raging bulls

Wed Aug 8 14:20:23 UTC 2012

"Naslund, Steve" <SNaslund () medline com> wrote:
> It seems to me that all the markets have been doing this the wrong way.
> Would it now be more fair to use some kind of signed timestamp and
> process all transactions in the order that they originated?  Perhaps
> each trade could have a signed GPS tag with the absolute time on it. It
> would keep everyone's trades in order no matter how latent their
> connection to the market was.  All you would have to do is introduce a
> couple of seconds delay to account for the longest circuit and then take
> them in order.  They could certainly use less expensive connections and
> ensure that international traders get a fair shake.

I can't see any incentive for any *influential* party involved (the
big firms or the exchanges) to make the process "fair". The exchange
gets more money for low-latency network access and expensive
co-location. The moneyed firms with HFT capability of course do not
want anyone else to have their advantage. Even governments don't want
long-distance traders to have "fair" access, as that reduces the
advantage of local tax-paying firms, thereby reducing tax revenue,
jobs, etc.

HFT is not just a US phenomenon; all major exchanges have basically
the same sort of phenomenon. So UK-based trading firms with HFT setups
very close to the FTSE exchanges have advantage over US-based firms
that don't have HFT setups in London.
-- 
RPM