It is a tough technical problem to be sure but not insurmountable. Think about a system in which the real time market data is also encrypted in such a way that it can only be decrypted at a particular point in time. Essentially it would be like each trading system receiving an envelope that must be opened simultaneously. Picture a satellite network that is time synchronized to transmit a key stream used to decrypt the data that is received over a terrestrial network. I am not talking about easy to implement here just what is possible. It is probably easier than faster than light travel although I supposed real estate on Mt Everest could get very valuable (closer to the satellites) :)
Steve -----Original Message----- From: Brett Frankenberger [mailto:[email protected]] Sent: Wednesday, August 08, 2012 9:08 AM To: Naslund, Steve Cc: [email protected] Subject: Re: raging bulls On Wed, Aug 08, 2012 at 08:52:51AM -0500, Naslund, Steve 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. This isn't about giving international traders a fair shake. This sort of latency is only relevant to high speed program trading, and the international traders can locate their servers in NYC just as easily as the US-based traders. What it's about is allowing traders to arbitrage between markets. When product A is traded in, say, London, and product B is traded in New York, and their prices are correlated, you can make money if your program running in NY can learn the price of product B in London a few milliseconds before the other guy's program. And you can make money if your program running in London can learn the price of product A in NY a few milliseconds before the other guy's program. Even if you execute the trades based on a GPS timestamp (I'm ignoring all the logistics of preventing cheating here), it doesn't matter, because the computer that got the information first will make the trading decision first. -- Brett
