines." sure...humans are curious by nature...they ALWAYS want to know what "the other" is up to. Just what are they seeing when they "proceed down this path of pure evil" though? And i will tell you: "only what the Government allows you to." In the world of "Spy vs Spy" the only winner is the Government. Hence "here comes the insider trader prosecutions." the Government already knows EVERYTHING. By "opening up the can of worms yourself" you've literally handed it to them for free. And that makes YOU the criminal...not the one you are watching all the time. THUS! "without even firing a shot they've got you by the balls." in other words "once i know what you're watching then all i need are superior methods of data processing and downloading." go ahead...hack into a Federal Government computer system...see what happens if you're wondering what i'm talking about. in other words "it's real easy to get on the terrorist watch list--just start watching!" as a consequence of "whatever it is you're doing with that material" can...and WILL BE done to you as well. since "it" doesn't exist to begin with...well, that includes EVERYTHING. http://en.wikipedia.org/wiki/Random_number_generation

Sun, 03/24/2013 - 19:13 | 3369935 Radical Marijuana
Radical Marijuana's picture

Yeah, disabledvet, when the technologies become trillions of times more powerful, and able to use trillions of times more information, the ONLY way forward, that does not end in collapse to chaos, is to retool that fascist plutocracy. There is no way to arrest that runaway fascist plutocracy juggernaut, and therefore, it looks like it will turn most people into its road kill, unless it could be redirected somehow instead. The PROBLEM before and beyond all the rest is that the human experiment of developing a brain that can model the world, and thereby enable science and technologies that WORK, comes as a package deal.

Indeed, we must ask, where is the "MORAL component?"  How is it possible to have a more scientific morality, or a more scientific spirituality? Right now, those seem like oxymoronic questions. The banksters have taken over governments, and are using the powers of We the People to rob those People blind, which runaway robbery is getting so much worse, so fast, that to keep those robberies going, the government has prepared to impose martial law, with potentially mass murders to keep that system going ???

My answers to those questions are that we have to embrace the technologies more fully, and thereby transform them to operate better. However, to do that we must, first and foremost, accept how and why warfare was the oldest and best developed social science, and therefore, how and why the War Kings morphed into the Fraud Kings.

In my opinion, "opening up the can of worms yourself" means that we should all become better Wolves. We need to democratize the death controls. We should understand that money is backed by murder, and take more direct and open responsibility for doing that. The problems we have today are that the real systems are force backed frauds, which have been more than 99% privatized. The paradoxes are that the powers of We the People are more than 99% used by the ruling classes to advance their agenda. Meanwhile, the vast majority of the People have been brainwashed to become Zombie Sheeple, that do not understand that, and do not want to understand that.

There is NO way, short of total collapse of civilization, to an unimaginable level, nearly extinction, that the technologies which are trillions of times more powerful are going to cease to exist. Instead, IF civilization survives, one can reasonably expect that those will become quadrillions, and then more times greater than they already ARE!

The power and control that those technologies represents are currently runaways, serving Neolithic civilization, which is a social pyramid system, based on keeping the vast majority of people ignorant and afraid, so that they can be controlled and exploited. Those Zombie Sheeple have been so totally brainwashed to believe in the biggest bullies' bullshit social stories that it is practically impossible for them to understand their real situation. Moreover, most of their so-called alternative leaders are nothing more than Black Sheeple, providing the same old-fashioned bullshit false fundamental dichotomies, and impossible ideals, which are extremely unscientific, as the alleged ways to resolve those political problems.

I like the phrase "front running...YOUR MIND." However, I believe we need to do that WAY MORE! My view is that the only genuine ways to embrace the sciences and technologies which have become so problematic is to go through a creative synthesis of postmodernizing science with ancient mysticism. All of the progress in sciences like physics and biology, etc., and especially those like thermodynamics and information theory, were based on paradigm breakthroughs to appreciate UNITARY MECHANISMS of understanding.

That is what I am proposing we need to do with respect to political science. We are NOT going to be able to arrest the development of a global electronic accounting, backed up with atomic bombs, etc.! However, we could, perhaps, go on with it, and ride that through ... Of course, at the present time, I tend to more expect we will mostly be wiped out instead, since I see no good reasons to believe that there will actually be the series of political miracles that would necessary for our political science to become more deeply scientific.

Like I said, to do that, we would have to appreciate that warfare was the oldest and best developed of social sciences, but that, PARADOXICALLY, success in warfare was based on deceits. Therefore, that flatly contradicts the superficial ideals regarding what "science" is supposed to be. The problems that we have with political economy and human ecology is that those ARE actually directed today by the Fraud Kings controlling the War Kings, to run the combined money/murder systems, whereby the debt controls are backed up by the death controls.

Those social pyramid systems are being astronomically amplified by technologies that are trillions of times more powerful, and are headed, IF that civilization survives, to become quadrillions of times more powerful yet again! Therefore, we have power and control systems, like the Internet, whereby the old fashioned systems of frauds, backed by force, are running amok!

BUT, the only practical way to cope with that is to maybe ride it through, and out, by retooling the fascist plutocracy to operate paradigm shifts in the militarism, and the monetary system. We should bring our combined money/murder systems more out into the open, in order to operate them better.

Paradoxically, it has been found impossible to actually generate purely random numbers. As far as I now know, there IS a transcendental conservation of energy, which is the SOURCE of our ideals of truth and justice. However, everything particular that we can finitely measure and talk about is always necessarily some systems of organized lies, operating organized robberies.

Since our progress in the scientific understanding energy systems has enabled technologies which are trillions of times more powerful, we are now in deep, deep, deep trouble, since those have primarily been used to astronomically amplify the established systems of force backed frauds. However, there are no possible ways to stop that, other than through the extinction of the human experiment. IF that extinction does not happen, then we will soon be adding new kingdoms of life to the picture, and there will then be emerging an industrial ecology that perhaps becomes even more important than the human ecology.

We need to embrace the paradox that the governments are the biggest terrorists! The only way to cope with that is to do that better. Attempting to stop that will always only backfire, and end up making things get worse instead!

Sun, 03/24/2013 - 11:49 | 3368489 Yen Cross
Yen Cross's picture

    Our trading system isn't complex. (Bernanke put)>POMO 85bb. BTFD :-D    HoHoHo kids- Merry Xmas.

Sun, 03/24/2013 - 11:46 | 3368482 Lord Peter Pipsqueak
Lord Peter Pipsqueak's picture

Why do you need to know the fill price sucker?Benny's got yo' back,that's all you need to know,fill price? fuggedaboudit.It's all good,just don't think short term,Benny will goose the Dow higher over 12 months,forget short term dips.Just play the game,don't ask too many questions - gedditt?

Sun, 03/24/2013 - 11:45 | 3368481 The Invisible Foot
The Invisible Foot's picture

Still doesn't touch my money printing baby. (I call her the problem solver) -Bernanke

Sun, 03/24/2013 - 09:41 | 3368107 Dollar Bill Hiccup
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But ... I have a dual pentium processor ... and free data from Yahoo !

Sun, 03/24/2013 - 17:00 | 3369481 WmMcK
WmMcK's picture

Better go quad, laggard, and stimulate the economy.

Your data may be "free" but it's far from secure.

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