Speed Traders Invade Sleepy Corner of England, Locals Bristle | Hacker News Reader

Speed Traders Invade Sleepy Corner of England, Locals Bristle

bloomberg.com

58 pointschollida164 comments

> for now at least, microwave signals are among the fastest ways to transmit orders between exchanges.

I think the author could have asserted this with a little more confidence. Short of building a vacuum tube, which would be about 0.03% faster, microwave signal is (and will continue to be) the fastest way we of transmitting information from England to Germany, or from anywhere to anywhere else for that matter.

Although, if anyone is going to completely overhaul our understanding of physics and develop faster-than-light communication it'll probably be high-frequency traders. I think Wall Street already hires more physics PhDs than all the universities in my country combined.

I doubt that the technology choice is so clear cut. I'd guess that the major factors are the group velocity (i.e., the speed of modulation, rather than the speed of a wavefront), the group delay of the analog (roughly 1/bandwidth), and the clock/complexity of the digital stuff (coding and modulation and whatnot). Point-to-point microwave may well be better, but it'd take a while to put a good delay budget together.

Sad waste of talent, just like all the people trying to figure out how to get more eyeballs on advertising. Physics people trying to eek out a millisecond or two out of a trading system in order to front-run order books just seems so trite and short-sighted. It's personally very disappointing that we exist in an economy which so highly incentivizes this type of endeavor.

I agree, but I think a lot of those physicists would love to work in physics if they could find a job. No one spends 6 years studying neutrino flavours because they want to make tons of money working in finance.

For original, in-depth, on-the-ground, and ongoing commentary on HFT developments in this region I recommend reading the "Sniper in Mahwah" blog(1). It gets a lot more technical, among other things. His posts are regularly featured here on HN(2).

(1)https://sniperinmahwah.wordpress.com/

(2)https://hn.algolia.com/?query=sniperinmahwah

Also of note, Mahwah is the small town where Wall Street effectively moved to.

Yet another case of NIMBYism. Why does the community get to decide on what is done with private property? A radio tower mast harms nobody, will not significantly affect traffic, utilization of public utilities, or pollute.

It's telling, the comment at the end. 100,000 pounds? Not enough. We need to extract more from those evil financial companies, because they can afford it. What a naked money grab.

I can't tell if you're serious, or this is just brilliant satire.

> What a naked money grab.

Whereas high frequency trading is what, exactly?

It'd be one thing if the radio tower were needed to serve a useful purpose, but why should they be able to impose it on a community to shave a couple milliseconds off of latency so financiers can play stock market games?

Maybe I'm not well educated on the issue, but is HFT not just a gigantic zero-sum arms race where the participants would all love to stop wasting money on it except they're worried that someone else would one-up them by half a millisecond?

It is a really good question whether it is the morally correct thing for ANYONE to aid and abed HFT firms.

HFT reduces spreads. End users end up benefiting from lower prices. If you wanted to make HFT less of a game, adding much higher precision would help. So instead of pricing in increments of a penny, which is a lot, try, say, 1/100,000th of a penny (8 digit precision on the price).

If we accept financial services as a whole to be OK, then HFT certainly is. I'd suggest the book "Dark Pools": https://www.amazon.com/Dark-Pools-Machine-Traders-Rigging/dp...

It describes how automatic trading started. If you're a programmer, you'll probably have your mouth hanging open realising how up-for-grabs so much money was. At least that's how it sounded on reading it.

Sweet the spreads are reduced. Thanks HFT! I've been up all night worrying about them.

Everyone profiting from HFT are trying desperately to convince everyone else that they provide a service and benefit and they just can't understand why normal folks aren't buying it.

The amount of power of HFT to move markets is frightening. Like, for example bogus assassination tweet sending the stock markets plunging $136 billion in two minutes*

* http://www.bloomberg.com/news/articles/2013-04-23/fake-repor...

As an average individual investor who thinks that keeping significant part of my net worth in stocks is a good strategy I do care about spreads and I don't care about market plunging $136 billion for a day or two. Why would I? Why would anyone? The company is still there, standing, producing, paying dividends. I couldn't care less about it plunging 50% for few hours because some suckers decided to sell some stocks for half the price. Maybe I can even benefit by buying then.

HFT is a godsend for your average investor who can now save money when buying/selling stocks instead of giving it to greedy traditional brokers on their overpriced services.

As an average Joe, I feel exactly the opposite. Spreads don't affect me much because the commission on a purchase or sale is so high and I trade infrequently. High volatility is what would make me more dyspeptic.

As an average individual investor, you're buying and holding for the long term, in which case you actually don't care about shaving razor-thin slices off spreads.

I do care. If I buy stocks to hold and sometimes re-balance the difference between spreads between liquid stocks (as in markets with active HFTs) and not liquid stocks (as for example in market in my country) is huge. Those things add-up.

I also want efficient arbitrage done by HFTs. I don't want to sell or buy being unaware of some important news. HFTs ensure I get a fair price without following the news every time I want to buy/sell something. The more efficient the market, the more liquidity and the lower the spreads - the better it is for me as an individual buy and holder.

People also might care if most of their retirement rests with some large insitutional investor.

So if you invest with an active mutual fund, HFT is either a) detecting any large move the fund makes and pushes up the price of the asset before the trade completes or b) making you use a more costly service to complete the trade secretively to hide it from HFT detection.

Passive funds might trade less but their moves are so widely broadcast you don't really need algorithms to detect them.

By end users you mean HFT trading firms?

"adding much higher precision would help. So instead of pricing in increments of a penny, which is a lot, try, say, 1/100,000th of a penny (8 digit precision on the price)"

So start gaming the price to fix gaming the trades?

I mean anyone not acting as a market maker.

It's not gaming the price. Using 1 penny increments is slightly less silly than 1/8th but makes about the same amount of sense: not much. There's no technical reason, it's purely a regulatory issue. (Well sub $1 stocks in the US are allowed 0.001 pricing.)

> HFT reduces spreads. End users end up benefiting from lower prices.

Is this really true? It's hard to understand how the fact that one guy can trade with a delay of two microseconds instead of three will benefit the market as a whole. I can tell you it is commonly thought that HFT's profits come at someone else's cost, and that someone else is precisely your "end user". See "front-running".

Front running is when you take your customers' orders, then use that knowledge to cheat them. For instance, your customer gives you an order to buy a stock. You then go and buy a bunch first, then sell to them at a profit.

Front running has nothing to do with speed. And since HFT firms don't have customers generally, they simply cannot front run.

The profits have come at the cost of other market makers - they're all HFT now. There's also the ability to adjust pricing quickly, so that when some large firm tries to buy or sell a large block, they don't get to avoid price impact as easily.

Front-running is precisely what Michael Lewis's Flash Boys is about.

The trades intercepted by HFT don't constitute marterial market information which could change the behavior of the trader being front-run. They can only serve, much as with Sysiphus, to take an existing transaction opportunity from them, after having been committed to it.

This is a straw man reply. It isn't responsive to the original objection -- why should the government get to decide whether someone can build a radio tower on private property, provided that it doesn't adversely impact anyone else? The proposed use of the tower is irrelevant.

I don't know what the land use laws are over there, but I can tell you that in the US, the government frequently gets to decide whether someone can build a radio tower on private property.

I'm fairly certain if someone bought a plot of land near me and said "I'm building a 1000 ft. tall radio mast for stock trading" they'd be promptly told to fuck off.

On the other hand, if a project is being built to provide a public benefit, say for an emergency radio system or something, then variances are more likely.

I don't think that answers they question of why the government should be able to do so.

A more extreme example to make a point: because it would be bad if someone could buy up the house next to me, knock it down, and replace it with a sewage plant.

At least in the US, a large component of limiting land use is to prevent someone from moving in with some undesirable feature and tanking an entire neighborhood's property values, which in many cases are homes that represent a large fraction of a lot of people's net worth (and retirement funds). Taken too far, this can lead to crazy NIMBYism that keeps anything from being built anywhere, but I don't think it's unreasonable to say "No, you can't put a landfill in the residential area that's been developed here for 150 years."

Whether you think a 1000 ft. radio mast falls into that category is up for debate, but a full-on libertarian "I can do whatever I want wherever I want to" system wouldn't lead to very good outcomes.

If you want to look at it from an quantitative perspective, say a developer wants to build that sewage plant. He scouts out a location, decides he can make 2 million bucks on this project, and starts building.

Once it's finished and the neighborhood literally smells like shit, the value of 200 nearby houses each drops by $100k. It adds up to a total loss of 20 million dollars for the residents.

The net effect being that the sewage plant developer has built a sewage plant, made $2MM, and destroyed $20MM of property values. If everyone is looking to make a buck and has no checks on what negative impacts they can have on nearby property owners, then schemes like that would be happening all the time. Government oversight of land use is a means for communities to prevent it.

You were probably exaggerating, but "I can do whatever I want" is far from libertarian. Indeed, forbidding imposing uncompensated the externality of decreased land values in this situation is one of the defining aspects of libertarianism as opposed to, say, anarchism or socialism (where you pay a fee to the government - excuse me, the People's Party - to do whatever you want).

So who or what does the forbidding, and what would make the outcome different from anything that has ever happened in history before?

You are correct, but I'd like to clarify that property rights on land is one of libertarianism's big things mostly because rich folk own a lot of land.

They'll defend having a "big government" that'll commit violence to protect rich people's land and they'll pay for that with taxes that they would otherwise decry as theft at gunpoint.

Contrast this with their general approach to industry dumping carbon or other pollution into the air and suggestions to price in those externalities.

You clearly have no clue what the term "big government" means. It doesn't mean your local Sheriff's office, at lower staffing levels than needed for the drug war.

A sewage plant smells. What does a radio tower do?

I wasn't suggesting that the govt shouldn't be able to do so (I generally think they should) but rather that the parent wasn't really replying to the point.

The query specifically states, "...provided it doesn't adversely impact anyone else."

Building a sewage plant or a landfill next to your house would most certainly impact your life.

I am with you on the irrelevance of the proposed use, but with regard to the larger question, the government gets involved in settling disputes over private property because that's what maintains the concept and reality of private property - without it, everything is up for grabs all the time (see, for example, northern Iraq.)

I trust you would have no problem with someone building a sewage treatment plan on the private property next to your house?

I'm not taking a position, just pointing out that the post I replied to was not responsive to the original objection (which someone else wrote).

Also, the post I wrote specifically states, "provided that it doesn't adversely impact anyone else." Building a sewage treatment plant next to your house would certainly adversely impact your life, so it doesn't fall under the parameters of the query at hand.

If it can be seen then that is an impact, if it casts shade that is an impact.

If peoples livelihoods are damaged that is an impact. I think that is stealing.

So, this is a community matter.

> A radio tower mast harms nobody

Visual pollution is a thing. And an important thing. Why as a well off society we don't do more about it surprises me.

If for some reason noone could see the mast, your point would be 100% valid.

Note that, from the article, this is a town that gets a good chunk of its economy from tourism. (Brits love their holidays.) So something that vacation-goers consider an eyesore could, in fact, cause significant economic damage.

It is kind of funny that you use "naked money grab" in defense of HFTs.

Not only that, but a gigantic (literally) liabilty of the company that maintains the tower goes out of business.

Yes, correct its not just a cell tower its 300 meters! It is not in sympathy with the scale of its surroundings. As such it constitutes a blight. It's an eyesore with no public benefit. NIMBYism isn't always a bad thing. Its easy to throw the NIMBY term around when its not your own backyard.

There's nothing inherently wrong with NIMBYism. Would you be at all concerned if your neighbour planned to place a radio mast as tall as the eiffel tower in their backyard? The local's concerns are entirely reasonable.

FWIW, said financial firms do pay very well for the rights to use those towers, and they almost always have to employ local or relatively local tower climbers and ground crew to maintain them. If Vodaphone wanted a tower in this town, it wouldn't be news.

Disclaimer: I work for one of the two companies mentioned as having applied for permits in TFA.

Pretty sure Vodafone would not be building one nearly as high.

Can the council build the tower and then rent space to the network operators, using the money to fund local services?

One plan is to require them to share a tower (rather than building two) but it would still be built with private money while still subject to an annual charge to be paid to the local authority. I assume this minimise financial risk to the local authority.

From a financial perspective it is not that costly to build a 300 meter guyed tower. FM radio stations in the Midwest and TV stations do it all the time. I've heard figures of around $2 million total for an 1800' in ND. Yes you could build a tower and rent space on it. Whether this makes sense for a local government to do is another question.

I keep hoping that some of this massive brain drain trying to shave off the last ms of latency (FPGAwork, microwave towers, etc etc) will somehow translate into some advancement good for the overall society.

Also, I hope the rapidly diminishing returns will stop this ridiculous arms race.

Is there a reason these HFT firms can't put servers in a DC in Frankfurt? What am I missing?

They almost certainly already have servers in a DC in Frankfurt - the point is that being able to communicate current prices between the major markets faster than anyone else gives you a trading edge over other market participants.

Doesn't the trading logic live on that machine in the a data center in Frankfurt? It responds to signals and executes trades based on those signal correct? It doesn't require hitting an API like in a standard web app right? From my admittedly limited exposure to an electronic trading shop, that logic was maybe updated a few times a day but largely ran as a state machine based on signals and market feeds. What am I missing?

Sure, some HFT strats are locally encoded. But that’s not the only way to make money. If what you want to do is run arbitrage between different exchanges then being faster than everyone else gives you an edge. You can take advantage of price differentials before anyone else does plus you get to front run news that has market impact round the world before anyone else can get their orders in.

There are plenty of ways to make money if you’re faster than everyone else at getting data from exchange A to exchange B.

That's quite the long path over water. Hope they don't have strong temperature inversions there...

Perhaps the plan is to just quit trading when the link is down. Make money when they can...

Why put it in a little village and not in the center of London? Cities (imho) are eye sore galore already so more eye sores don't really make a difference, while in a quaint English town it changes everything.

Because the earth is a sphere and microwaves travel in a straight line.

At my height, standing on the beach the horizon I see is only 5km away.

Huh, why does that make building it in the city / countryside any different?

Why aren't they building a fiber optic link? Is it that the shipping channel makes it too likely for disruption of the link?

Fiber optics are slower than microwave, and the routes aren't as straight.

I'm being pedantic but microwave just has lower latency. Bandwidth is definitely down compared to fiber.

I wondered about that, but since microwaves in air are 50% faster moving than the light through fiber it seemed correct.

Probably should have said "Light through fiber optics is slower than microwaves in air".

Light in fiber moves at about 0.66c due to bouncing off the walls of the fiber trillions of times in a short distance.

It moves at that speed because the index of refraction of glass is about 1.5. In single-mode fiber the light doesn't really bounce off the walls.

Also significant latency is imposed by the network architecture vs the choice of bearer, and by shared vs single user. My guess is that the main driver is actually to get a private channel with qos guarantees and as few retransmission hops and security bumps as possible.

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