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$300M To Save 6 Milliseconds 524

Posted by Soulskill
from the time-is-money-friend dept.
whoever57 writes "A new transatlantic cable (the first in 10 years) is going to be laid at the cost of $300M. The reason? To shave 6ms off the time to transmit packets from London to New York. The Hibernian Express will reduce the current transmission time — roughly 65 milliseconds — by less than ten percent. However, investors believe the financial community will be lining up to pay premium rates to use the new cable. The article suggests that a one-millisecond advantage could be worth $100M per year to a large hedge fund."
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$300M To Save 6 Milliseconds

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  • by rolfwind (528248) on Tuesday September 13, 2011 @05:14AM (#37384498)

    To suck American's and other peoples' money out of their wallets from overhead. Same basic effect.

    • by ArsenneLupin (766289) on Tuesday September 13, 2011 @05:24AM (#37384534)
      Indeed. Everybody knows that light speed is fastest in vacuum...
      • by zoloto (586738)
        If we could convince them they'd make that much money by laying more cables throughout every state in the lower 48, we just might have speeds comparable to Asia right to the home.
      • Hell no. It's not as fast as... Ludicrous Speed!!1!!
    • Also, the vacuum would only suck real money.
    • And when the economy is good. It is a great way to increase world wide wealth.
      What it really comes done to is the investors willing to invest into an infrastructure. That is a good thing. Other then a small speed increase they are new lines going across reducing failure.

      • by igny (716218) on Tuesday September 13, 2011 @07:03AM (#37384966) Homepage Journal
        Re "What it really comes done to is the investors willing to invest into an infrastructure."

        What it really comes down to is investing in a tool to facilitate the robo-gambling, aka Wall Street. The claimed profit of $100m/ year would come from retirement funds of John Does from the Main Street.
      • Every MS helps to those battlefield3 servers, bullets are fast.

        I need every ms too.

      • by Jawnn (445279) on Tuesday September 13, 2011 @09:36AM (#37386314)
        Congratulations on completely missing GP's (admittedly off-topic) point. Making money off of the buying and selling of money is a drain on the economy. It produces nothing of intrinsic value and, by design, enriches only a lucky few. If you read your history, you will find that the rise of such an "economy" is frequently the harbinger of society's fall from dominance, if not it's outright collapse. And that is most certainly not "a good thing".
  • now they can lose money even faster!
  • Just imagine how much better gaming will be w-- oop, nevermind, just got headshotted by a chinese / russian sniper again.
  • Wow (Score:2, Funny)

    by Anonymous Coward

    Slashdot is serious business. You Brits will do anything to get first posts!

  • by dargaud (518470) <slashdot2NO@SPAMgdargaud.net> on Tuesday September 13, 2011 @05:20AM (#37384524) Homepage
    This kind of thing is the direct proof that the way the stock exchange is built is deeply flawed. Why don't they try to build it on sounder bases than "the fastest takes all" ?!?
    • by Rosco P. Coltrane (209368) on Tuesday September 13, 2011 @05:39AM (#37384602)

      This kind of thing is the direct proof that the way the stock exchange is built is deeply flawed. Why don't they try to build it on sounder bases than "the fastest takes all" ?!?

      I heard some european head of state (Sarkozy perhaps) suggest that stock transactions be taxed based on speed, i.e. speculators who buy and sell very fast to make a quick buck get taxed a lot, but real investors who're in for the long run and keep their stock for a long time don't. That sounds like a great idea to me. With a scheme like that, the super-fast transatlantic cable would make speculators be taxed even more heavily.

      • by wisty (1335733) on Tuesday September 13, 2011 @05:51AM (#37384660)

        Well, my personal recommendation would be to add some white (or log-white) noise to trade timestamps. If you get in 1ms faster, there would be an almost 50% chance the next guy would make the trade, not you. If you were a whole second faster, you win for sure.

        Traders would focus *less* on high-speed performance, and more on more useful stuff.

      • Might take a bite out of black box trading, which is what I presume this cable is being laid for.
      • And, again, that's why a gross receipts tax would be great. 3% on all receipts means that day traders would lose their shirts on all by the craziest of moves, but the long term investor with a 10-30 year time horizon would pay only 3% on the gains and dividends - practically tax free by today's standards. We could just eliminate the "tax advantaged" savings accounts for retirement - the new tax would be so low as to make it trivial.

      • by Bengie (1121981) on Tuesday September 13, 2011 @08:09AM (#37385360)

        Tax starts at $0.01 and doubles every time you do a buy+sell. Counter doesn't reset for 24 hours after your last buy+sell.

        When you get these crazy companies doing trades measured in microseconds, this adds up really fast. Think binary. First transaction cost is (2^1-1)*0.01, second is (2^2-1)*0.01, third is (2^3-1)*0.01.. etc.. Those pennies add up. It doesn't stop people from doing short term buy+sells, but it discourages them from doing a bunch of them in a row.

        Or something that scales exponentially.

      • by dkleinsc (563838) on Tuesday September 13, 2011 @08:19AM (#37385422) Homepage

        I heard some european head of state (Sarkozy perhaps) suggest that stock transactions be taxed based on speed, i.e. speculators who buy and sell very fast to make a quick buck get taxed a lot, but real investors who're in for the long run and keep their stock for a long time don't. That sounds like a great idea to me.

        This concept actually was first proposed in 1972 by Nobel-winning economist James Tobin, with the idea that it would apply to currency transactions to prevent speculators from rapid trading like the kind you're describing. Basically, the concept is that with such a tax in place, traders would have to hold onto the asset long enough that they could pay for the tax, plus whatever gains they were anticipating, so that meant that they'd have to expect to own something for longer than a few minutes. There have since been discussions of applying the same idea to stocks, bonds, mortgage-backed securities, and other assets.

        The purpose of that tax isn't so much to generate revenue (although this definitely would happen), it's to slow down the markets enough so that the assets could be properly valued rather than people making money on millisecond-level differences.

    • by macson_g (1551397)
      That's the most fair way of deciding who should trade on public exchange. Of course in extremes it ends up as 'the trade goes to whoever can afford the fastest link/equipment/code', but what else could be better? And please remember that there are traders who don't care about speed and they use different ways of trading and sometimes different venues.
      • by Rich0 (548339)

        Why not just execute trades once per day, collecting asks/bids all day long. The close of the day will be sometime between 4PM and 6PM each day, determined randomly and with the time not announced in advance. After the close all bids/asks go to the next day. You can cancel a bid/ask an hour after you make it.

        Oh, to place a bid you put money in escrow with the exchange, and to place an ask you must hold the stock in escrow with the exchange.

        Then you run the whole exchange off of a website that anybody can

        • Re: (Score:3, Informative)

          by macson_g (1551397)
          The collecting asks/bids is called 'auction' and it is already available. The idea of market participants not knowing of each other's orders is called 'dark pool'. They do exists and people use them. If you want to trade this way, you can do it. Whoever goes to this 'corrupt' 'first-in, first-served, executed ASAP' exchanges does it voluntary.
    • by cbope (130292)

      This just further illustrates that those with the deepest pockets can buy the fastest iron to profit the most from the stock market. This just raises the level of the "game" a bit higher.

      I say there should be a mandatory artificial trading delay for every single trade to prevent this sort of thing from being used to game the system. There is absolutely no need, beyond pure greed, for trades to be made this quickly.

      • ... beyond pure greed...

        You've pretty much summed up the stock market there.

        • There was a test done between an experienced stock trader, a stock buying AI program, a 5 year old child, and a random number generator ... the Stock trader came last, the 5 year old child won ... and these guys get paid for their insight and experience ....

    • by Phat_Tony (661117)
      It's true, the transaction speed advantage, unlike the market as a whole, is a 0-sum game, and companies are investing in huge resources trying to win it. That is, they're dumping huge resources into a totally unproductive sector of the economy. This is not a sign of efficient markets, something stock markets supposedly help facilitate.

      They should go to turn-based trading. Everyone line up your bids and resolve them on 1-second intervals or some such scheme.
    • by jafac (1449)

      Do a little wikipedia search on Euler's Number, and read about how Bernoulli used it to calculate continuous interest. Then you'll understand why this is all a scam.

  • by geekmux (1040042) on Tuesday September 13, 2011 @05:22AM (#37384528)

    "...The article suggests that a one-millisecond advantage could be worth $100M per year to a large hedge fund."

    I think we now have real proof that life is moving too fast when the metric to measure your performance as a large hedge fund investor is now measured in single milliseconds.

    I'm glad I'm not a large hedge fund investor. Think your 30-minute lunch break is shitty? These guys don't have time to blink.

    • "Only" a few milliseconds? Do you realize that's trillions of femtoseconds? Twenty thousand femtoseconds for each otherwise worthless dollar. Get some perspective man!
    • by camperdave (969942) on Tuesday September 13, 2011 @08:46AM (#37385694) Journal

      "...The article suggests that a one-millisecond advantage could be worth $100M per year to a large hedge fund."

      I think we now have real proof that life is moving too fast when the metric to measure your performance as a large hedge fund investor is now measured in single milliseconds.

      I'm glad I'm not a large hedge fund investor. Think your 30-minute lunch break is shitty? These guys don't have time to blink.

      Who'd have thought there'd be that much interest in buying shrubbery?

  • by Alex (342) on Tuesday September 13, 2011 @05:45AM (#37384636)

    This 1ms advantage is worth 100m USD, isn't relevant to transatlantic bandwidth.

    The quote from wikipedia https://secure.wikimedia.org/wikipedia/en/wiki/Low_latency_(capital_markets) [wikimedia.org] is

    "A 1-millisecond advantage in trading applications can be worth $100 million a year to a major brokerage firm, by one estimate."

    I can't find the original source of this - but IIRC its from the CTO of someone like Goldman's or BoA.

    If you are doing high frequency trading on a NY or London based exchange, you don't buy the lowest latency connectivity from the exchange to you. You put your systems as close to the exchange as possible AND THEN you buy the lowest latency connectivity from the exchange to you. Your systems which trade in NY are based in NY, and your systems which trade in London are based in London.

    I'm sure there is some minor advantage of NY and London being slightly closer together from a latency perspective, but I'm sure its not as much as 100M USD.

    Alex

    • by myurr (468709)

      Don't you think, though, that the people investing $300m in this cable have thought a little bit about their business model and believe it to be sound? Clearly those 6ms are really valuable to some people, and if not high frequency traders then who?

      • Yep, this. GP missed the point, but, at the same time, I too am sceptical about that $100m/yr figure...
      • Don't you think, though, that the people investing $300m in this cable have thought a little bit about their business model and believe it to be sound? Clearly those 6ms are really valuable to some people, and if not high frequency traders then who?

        You don't know many people in the financial sector, do you?

    • by Sqr(twg) (2126054)

      The reason why a low latency connection is valuable is than many identical stocks and commodities are traded in both NY and London. If you are the first one to detect a pricing difference you can make a sure profit.

    • by mikael_j (106439)

      Well, for someone trading in both Europe and the US it would probably make sense to have the lowest possible latency between their own systems to coordinate trading.

      Now, if this would be worth $100M I don't know. But it does kind of make sense if you want your different systems to communicate with each other.

    • Arbitrage (Score:5, Informative)

      by Fred Ferrigno (122319) on Tuesday September 13, 2011 @06:10AM (#37384744)

      If you're in London and you know 6ms before anyone else that the price of oil in New York just shot up, you can buy oil right now and then sell it in 6ms for a tidy profit.

      • by nzac (1822298)

        No everyone now has to buy bandwidth on the cable so they are not on the wrong side of this.

        I don't think anything will change except the company who put the cable in will be charging more than the old company.

        • by Rich0 (548339)

          Yup. This isn't much different than offering a new TLD - everybody has to pay an extra $20/yr or whatever to make yet another clone of .com.

    • by gweihir (88907)

      Indeed. And it is really no problem to remotely administrate such a system close to the exchange. The reasoning given in the article is flawed. That said, the lower delay and additional redundancy can be worth a lot.

    • Arbitrage [wikipedia.org]
  • by Puff_Of_Hot_Air (995689) on Tuesday September 13, 2011 @05:53AM (#37384676)
    The entire finance sector fills me with equal parts revulsion and sadness. This is yet another example of enormous resources consumed for no net gain to society. At least in this case something (however unnecessary), tangible is produced as a result. Think of the huge numbers of brilliant mathematical and programming minds that have been consumed by this nonsense! Think of the resources and financial liquidity that is reinvested into this zero sum game! Every hour of work, every employee, every structure erected in praise of this wholly disgusting idol of modern nihilism, makes the rest of our society just that little bit worse. To those who would praise the enabling power of our new financial systems I say Pah! We can create better financial systems within virtual worlds. The only intrinsic value in the financial institutions is the power it gives; and this has been abused for all it is worth! Give me back my engineers! Give me back my scientists! Give me back my hope for a better future!
    • ... Greed and fear are the driving forces of humanity now. The only thing you and I as "mere mortals" can do now is watch until the final collapse.
  • Because it is made of "Monster" cables . . . http://www.monstercable.com/ [monstercable.com]

    However, investors believe the financial community will be lining up to pay premium rates to use the new cable. The article suggests that a one-millisecond advantage could be worth $100M per year to a large hedge fund.

    So obviously, a cable made of "Monster" cables will be worth* even more! Roll out your checkbooks, all you unfeasibly large hedge funds!

    *Your actual worth is subject to local regulation, taxes, palm grease, wind velocity of an unladen swallow, global warming, sea temperatures, etc . . .

  • Zero sum game (Score:5, Interesting)

    by AlecC (512609) <aleccawley@gmail.com> on Tuesday September 13, 2011 @06:15AM (#37384772)

    Sadly, the high speed trading for which this is designed is a zero sum game - the extra dollars made by the hedge funds are shaved off someone else.

    Banking has a very valid job to do: transferring money from savers to borrowers, aggregating small savings into large investments, and ironing out risk by spreading it over many loans. But these are, fundamentally, decisions made by humans, and such decisions will be made on timescales of, at the fastest, a minute or so. In order to ensure liquidity, and to even out large lumps in the trading,it is useful to have automated system which work on a timescale which is, say, ten times faster. Such banking and trading adds value. and it the reason we need banks. But any trading faster than that is purely profiting from irregularities in the system, and adds no value to the world. So any value extracted by the traders, or used to build links for such traders (as described in the article) is money wasted: a net loss to humanity.

    I would like to put a drag on such trading: one which would dissuade high speed trades while not harming legitimate trades, including legitimate spreading of large risks. A nano-tax might do it - and the premium traders will pay to use this cable suggests the magnitude of such a nano-tax.

    • by Dunbal (464142) *
      It's only a zero sum game if you look at one single trade. If you look at the aggregate of all trades you will find that money is entering and exiting the market all the time at different and varying rates. Therefore it is NOT a zero sum game.
  • This has been their plan all along. Get Gold Man-Sacks to pay for world-beating ping-times.

    Screw hedgefunds, those guys are going to rule in deathmatch mode.

  • by yours truly in 'DailyKos [dailykos.com]

  • So if using this connection gives $600M advantage a year over those that aren't using it, everyone will simply start using it. That way nobody will have the advantage and it's back to square one - only everyone be paying extra for the faster connection.

  • by Joe_Dragon (2206452) on Tuesday September 13, 2011 @07:37AM (#37385150)

    But this also adds more bandwidth as well right? as well acting as a back up for other cables.

  • by thesandbender (911391) on Tuesday September 13, 2011 @08:12AM (#37385378)
    1817 : Major Brokerage leases building on Wall ST!
    1836 : Major Brokerage house installs first telegraph!!
    1890 : Major Brokerage house installs first telephone!!!
    1990 : Major Brokerage house has access to internet!!!!

    Sound investing is based on research but it is also based on the ability to react quickly to that information. If a company in the US announces that their CFO has been indicted, then investment firms in the UK are definitely going to pay to get that information and react to it as quickly as possible. Before you could submit bids to the fed electronically, investment firms used to place runners in pay phone booths next to the Fed so they could call them at the last minute and have them get in the best bid. Fundamentally, there is no difference between that and this.
    And yes, "black box" high-frequency traders are going to be the primary users of this line but that doesn't mean there aren't valid and legitimate (as far as the average consumer is concerned) uses for this line.
  • by InterGuru (50986) <jhd.interguru@com> on Tuesday September 13, 2011 @08:27AM (#37385506) Homepage

    by yours truly, here [slashdot.org].

    I just read an article in Popular Science that almost made me sick to the stomach. The headline says it all "Pricey Transatlantic Cable Could Save Milliseconds, Millions by Speeding Data to Stock Traders".

    Here is $400M being spent just to give flash traders a 5 ms advantage in trans-atlantic trading. It adds nothing to the economy, just lets the Wall Street Casino operators skim more money from the economy. I addition, it diverts talent from productive projects.

    Never has Matt Taibbi's description of Goldman Sachs, and by extension, all the big banks, as "a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money" seem even more apt.

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