raging bulls

Naslund, Steve SNaslund at medline.com
Wed Aug 8 16:10:41 UTC 2012

Just leaving room for disagreement on the value of HFT.  It would seem to add nothing but more volatility to the market and make small events more extreme.  There are also big risks of systems making convention wisdom decisions in unconventional situations.  Can someone pull the plug fast enough if some unpredicted event makes the conventional wisdom wrong?  The article in question uses an example like "oil price goes up, airline stocks go down".  This sounds true enough but how many assumptions like this exist that might not ALWAYS be true.  Is it fair to crater the airline industry or any other one because some convention like that causes a huge fast momentum swing.  I guess the danger is that all the assumptions are those of a human but done at the speed of computing without natures built in safety catch of time to reconsider the assumption before pulling the trigger.  We worry greatly over the software that controls aircraft and nuclear power plants but this software has a much greater potential for worldwide disaster and being a competitive market is probably changed many, many times more often in a less controlled way.  You have to decide whether a global market meltdown and an aircraft crash can be compared but both are bad events.

Again, this is a risk / reward situation that the markets and regulators need to deal with.  I am normally not a big advocate for government control of anything but clearly there is a need for regulating an industry that has again and again done some very risky things that have very tangible effects on the world economy.  When the speed limit of light becomes a major worry for your system, it peaks my radar as being a system that is running "on the edge".

We are getting a bit off the NANOG subject which would be the network implications of this so I will curtail the general discussing of HFT.


-----Original Message-----
From: John Levine [mailto:johnl at iecc.com] 
Sent: Wednesday, August 08, 2012 10:54 AM
To: nanog at nanog.org
Cc: Naslund, Steve
Subject: Re: raging bulls

>Here is another thought.  Many people think that the rapid computer 
>trading does not really add any value to the market in any case since 
>there is no long term investment.

It clearly doesn't.  A proposal that's been kicking around for a while is to clear all trades once a second, so everyone has plenty of time to get them in no matter where they are.  This has no chance of going anywhere, of course, until there's enough software disasters to provide political pushback against the leeches doing high speed trading.

There is a new data center in Keflavik, Iceland.  They advertise all of its fabulous green characteristics, e.g., power is from geothermal, and A/C is by opening the window, but it also happens to be closer to New York than anywhere in Europe, and closer to London than anywhere in North America, with good cable connections to both.


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