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Comment by tptacek | Hacker News Reader

The sad thing about any thread including the term "High-Frequency Trading" is that we won't be able to talk about the technology, and instead will need to relitigate automated trading.

I think we'd have been better off if the title of this thread had been "Online Algorithms in Automated Trading Systems". As far as I understand, that title has exactly the same meaning, but doesn't set off a crowd of HN commenters who have never placed a limit order jumping in to crow about _Flash Boys_.

I'm a little frustrated, since this is a technical topic that happens to be very relevant to me right now (I'm not a trader, FWIW).

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The High-Frequency Trading Arms Race: Frequent Batch Auctions as a Market Design Response[1][2] is a must-read. The tldr; is that a continuous mechanism (sequential trade processing) only looks efficient in time-space, but is actually inefficient in volume-space (most of the volume trades at stale prices). The solution is discrete batch auctions (batch trade processing).

1. slides: http://faculty.chicagobooth.edu/eric.budish/research/HFT-Fre... 2. paper: http://faculty.chicagobooth.edu/eric.budish/research/HFT-Fre...

This is really interesting, but doesn't it presume that there's only one trading venue for each instrument, and that instruments aren't correlated?

You can make time discrete for a single auction, but the time between auctions still has to be continuous unless everything's traded in a single exchange, which can't in reality happen even if we want it to (and we probably don't).

As I understand it, most of the most dramatic HFT stuff is already targeting multi-venue trades or correlations.

Decentralized assets[1] (technically possible already today, but not yet used for any high-volume instrument) have a single trading venue, namely the blockchain(s) on which the assets live. If multiple chains are involved[2][3], each individual trade is still atomic, but there would be a more complex ordering of trades: you could have trades which take longer than others to occur, and failed trades would also be publicly visible.

[1] https://en.bitcoin.it/wiki/Colored_Coins

[2] https://en.bitcoin.it/wiki/Atomic_cross-chain_trading

[3] https://github.com/TierNolan/bips/blob/bip4x/bip-atom.mediaw...

I think it is modeled in terms of endogenous vs exogenous entry. But I might be wrong, please correct me if I misunderstood.

It's obvious that they see the issue, since the examples in their slide deck are about correlation between different securities and between the same security trading on different exchanges. What I don't see is how batch auctions get around the distributed systems problem; we're still talking about an eventually-consistent system, right? There still must be opportunities for sniping, right?

(I'm not smart enough to know the answer, which is why I'm asking).

I'd share the same sentiment. I was really disappointed yesterday when the only comments (after 5 hours of nothing) was a seemingly snark question on the evil of HFT.

And to everyone who feel the need to voice their disapproval of HFT: if this was an article about improving the penetration of M1 Abrams, are you gonna be voicing your disapproval about ... something? Why/ why not?

Should we really be putting engineers to work designing more efficient techniques for punching plasma holes through sheet metal? They should instead work on improving sheet metal technology, as it is useful both for protecting both against natural disasters, and against those pesky hole-punchers.

It's interesting how you consider placing a limit order as a criterion for being eligible to comment on this topic.

So what is your opinion on the book Flash Boys?

tptacek already responded to your previous comment about Flash Boys below [0]

[0] https://news.ycombinator.com/item?id=9045150

Reply on news.ycombinator.com