HFT reached the absolut limit in minimizing delays?

Discussion in 'Automated Trading' started by GreenMan, Aug 23, 2010.

  1. GreenMan


    Is the following statement true or false? If it's true, what exchanges are doing this?

    "It is interesting to note that some of the exchanges make sure that each co-located customer receives equal amounts of connecting cable, so that a server at the northeast corner of a facility has the same latency as one at the southwest corner."

    Latency Arbitrage:
    The Real Power Behind Predatory High Frequency Trading
    A Themis Trading LLC White Paper
    By Sal Arnuk and Joseph Saluzzi
  2. HighSea


    Once they switch to pure silver cables you'll know they hit the end.
  3. Google (with intro of fast internet to the 'common people') is doing the most against latency arb. On some level its a pay-to-play game. The latency involved in Duplexing (is that proper term?), especially fiber (because moving fiber >> copper quickly is expensive) is very hard to overcome.

    This sounds like a statement stock777 would be all over. There is no substitution to close proximity and since my latency to the NYSE matching engines is ~0ms (Times Square area) their latency must me measured nano. I'm not even close to understanding the complexity and technology involved with fast fiber >> copper conversions and throw huge bandwidth on top...

    I do know that on a micro level converting pulses of light to copper is expensive and usually (at a retail/entry enterprise level) slower than copper point a 2 b. We have 10GBit over copper but only for short distances. Depending on the distance from the matching engine, copper may be limited to gigabit, I don't know that a server with 5-10x gigabit ports (even if 10GBit able) and 5-10 cat6 cables can push any faster than glass over that distance - and the nanosecond latency involved will be enough to make a difference IMHO (uneducated but still my opinion).

    On some macro level the cost involved with reducing latency from a distance will be equal to (or outweigh) the premium cost of close location. If that is the case and we are talking huge dollars to make sub-pennies I have a hard time believing "throwing me an extra run of fiber" will make up for the fact that I'm farther away than someone else. I'll pay so much to handle the extra link that it will neutralize any edge.

    Just my 0.02
  4. GreenMan


    No. Absolute latency doesn't matter as long as it's equal among participants. If this amount of cable is equal among collocated servers, then that servers are at the absolute limit of proximity to the matching engine of this particular exchange. Still wonder what exchanges are doing this?
  5. Some exchanges probably do do this, but sometimes there's other weird quirks that shift latency on the exchange. I guess an easier question to ask the audience would be which exchanges don't do much in the way of fairness. I can tell you there are a few that annoy me to no end.
  6. jprad


    What makes you think they're not already using fiber?
  7. jprad


    Converting from fiber to copper is a telco issue, it's not a problem with a computer LAN since the conversion occurs on the network card at CPU bus speed, which is much higher than the fiber network speed.

    Yep, and that's not a conductance problem, it's because of inductance. The capacitance of the network cable is the limiting factor, which is why coax LAN cables have a physical limit for each segment of cable between network interfaces..
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