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High Frequency Trading

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.MASSHOLE.
Posts: 7408 - Karma: 11,040
Anyone else catch the 60 Minutes piece on HFT (High Frequency Trading) last night? It was fascinating.

Here is a read for anyone interested

Mar 31 2014 11:58AM
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Barefootin_Fiend
Posts: 7618 - Karma: 4,727
i didn't see it last night, but just read that article and fascinating is a good way to put it.
Mar 31 2014 2:11PM
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Spillway_East
Posts: 1127 - Karma: 374
long read but worth it, very interesting.
Mar 31 2014 4:33PM
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first_rodeo
Posts: 2383 - Karma: 7,764

the playing field is never going to be level.....

anyone else on e trade?

Mar 31 2014 5:32PM
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Dirac
Posts: 1304 - Karma: 335
I didn't see the video, but I think it's fairly cool in an almost pathetic way.

the math that goes into this stuff is crazy and what leads up to those micro-crashes or whatever. It's also crazy that fibre optic cables are too slow, and people are buying property with line of sight to closer buildings because the light travels faster through air.

It makes no sense to me how people can make money by exploiting the system like this instead of like actually investing in companies that make products or whatever. I don't get any of that stuff though, i'm for sure no economist. That part is quite boring to me.
Mar 31 2014 5:39PM
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.MASSHOLE.
Posts: 7408 - Karma: 11,040
It makes me wonder how much backlash there will be. I cant imagine the HFT firms are too pleased.
Mar 31 2014 5:39PM
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penguiin
Posts: 1444 - Karma: 561
this stuff is fascinating. I just want to know how much money people have made off of it.
Mar 31 2014 7:15PM
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extravert
Posts: 1112 - Karma: 3,174
Good read, Michael Lewis is great. This only touches on one aspect of HFT though, there are actually a few other strategies they use. It's estimated that 50-70% of equity trades are created by computer algorithms, which is a little scary if you think about it.
Mar 31 2014 7:31PM
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Scaredwhiteboy
Posts: 1395 - Karma: -946
High frequency trading is awesome. They make a tiny fraction of percentage on each trade, but they do it thousands of times a second. The good HFT firms turn in over $100 million in annual profit without knowing shit about any of the companies they trade.
Mar 31 2014 8:26PM
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Dirac
Posts: 1304 - Karma: 335
they send light through the air instead of through fiber optic cables, because it travels faster in air. which allows them to trade a bit faster than their competitors.
Mar 31 2014 10:05PM
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gotti
Posts: 4269 - Karma: 4,548
pretty sure its all going through cables and people are trying to get more direct routes with the cables. haha its not like they have a choice of whether they want their data transmitted by air or cable
Mar 31 2014 10:44PM
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Dirac
Posts: 1304 - Karma: 335
yeah they do. they have been transmitting data using regular microwaves for awhile now, and starting to use lasers for more bandwidth.
Mar 31 2014 10:58PM
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Scott0_robot0
Posts: 3291 - Karma: 212
yea watched that last night, some prety crazy shit.

but did you see the bit about the guy who made tesla? that guy is a boss.
Mar 31 2014 11:07PM
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Barefootin_Fiend
Posts: 7618 - Karma: 4,727
do you have any sources for this? from what i gathered from the article, companies were basically trying to buy property closer to the market to cut down on the distance the data had to travel through fiber optic lines.

i didn't see anything about laser transmissions, etc....
Mar 31 2014 11:07PM
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Dirac
Posts: 1304 - Karma: 335
I don't have any online sources, although I am sure a google search would find it unless i'm full of shit. I was told by my optics professor, who worked on laser trasmission. microwaves are faster than fiberoptic cables for obvious reasons, but they have lower bandwidth and stuff like weather can affect the transmission quality and lead to more packet loss. Lasers have the speed advantages that microwaves to, and don't have the transmission/bandwidth issues associated with them.
Mar 31 2014 11:13PM
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Dirac
Posts: 1304 - Karma: 335
I found these afer a quick google search. not sure how legit they are, as I just skimmed over them.

http://www.reuters.com/article/2013/05/01/us-highfrequency-microwave-idUSBRE9400L920130501

http://www.extremetech.com/extreme/176551-new-laser-network-between-nyse-and-nasdaq-will-allow-high-frequency-traders-to-make-even-more-money

http://www.rec-usa.com/press/High%20Frequency%20Trading%20Turns%20to%20High%20Frequency.pdf

Mar 31 2014 11:16PM
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CRiP
Posts: 1323 - Karma: 482
interesting article. definitely worth the read
Apr 1 2014 9:15AM
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Barefootin_Fiend
Posts: 7618 - Karma: 4,727
wow, that's crazy. although I would think that both of these would be susceptible to tampering.
Apr 1 2014 11:20AM
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Phil-X-
Posts: 7205 - Karma: 14,399
threads
Apr 1 2014 11:33AM
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DirtyDan
Posts: 1576 - Karma: 158
Easily the best 20 minutes of television I've seen since Breaking Bad ended.
Apr 1 2014 11:54AM
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oakskier
Posts: 183 - Karma: 154
Im pretty sure that you are completely wrong. Did you even read the article?" people are buying property with line of sight to closer buildings because the light travels faster through air" is bs. It even says in the article that Light travels the fastest in a vacuum, not air. Line of sight shouldn't matter. Vacuum sealed fiber optic cables would be/ are much faster as it is mentioned.
Apr 2 2014 6:32PM
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special_k10101
Posts: 1498 - Karma: 72
In the original article it says, "Light inside fiber bounces off the walls and travels at only about two-thirds of its theoretical speed." I would imagine that a laser could move a lot closer to the actual speed of light, so if you were using an inefficient or unreliable connection of the sort mentioned in the article, it could definitely make sense to use private laser or microwave links in some situations.

Also, OP, thanks for the original link! I loved Moneyball and The Blind Side and I'm definitely going to pick up Flash Boys now.
Apr 2 2014 9:43PM
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chickenonabun
Posts: 461 - Karma: 285
That was confusing.
Apr 2 2014 10:24PM
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bigbromskier
Posts: 1175 - Karma: 330
Really good read. I don't really play into finance and investing, but it's a breath of fresh air to hear that someone's tried to level the playing field and seems to be succeeding in doing so.

As was stated, you can't really blame the traders who found out how to work the system to their advantage, but it's definitely worrisome that the core values of the stock market were exploited for their own interests. still a scary prospect that many well-meaning investors' money has been/is being played with in a not exactly honest fashion.
Apr 2 2014 11:25PM
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