The following is a fantastic documentary on high frequency trading produced by a Dutch TV news program. It focuses on the flash crash of May 6, 2010 but covers most aspects of HFT in depth, and it's really well done and entertaining. It might open your eyes to a few things (like how much they actually spend to build an HFT datacenter - Jesus) and how critical a millisecond in time can be to these guys. Of course, they also cover what happens when an algo gets off the chain, which ain't good. Check it out:
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the ultra low latency game is dying/becoming stagnant imo, the markets have adapted such that the pure arb spreads are becoming thinner and thinner, so far less opportunities, and the stat arb game doesnt require speed.
many exchanges are getting fed up with the cost of having to put up with more and more orders which do fewer and fewer trades, and the cost of getting that extra ms shaved off is getting silly (satellites soon lol). The markets are pretty efficient as a result of it, but getting more than a few cents in an arb trade is really rare, and the chances of getting stung in a cable spike on a forex arb is only worth the effort in auctions.
Think microwave transmitters may be even better than satellites? Beat the lines by ~2 ms's. That said, shits cray.
http://si.wsj.net/public/resources/images/MK-BU639_TELECO_G_20120529184208.jpg
which will cost say, $100m per trading firm, and in X months time, microwave mk2 comes out, and your $100m bought you some recycling.
very interesting - thanks Eddie!
Fried Banana to you. Thanks
nice! have been looking for an in-depth explanation of the flash crash for a while Thanks
That show always brings quality content, if somewhat biased at times. Missed this one, so thanks.
There was another documentary made by the same people about trading. I think it was posted here but I can't remember its name. It was very interesting too. Thanks for posting this!
I like how at 25:12 they show the satellite image of the two trading centers so close, with the guy saying just before that there is no connection, then transition into the segment "Arbitrage". Wouldn't doubt at all this investment bank was tipped off ahead of time they would be building there eventually. It would be interesting to know when the bank built their building and the nasdaq owned that property.
enjoyed that, thanks for the post
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