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Comment by harryh | Hacker News Reader

There are several problems with trading at 1 second intervals (or any other fixed interval):

A) What do you do when bids and asks do not match up? Who's orders get filled and who's do not? There are several possible answers to this problem, but not are satisfactory.

B) You do not eliminate the advantage of speed because everyone is still incentivized to put in their orders at the last possible moment before the end of the interval.

The world is continuous, not discrete. Therefore, like it or not, trading must be continuous and not discrete.

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> The world is continuous, not discrete. Therefore, like it or not, trading must be continuous and not discrete.

That is not true, there are market models where you run auctions all the time (with short but random auction end).

Great point. Adding onto this, an example of an auction is debt issuances. Also many exchanges use auctions (https://www.daytradetheworld.com/wiki/tse/#auction_mechanism...) during opens and closes. Essentially auction mechanisms mean that speed is not as important for participants.

None of those models will fully disconnect participants their real world experience and the incentives that creates.

At the end of the day if I can see something in the real world and react to it faster than you can, that will give me an edge. That's just reality.

B) you don’t advertise orders until the end of the second; for all ordering questions within your algorithm, you assume they have arrived at a certain random order; given two of the above, you resolve all of the orders at that end of the second too

It doesn't matter if you don't advertise orders until the end of the second. There is a whole world of information out there outside if your particular exchange. People trade on that information, so they will wait until the last possible moment before the end of the interval to gather as much of that information as possible.

There is human-relevant information being traded and relevant on a microsecond timescale?

Sure.

Something important happens. Whoever reacts the fastest has an edge. I don't really know whether we're measuring "reacts the fastest" in terms of microseconds yet these days, but fastest is fastest no matter how much you win by.

https://www.youtube.com/watch?v=cGZa-yf8vMU

Then you allow to only make orders a second before they are announced an executed

You just need to make it long enough so that microsecond latency would be diluted by the time it takes to execute the order.

But many participants are reacting to small signals only from the exchange, at least at the microseconds and smaller latencies. Real world events are not usually interpreted that fast by humans or computers; typically only market activity is. A greater danger of course when at that micro/nano scale the only information to inform trades is other market action which can cause positive/negative feedback loops between participants - for most market participants outside the HFT's and the like this could be a negative factor to the markets.

Your argument may hold for "real world" information and even then there's probably ways to even the playing field; but I'm not so sure for market information (e.g. momentum trades). Most short term trading is of the latter category except certain dates. After all information asymmetry is something that markets tend to want to reduce.

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