Someone in Chicago used a FTL drive to play the market (or cheated)


#1

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#2

Oh, what a surprise. Who would ever have thought that somebody would benefit from inside information...


#3

BEEKS!

Fascinating. Now can we start with the High Frequency Trading Tax?


#4

Relevant xkcd cartoon here

The thing is, first they need the information, and then then need to use the multi million dollar system to get in before the news. They already have the sunk cost of the computer system, but they can't really use in correctly until they know which way it is going to know.

I'm thinking that there are all sorts of ways this information can be obtained from low tech to high tech.


#5

So, does that mean the stock market isn't useful or representative of actual value?

(checks with science)

Oh. Yeah, it's useless, well observed.


#6

Hmmm... What do you mean "announced"? Do you mean a relay flipped or do you mean someone came out and talked about it? So I'm not saying something screwy didn't happen but it wasn't like someone announced to the public what was going to happen and then some one thought... Oh, I'm going to log into my computer and put in a buy order by typing in my login password and then find the stock listing and hit the enter key a few times in 7 ms.


#7

Umm .... paging Friar Occam


#8

The Feds rules were that the financial press were briefed and given the information 10 minutes before the embargo release, they were also allowed to open a phone line to their office, but not to start speaking before 2pm. So, in that case, you have one phone number to dial if the Fed is buying, and a second phone number to dial if the Fed is not. ... the back office just looks at the caller ID and knows immediately what the key piece of information was going to be ahead of the 2pm embargo.


#9

Simplest explanation is that the clocks are not synchronized to the same time source; someone watching the announcement pressed/clicked something to execute the 'buy order' macro as soon as they thought what they knew the announcement was going to be; the two in combination could account for it.


#10

Price of a commodity is only a macroscopic quantity. When you look in detail you find that everything is fluctuating.

You'd think Maxwell's Demon would have something to say about the intelligence of trying to extract value via High Frequency Trading.


#11

Comment of the new millenium.
It should be enshrined in bronze.


#12

Or maybe there was a measurement error? Somewhere. Maybe.


#13

in theory, with an open line, you don't have to talk to communicate. one of the reporters could have a high-frequency device that'd be inaudible but able to communicate data over the line.


#14

That would be a good start though it wouldn't have prevented this situation. Whatever tax would be due would be worth it to be ahead of the rest of the market. For those who don't know, news like this isn't just announced to humans, it is also encoded in a format computers owned by traders can understand. It's much like the issue with Watson on Jeopardy where the machine was able to understand the text and respond faster than the humans even though in most cases the humans knew the same answer (Toronto excluded). I'm not sure with Fed announcements however if they're released in computer format at the same time as human format like most of the news services do. Either way, the speed at which this trade was made seems to have been set in motion before humans should have been able to hear the news.

As for clocks being off, we're talking about systems where it makes sense to build new cables costing hundreds of millions between cities to shave a few ms off the time it takes a trade to complete. Clock errors don't happen. There's too much money involved in each and every ms.

The thing that gets me about these automated high frequency trading systems is when they're called into question, those making billions off of them claim they're necessary because they bring liquidity to the market. I have to question if anyone in the market needs millisecond liquidity except for them. If I've held a stock for twenty years, I'm fine with it taking twenty minutes to sell rather than twenty milliseconds. They're using solving a problem they're creating as justification for their actions. Guess they look that whole bit about pulling yourself up by the bootstraps a bit too literally.


#15

What would it look like, if all that computing-fu were used for a democracy? Y'know, like Venezuala before the coup.( D'oh! I answered my own question.)


#16

Either:

• The short hallway that connects the revolving doors at The Fed and Goldman Sachs has something to do with this

Or:

• Bigend now controls the order flow


#17

Well there is a good neutrino detector in northern MN. It is about 600 miles from Chicago, but I assume that it has state of the art data lines to Fermi Lab, so perhaps that was the route of transmission.


#18

FIRST!





Dang. How the hell did you guys posts before me?

mutter mutter mutter.

Oh. I see. Inverted. Got it now.

See you yesterday!


#19

You're going to have beenplanning on having replied to us two days before tomorrow, aren't you?


#20

That won't be funny the first time you said it again.