(newest first)

  • Alex | Wed, 29 Jun 2016 14:06:14 UTC

    One line of the article is confusing me: "Today it is possible to buy a custom ASIC (application- specific integrated circuit) to parse market data and send executions in 740 nanoseconds". 
    If the context is about HFT shops, they are clients to exchange and they are not sending executions. 
    If the context is Exchange, exchanges do not parse market data. 
    Could anyone please explain what "execution" means in this context? Does it mean NOS 35=D?
  • Wei Liu | Thu, 14 Nov 2013 02:05:19 UTC

    I was always thinking of entering this field one day and this article successfully frighten me away - just a few days back I was in New York seeing the classic-looking buildings and thinking of working by solving programming challenges.
    It feels to me that HFT is more about electronic engineering or even physics instead of computer science, as the biggest challenge is to implement the simplest algorithm as fast as possible (which usually is done with hardware).
  • Rodrick B. | Thu, 31 Oct 2013 17:56:04 UTC

    The screen shot in P2 is from a network monitoring tool. 
    @JOE yes you are right many firms do use public space from ARIN instead of NAT that being said many trading firms that trade FX especially in the global markets do use NAT and VRF's extensively especially on the exchange side/(sell side) who have to deal with a large number of cross connects and client connections.
  • Nemo | Mon, 28 Oct 2013 13:06:38 UTC

    The market servers 2 purposes:  
    1) it is a place for firms to raise capital through share or debt issuance.  
    2)  It is a place that provides a place of exchange for differing views on the value of those issuances.
    Firms still go public and shares are still exchanged.  
    Regarding social value: That is subjective.  One could ask, exactly what socially redeeming value do those who receive government largesse supply?  For many, the answer is also "none".  Yet they do, and will continue to do so.
  • Harish M | Sat, 26 Oct 2013 20:11:55 UTC

    @JB Poplawski - the app in figure 2 looks like it's Boundary (
  • Walter Faxon | Thu, 24 Oct 2013 11:47:50 UTC

    Commenter "Fred" lists some reasons why HFT is in general a very bad idea. He's hardly the first to do so. To discourage the practice, commenter "Joe Smith" suggests a 100% tax on profits on trades held less than one second. That might need a little tuning. Commenter "ivo welch" suggests batching buy/sell orders for auction once per second. That would increase fairness at least. My own idea is to delay all orders by a random few seconds. This would undermine the logic behind HFT but not effect regular investors at all.
    And isn't the market supposed to facilitate "investment"?
    There's big money behind HFT so I don't expect regulation anytime soon. More trading by itself improves Wall Street's bottom line. But how bad will an HFT-triggered crash have to be before we effectively outlaw it?
  • Joe Brunner | Wed, 23 Oct 2013 03:58:29 UTC

    The NAT part is wrong - we don't use nat... we and the exchanges/dark pools/ecn's use reserved PUBLIC IP's in the facilities we manage... only requirement is the big bank gives smaller firms some non-contended ipv4 rfc 1918 space (like and allows us to source from that... 
    most larger firms (over 50 traders) have some public ip's we dont advertise to the internet, but own with arin...
    i cant think of one trading firm doing hft that uses nat... just not a very good technology... while the newer arista and Nexus 3548's do "hardware nat" I have not had to implement it for anyone... weird...
  • Bruce | Tue, 22 Oct 2013 01:16:14 UTC

    This money has always been taken from investors, ever since the buttonwood tree.   Its just being taken by different people, enabled by technology.   And they are taking less of it than ever before.
    Are we going to start passing judgment now on who should make money?   Tobacco, gambling, alcohol and prostitution ...  Are we going to stop them?   
  • Justin | Mon, 21 Oct 2013 16:25:27 UTC

    When will the third article in the series be published?
  • Lawrence Oswald | Mon, 21 Oct 2013 16:17:59 UTC

    A victory for the internet in that this is a fine article that has engendered equally fine comments. I guess I will end the streak.
    So HFTs have a bit of overhead ... rent, electricity, salaries ... and beyond that this HFT business generates a lot of profit while benefiting the world not one bit. They make money but they create nothing, neither money nor goods nor services nor happiness nor love.  Where does this money comes from? Some of their dollars might be mine, or yours. Or it could be from the FED and this is just a distribution system that effectively raises the velocity of money thereby increasing the GDP. That's good? 
  • Bruce | Mon, 21 Oct 2013 12:06:54 UTC

    For those who oppose HFT, and are old enough, remember the 1/8 increments in bid ask?  Today trading is much cheaper, both in commissions and and spread.   If you are really a buy and hold investor, why are you quibbling over pennies?    HFT's are like the guys in Superman who steal fractional pennies from savings accounts.
    By the way, these machines don't read headlines.   News is just noise.   CNBC viewership is down because of people's experience following "expert" advice.   There are only so many suckers born every minute.
  • ivo welch | Sun, 20 Oct 2013 05:56:44 UTC

    I am a financial economist.  conceptual: (a) competition is good; (b) as time goes to 0, there is only the first HFT, which means that they become the quasi-monopolist.  (there is a social problem, in that redistribution can be socially wasteful, yet privately optimal, too.)
    one natural solution would be to bunch all buy-and-sell orders into an auction that is held once per second.  this way, many traders would compete to offer the best price for (slower retail) customers.
  • Curious George | Sun, 20 Oct 2013 03:30:59 UTC

    Good idea -- wrong metrics
    I think the basic notion of matching resources with needs would be great if it could be tailored to more useful long-term metrics like happiness, prosperity, or even love. Short of any consideration of these sorts of metrics, then it just seems like we are teaching our future robot overlords how to enslave us. As the author pointed out, these very simple robots now move more money than humans today. 
    Coming up with useful metrics will prove challenging, but ignoring the need for them in the face of the growth in automation techniques like HFT seems suicidal.
  • Fred | Fri, 18 Oct 2013 22:40:09 UTC

    Seems like the people that are the most vocal in support for HFT are in the HFT business in one aspect or another. 
    The idea that HFT is a source of liquidity is a popular argument, but the HFT crowd is the first to pull liquidity during times in panic. Why? Because it's very easy.  Then, all of a sudden all this great liquidity is gone.
    The notion that HFT makes the market more rational is equally ludicrous. Rationality implies that there is actual consideration of economic variables. A bot machine-reading a headline and blasting off orders is not rational decision-making. Speed doesn't equal rational or efficient markets. In fact, one could make the markets are more irrational than ever when it comes the short-term.
    The HFT advocates seem to fail to notice, or seem to refuse to notice, that the US financial market is in a state of dysfunction that only congress can rival. The American people have no idea what's going on, from outages at the exchanges, to flash crashes, and high frequency firms blowing up. The exchanges are desperately cutting costs amid mounting competition from dark pools and a general disinterest in financial markets by the mainstream investor. CNBC viewership has dropped to 20 year lows.
    That's really super that millions of trades can be blasted to the market in nano seconds when the sad fact is that the entire structure is in a total state of disrepair and, even if somebody was trying to fix it (which their not), it would take decades to solve the many vast structural problems. 
    Have a nice weekend :)
  • Adam Williamson | Fri, 18 Oct 2013 20:55:18 UTC

    Joe Smith: why? To whose benefit would such a move be?
  • Joe Smith | Fri, 18 Oct 2013 19:59:36 UTC

    HFT should be taxed out of existence, its the opposite of investing. Holding a stock for less than a minute should result in 100% tax on profits, and no ability to write off losses.
  • Dan | Fri, 18 Oct 2013 19:01:35 UTC

    The reason airlines can do it is because they are an oligopoly with high barriers to entry.  Realistically and relative to other fields, the barriers to entry for HFT are very low and the degree of competition is way too high for collusion to be economically viable.  Besides if I were an HFT and colluding, I would be constantly incentivized to screw over the person I'm colluding with.  If I were firm X and knew that by creating a signal, I can cause Y to act as such, that is exploitable.  It is also something that firm Z that has a data mining algorithm can see and exploit as a third party as well. 
  • Craig | Fri, 18 Oct 2013 18:20:14 UTC

    This article makes all this sound rational and ordered, but patterns of placing orders and cancelling them before they could be matched up and executed are in HFT flows that have been published. In all this extreme bandwidth, how can the public have any assurance that the order flow is free of steganographically encoded information that communicates illegal collusion over pricing or order flow?  It's been well known that airlines send pricing signals to each other through their reservation system (for example, matching another airlines price reduction but only for one day signals that they don't line the idea of lowering prices and invites the original airline to rescind a price reduction). Given all the other major scandals in the financial world, why should we believe that the HFT system isn't being used for collusion?
  • Adam Williamson | Fri, 18 Oct 2013 18:04:05 UTC

    Christian: "Sometimes a small trigger like one trader's fat finger, or one HFT's algorithm running haywire could cause it."
    Well, a trader's fat finger has nothing to do with HFT. So you just kind of destroyed your own point. HFT is just another element of how stock markets work; as with absolutely any complex system there is a possibility that they can go wrong at times. That's a motivation to make the system robust, not to not have one, or artificially cripple how it works because you're worried that you haven't made it robust against failure.
    The only thing I'd take issue with in the article is the assertion that HFT 'is the market' - I think that's true in the sense Gary B very cogently explained, but the funny thing is that since, as Gary explained, all HFT ultimately achieves to the outside observer is to smooth out the way in which 'the market' adjusts to well-understood stimuli, if you're playing the market in a traditional human way - looking on a much longer, more speculative term than HFT does, like "I think Company X will do better than everyone else thinks it will over the next three months" - HFT really doesn't affect you at all. You can go ahead and buy Company X and everything will work just fine.
  • - | Fri, 18 Oct 2013 17:50:11 UTC

    When talking about putting servers in the same place, it's generally written "co-location", not "collocation", which more commonly refers to words that go together (i.e. a common phrase).
  • Christian Buchner | Fri, 18 Oct 2013 17:46:20 UTC

    in response to GaryB:
    So now you can watch your entire stock market crash in High Definition and within Milliseconds. Sometimes a small trigger like one trader's fat finger, or one HFT's algorithm running haywire could cause it. Or maybe just the proverbial butterfly moving its wings. Explain how that is good?
  • Darek K. | Fri, 18 Oct 2013 16:00:06 UTC

    Anybody noticed the simple calc error in Figure 10 with pUP and pDN?
  • Gary B | Fri, 18 Oct 2013 04:29:27 UTC

    Johannes (and all who think that way), HFT is emphatically _not_ "the devil".  If there were only one HFT company, then that would be an arguable case.  When the first HFTs came online they did indeed have a first mover advantage - a typical example of new tech providing a vast opportunity for profit (much like a few other companies like Google).   But now, the market is mature, and HFT is essentially what implements the market as a whole today.  When you buy or sell your 52.43 shares of IBM on your Schwabe account, that is likely to be handled entirely at Schwab using their internal HFT system, and the balancing trades if any will be handled by their HFT interface to other HFT systems and/or the HFT system at NYSE.  HFT is now just the way the business is run.  And the result of this is an amazing improvement in how closely the market in all stocks follows the ideal from economics.  Watch any stock, and in the absence of a particular event for that stock, it will follow the macroeconomic state of the world within minutes.  And you'll notice that the HFT firms are holding on to a tiger's tail - if they don't constantly improve their performance, and reduce their costs, they will lose money and die.  A few short years ago market makers made huge amounts of money on the excessive spread they could enforce on investors, but now that is all gone.
    HFT has made the market more rational; in essence it has removed most of the digital noise and smoothed out the ripples on the image of the waves of the economic ocean.  They should rename it HDT: "High Definition Trading" because they've improved the resolution both financially (spreads) and temporally (times) :)
  • Angus | Fri, 18 Oct 2013 01:20:27 UTC

    Henry Skoglund: Read more about quantum entanglement; it does not enable faster-than-light communication at all.
  • JB Poplawski | Thu, 17 Oct 2013 20:22:08 UTC

    What's the app in Figure 2?
  • Henry Skoglund | Thu, 17 Oct 2013 16:50:08 UTC

    It's amazing that the HFT companies pay for a new cable in the Atlantic Ocean just to grab some extra milliseconds. But I wonder if they also considered researching in using quantum entanglement for HFT traffic? It if could work, faster than light beats fiber or microwave :-)
  • Johannes | Thu, 17 Oct 2013 15:34:54 UTC

    The title led me to belive the author would eventually critque the system and offer a interesting inside view. While he delivered on the second promise the lack of the former makes it unclear if he realize he's the devil.
Leave this field empty

Post a Comment:

(Required - 4,000 character limit - HTML syntax is not allowed and will be removed)