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Comment by minimax | Hacker News Reader

In a batch auction like that you still have a latency game. There is no reason to submit your order until the last possible moment since you will want to incorporate as much information from other markets and news sources as possible. You would just end up with a crush of orders in the last 100 uS of the batch interval.

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What about randomizing the auction time?

That sounds like an interesting wrinkle. The (odds of a) round closing could also be sensitive to the in-rush of sealed bids or even how different later orders are from earlier ones. That might help ensure an early-close either just before, or just after, a wave of orders that hints at information the earlier-bids didn't have. (That is, tick the unseal-matching process based on a signal of substantive change, rather than only wall-clock-time.)

But that way you could force the closing of a round by flooding with bids, effectively giving more control rather than less to anybody trying to abuse this system.

Not sure that'd be fatal, or worse than the current races.

The reset after a calculated flood-to-force-a-round-closure might even bring a compensating external benefit: a slight pause to digest the new information.

It all depends on the specific mechanism design, including choices like whether a flood can be guaranteed to land in a certain round... or might wind up as 'first in' to a subsequent round.

I haven't read the paper, but I would guess that the one-second-worth of orders in each batch are secret until the batch executes

Doesn't matter. There is still the incentive for low latency.

A much smaller and less exploitable incentive. A few milliseconds of info from other news sources is not abusive as far as I know. Unlike the ability to react to pending trades before they happen.

You are obviously not involved in the trading. A few milliseconds definitely matters. And how would you react to a "pending" trade before it happens?

I think you are conflating two types of information that can be taken advantage of:

1) Information about other orders coming into the system 2) Information about world events that may affect stock prices

The whole point of HFT is extracting maximum information from (1) and using it to make money (supposedly from slower market participants). That is what batch auctions would remove.

Nobody minds if people make money from the second type of information - but it is many orders of magnitude less frequent (ie how many times a day are there economic releases or earnings posted)?

Then why are people investing massive amounts of money to shave milliseconds in communication times between trading markets (London, Tokyo, NY, Chicago)?

They are all attempting to gain an edge on correlated inter market differences.

That only matters because both exchanges have the same problem. I think it is definitely true that if both exchanges ran on a synchronized 1 second schedule the advantage would go away, because the information from the previous round would be uniformly available early in the next.

It is less clear to me whether fixing just one exchange fixes both or neither.

The ONLY reason HFT companies invest money to shave milliseconds is to have quicker access to orders that come into the system (this article elaborates: http://blogs.wsj.com/marketbeat/2012/09/20/collocation-the-r...)

It absolutely has nothing to do with reacting to real-world events. So if all activity were to take place at 1 second intervals (kind of like microprocessor clock) - their main advantage would go away.

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