The other crucial routes are New York to London and London to Tokyo. (Trading hours in the US don’t overlap much with Asia, so there’s less demand for an ultrafast New York–Tokyo link.) At least three companies have announced plans for fiber-optic cables under the Arctic Ocean between Europe and Japan. One route skirts the Russian coast and comes ashore on the northern tip of Murmansk; the other traverses the Northwest Passage through the Canadian Arctic. When they go into operation around 2014, they will cut latency from about 230 milliseconds on routes through Asia to between 155 and 168 milliseconds.
Meanwhile manufacturers have begun making cable for a new New York–London link intended to shave 311 miles off the usual distance and cut the round-trip message time from 65 milliseconds to just under 60. It will do this by taking a great-circle route, traversing the shallow Grand Banks off Newfoundland. Most transatlantic cables head straight for deep water, to get away from sharks. In what some might consider a case of karmic justice, sharks threaten the financial industry by biting its cables, attracted by the electromagnetic fields generated by the wires that power the amplifiers at intervals along their length. Along the continental shelf, cables must be expensively armored against sharks and if possible buried to avoid damage from anchors and fishing trawls. The new cable will be armored for about 60 percent of its length, to take advantage of the shortest possible route. By summer 2013, two ships will begin laying cable, meeting mid-Atlantic in about three months, according to officials of Hibernia Atlantic, the company behind what it calls Project Express. Cost: around $300 million. Estimated useful life before obsolescence: hard to say. But what else can they do? Unlike the New York–Chicago route, the Atlantic Ocean is a highly unsuitable environment for erecting microwave towers. On the other hand, when I raised this point at the Battle of the Quants with Alexander Dziejma, chief architect at a high-frequency trading firm called Dymaxion Capital Management, he scoffed.
“They’re doing amazing things now with drones,” Dziejma said.
“Drones?”
Sure, he said. A fleet of unmanned, solar-powered drones carrying microwave relay stations could hover at intervals across the Atlantic. I started to come up with all the reasons that was a crackpot idea, then realized I’d heard 10 crazier things since 9 am that day. “Someone will do this eventually,” he said.
and of-course this:
The quotes in Yahoo’s order book probably came from an algo, and you almost certainly can’t trade at that price. Even if you had access to the exchange, which of course you do not, they would likely be gone long before you could jump in the market—either already executed or, much more likely, withdrawn before any shares changed hands. And that’s where the really dangerous part begins to set in. It’s not just that humans are less and less involved in trading; it’s that they can’t be involved. “By the time the ordinary investor sees a quote, it’s like looking at a star that burned out 50,000 years ago,” says Sal Arnuk, a partner in Themis Trading and coauthor of a book critical of high-frequency trading titled Broken Markets. By some estimates, 90 percent of quotes on the major exchanges are canceled before execution. Many of them were never meant to be executed; they are there to test the market, to confuse or subvert competing algorithms, or to slow trading in a stock by clogging the system—a practice known as quote stuffing. It may even be a different stock, but one whose trades are handled on the same server. On the Internet, this is called a denial-of-service attack, and it’s a crime. Among quants, it’s considered at most bad manners.
and the big question:
High-frequency trading raises an existential question for capitalism, one that most traders try to avoid confronting: Why do we have stock markets? To promote business investment, is the textbook answer, by assuring investors that they can always sell their shares at a published price—the guarantee of liquidity. From 1792 until 2006, the New York Stock Exchange was a nonprofit quasi utility owned by its members, the brokers who traded there. Today it is an arm of NYSE Euronext, whose own profits and stock price depend on getting high-frequency traders in the door. Trading increasingly is an end in itself, operating at a remove from the goods-and-services-producing part of the economy and taking a growing share of GDP—twice what it did a century ago, when Wall Street was financing the enormous industrial expansion of the economy. “This is counterintuitive, to say the least,” wrote New York University economist Thomas Philippon in an article for the Russell Sage Foundation. “How is it possible for today’s finance industry not to be significantly more efficient than the finance industry of John Pierpont Morgan?”
- More Here
Meanwhile manufacturers have begun making cable for a new New York–London link intended to shave 311 miles off the usual distance and cut the round-trip message time from 65 milliseconds to just under 60. It will do this by taking a great-circle route, traversing the shallow Grand Banks off Newfoundland. Most transatlantic cables head straight for deep water, to get away from sharks. In what some might consider a case of karmic justice, sharks threaten the financial industry by biting its cables, attracted by the electromagnetic fields generated by the wires that power the amplifiers at intervals along their length. Along the continental shelf, cables must be expensively armored against sharks and if possible buried to avoid damage from anchors and fishing trawls. The new cable will be armored for about 60 percent of its length, to take advantage of the shortest possible route. By summer 2013, two ships will begin laying cable, meeting mid-Atlantic in about three months, according to officials of Hibernia Atlantic, the company behind what it calls Project Express. Cost: around $300 million. Estimated useful life before obsolescence: hard to say. But what else can they do? Unlike the New York–Chicago route, the Atlantic Ocean is a highly unsuitable environment for erecting microwave towers. On the other hand, when I raised this point at the Battle of the Quants with Alexander Dziejma, chief architect at a high-frequency trading firm called Dymaxion Capital Management, he scoffed.
“They’re doing amazing things now with drones,” Dziejma said.
“Drones?”
Sure, he said. A fleet of unmanned, solar-powered drones carrying microwave relay stations could hover at intervals across the Atlantic. I started to come up with all the reasons that was a crackpot idea, then realized I’d heard 10 crazier things since 9 am that day. “Someone will do this eventually,” he said.
and of-course this:
The quotes in Yahoo’s order book probably came from an algo, and you almost certainly can’t trade at that price. Even if you had access to the exchange, which of course you do not, they would likely be gone long before you could jump in the market—either already executed or, much more likely, withdrawn before any shares changed hands. And that’s where the really dangerous part begins to set in. It’s not just that humans are less and less involved in trading; it’s that they can’t be involved. “By the time the ordinary investor sees a quote, it’s like looking at a star that burned out 50,000 years ago,” says Sal Arnuk, a partner in Themis Trading and coauthor of a book critical of high-frequency trading titled Broken Markets. By some estimates, 90 percent of quotes on the major exchanges are canceled before execution. Many of them were never meant to be executed; they are there to test the market, to confuse or subvert competing algorithms, or to slow trading in a stock by clogging the system—a practice known as quote stuffing. It may even be a different stock, but one whose trades are handled on the same server. On the Internet, this is called a denial-of-service attack, and it’s a crime. Among quants, it’s considered at most bad manners.
and the big question:
High-frequency trading raises an existential question for capitalism, one that most traders try to avoid confronting: Why do we have stock markets? To promote business investment, is the textbook answer, by assuring investors that they can always sell their shares at a published price—the guarantee of liquidity. From 1792 until 2006, the New York Stock Exchange was a nonprofit quasi utility owned by its members, the brokers who traded there. Today it is an arm of NYSE Euronext, whose own profits and stock price depend on getting high-frequency traders in the door. Trading increasingly is an end in itself, operating at a remove from the goods-and-services-producing part of the economy and taking a growing share of GDP—twice what it did a century ago, when Wall Street was financing the enormous industrial expansion of the economy. “This is counterintuitive, to say the least,” wrote New York University economist Thomas Philippon in an article for the Russell Sage Foundation. “How is it possible for today’s finance industry not to be significantly more efficient than the finance industry of John Pierpont Morgan?”
- More Here
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