RE: High Frequency Trading8 Feb 2019 00:13
Wulbert,
Thanks for posting that link, and I reckon everyone should listen to it, though many might turn it off within the first couple of minutes.
A few observations:
(a) It's about ten years out of date. This is stuff which any PI who occasionally trades should have been aware of, anyway. Though possibly, some may not have been, until the publication of a 'mainstream' book called 'Flash Boys' by Michael Lewis in 2015 (pub Penguin). Which is an excellent read, but should be considered mandatory if you want to know how stock-exchanges work.
(b) It involves three people. The commentator, someone with a Scottish accent (could it be Carnegie) who speaks so slowly it's like watching paint dry. The other is some young yank, who said that one way of making things yet faster might be shooting neutrinos through the earth from a 'transmitter in NY to a receiver' in, say, London. At which point I fell off my chair laughing, of course. The guy might know about the stock-exchange, but my neighbour's cat probably knows more about particle physics than he does!
(c) There were many mentions about 'the algorithms do this, the computers do that'. But nothing at all regarding the fact that some actual people program the computers to run such algorithms (devised by programmers), tell'em to run a slightly different algorithm, and so on.
(c subset) No mention of AI. When the computers start creating their own algorithms, or timing the switch. That's a little bit frightening. Byebye bank account sort of thing, potentially.
(d) It's why I laugh about 'trader' posters here trying to get peoples' knickers in a twist about a penny here, a penny there. They may think they're 'fast', but the algos are a lot faster, and deal in base points. In volume.
(e) It's also why I don't take any notice, because (especially because I live outside of the UK, so currency exchange is involved every (rare) trade I do), I have to think in terms of hours if not days, before any trade is finalised. So anything which won't be worth 15% profit or so just isn't worth the bother.
(e subset) The smart 'trady' posters on here are having their own hourly orders picked up on by the algos, so they themselves might not be getting the absolute 'best deal' after all, despite their smugness.
(f) I once spent a happy day ('cos I didn't have much else to do) finding out about the physical positioning of various servers on the LSE 'trading floor' (so called). Because literally, distance matters. The shorter the wire, the shorter the signal transmission-time. When you're talking microseconds. Sorry, no links.
High-frequency trading exists, and won't cause me a microsecond's lost sleep. More to the point it won't cause me a few hours' lost sleep, neither.
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