The Fiberoptic War Between Stock Traders Who Cash in Data Lag for Dollars [Money]

most of the biggest stock moves of the global economy are made by a gaggle of dudes yelling at each other in an incredible room, right? Wrong. Computers are dependable, battling for the speediest connections . Fastest gets richest.

The new wave of robotic trading- called High-Frequency Trading, or HFT -excludes humans, because, well we’re just not capable of pulling off what these financial black boxes do. Every minute HFT firms use powerful computers to execute thousands of trades every minute. And these aren’t your traditional, Welp, I bought this share for $15, now I’ll sell it for $20! stock trades. HFT computers are ready to machine gun completely automated trades internationally, profiting from only penny differences in prices across foreign markets.

Remember playing games online when not everyone had a high speed connection? The asshole with broadband just teleported around and slaughtered everyone. An identical goes for today’s financial snipers-the fellow with the fastest connection makes a killing, because anything else of the suckers are lagging too far behind. Firms world wide are competing for (and building) blazing fiberoptic networks to confirm they’ve got a millionth of a second edge over the competition-with a view to feed the newest prices into their algorithms while other HFT firms are playing robot catch up (in the event you can call microseconds catchup).

Where’s this heading? It’s a financial frontier, so nobody really knows how the playing field will likely be leveled-or if it even will be. But we love the solution posited by MIT professor Alex Wissner-Gross and the University of Hawaii’s Cameron Freer: stick the entire computers in Antarctica, so everyone’s at an equal disadvantage. [ Wired ]

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This post is tagged: fiberoptic networks, foreign markets, high frequency, high speed connection, powerful computers, university of hawaii