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Eddie_George

Millions Of Hidden Share Trades To Be Revealed

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Millions of previously hidden US stock trades will be revealed for the first time on Monday 9 December thanks to research from a team of academics.

Previously odd lots, which are trades of less than 100 shares, have not been revealed on the publicly available ‘consolidated tape’, with only big investment banks and sophisticated computer-powered high-frequency traders paying to see them from individual exchanges. It was thought they were used only by small retail investors and so were not important.

But Chen Yao, of Warwick Business School, Maureen O’Hara, of Cornell University and Mao Ye, of University of Illinois, discovered that more and more big trades were being ‘sliced and diced’ to less than 100 shares so they remained hidden, leading to a ‘two-tier market’. They found four per cent of the volume of shares traded were done as odd lots in 2009 and that had risen to 4.9 per cent in the summer of 2013. In some cases they found that 60 per cent of a stock’s shares were traded as odd lots and so were hidden from the public transaction feed.

http://www.wbs.ac.uk/news/millions-of-hidden-share-trades-to-be-revealed/

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What about after hours trading. Dark liquidity pools.

Transparency is impossible when you have the like of Goldman Sachs plugging finite state machines into the main exchange servers, with the mechanics of said machines developed behind closed doors with the expertise of academia's best computer scientist, physicists and mathematicians.

Nobody is going to jail, at least not until the corruption comes to such a level that gangsters, oligarchs, and smaller states start publicly putting hits out on senior bankers.

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What about after hours trading. Dark liquidity pools.

Transparency is impossible when you have the like of Goldman Sachs plugging finite state machines into the main exchange servers, with the mechanics of said machines developed behind closed doors with the expertise of academia's best computer scientist, physicists and mathematicians.

GS plugging their gear straight into the exchange servers? Sounds implausible to me. Evidence?

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GS plugging their gear straight into the exchange servers? Sounds implausible to me. Evidence?

No. It's very common.

All the big exchanges have facilities for customers to install their private equipment in the exchange's datacenter. The exchange equipemnt is in its own secure cage, but there are lots of cages to rent (at an obscene price), with bundles of optical fibres running directly into the exchange's servers.

The exchanges do pay lip service to the idea of fairness, by ensuring that the length of the cables from the servers to each "customer" cage are the same, so that one customer doesn't get the benefit of a lower response time by virtue of the fact that the light takes less time to travel through a shorter cable.

Indeed, these days, most customers don't put "servers" directly into the exchange datacentre - the rent is too expensive and the response too slow. If you're going to the expense of putting gear in the exchange data centre, then it's going to be an FPGA or ASIC.

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No. It's very common.

All the big exchanges have facilities for customers to install their private equipment in the exchange's datacenter. The exchange equipemnt is in its own secure cage, but there are lots of cages to rent (at an obscene price), with bundles of optical fibres running directly into the exchange's servers.

The exchanges do pay lip service to the idea of fairness, by ensuring that the length of the cables from the servers to each "customer" cage are the same, so that one customer doesn't get the benefit of a lower response time by virtue of the fact that the light takes less time to travel through a shorter cable.

Indeed, these days, most customers don't put "servers" directly into the exchange datacentre - the rent is too expensive and the response too slow. If you're going to the expense of putting gear in the exchange data centre, then it's going to be an FPGA or ASIC.

OK. Got it now. Love the idea of them trying to ensure 'fair-play' by measuring the length of the cables. I know there's been a race to zero between HFT players for the last few years as they try to minimise latency by relocating ever closer to the exchanges. I guess co-location takes that to the end of logic.

Just found this interesting tidbit, for instance:

How do you speed up high-frequency trading (HFT) when you already have fibre-optic cables running from your firm's servers to the data centers where all the magic happens? Private equity firms are betting that HFT firms will pay big bucks to move their infrastructure to a secure, reliable location close to their offices. On Wednesday, central London got its first new data center, named Volta, in a decade. It's aimed squarely at the city's financial sector, which is a mile away as the crow flies.

Set up by Glebe Asset Management, a property investment company, and Apollo Global, a large private equity firm, Volta took a year to fit out. The building alone cost £25 million ($40 million), with many millions more to set up the infrastructure, which includes transformers in the basement, cooling towers on the roof, two independent connections to separate parts of the power grid, and back-up power. (Volta did not disclose the size of the investment; the £25 million figure is from public records.)

The 91,000 square-foot building, half of which will be filled with 1,600 server racks, will consume more power than the Shard, which as Europe's tallest building is more than ten times as large. Most of that will go towards servicing high-frequency trading firms. It is connected to various trading venues, including the London Stock Exchange, as well as Basildon and Slough, innocuous commuter towns that happen to host high-frequency-trading data centers. An under-sea cable connects it to the International Financial Services Centre, homes to the European headquarters of dozens of big banks (pdf).

Still, Volta wants to be seen as cuddly and supporting local business. The company promises to make its infrastructure available in smaller chunks, suited to the needs and budgets of local tech firms, many of which are located within walking distance of the data center. To that end, it offers something called the "Shoreditch suite" to provide start-ups with "corporate infrastructure at a fraction of the cost." That's hardly going to cover the cost of the investment. But it is a nod to the growing importance of London's tech economy.

http://qz.com/129229...ff-trade-times/

Edited by zugzwang

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It does seem FPGAs are very popular right now with these people, I am a FPGA expert (pretty widely published) and I am fed up of being approached by agents recruiting for companies in the city I always turn them down as apart from the morality of the end application I am not sure how you can get excited getting a packet through with less latency.

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GS plugging their gear straight into the exchange servers? Sounds implausible to me. Evidence?

It's referred to as' co-location.' They effectively try and trade milliseconds ahead of the broader market.

'In a sign of the rush for speed in trading, ex­changes are building huge data centres where traders, members and non-members alike, can place computers containing their trading algorithms next to an exchange’s matching engine, which matches “buy” and “sell” orders. This “co-location” shaves crucial milliseconds from the time it takes to complete a trade. [1] If traders are located 100 miles away from an exchange, they face a delay of one millisecond whenever they seek to trade a price via their computer screen. Few serious investors can afford to be that late to prices that flash so quickly. The blink of a human eye takes 300 milliseconds; many traders now operate in the smaller realm of microseconds.

Being faster than rivals to the best price – that is, having the lowest “latency” – is thus crucial in today’s markets. [2]

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It's referred to as' co-location.' They effectively try and trade milliseconds ahead of the broader market.

Grace Hopper is famous for her nanoseconds visual aid. People (such as generals and admirals) used to ask her why satellite communication took so long. She started handing out pieces of wire that were just under one foot long (11.80 inches)—the distance that light travels in one nanosecond. She gave these pieces of wire the metonym "nanoseconds." She was careful to tell her audience that the length of her nanoseconds was actually the maximum speed the signals would travel in a vacuum, and that signals would travel more slowly through the actual wires that were her teaching aids. Later she used the same pieces of wire to illustrate why computers had to be small to be fast. At many of her talks and visits, she handed out "nanoseconds" to everyone in the audience, contrasting them with a coil of wire nearly a thousand feet long, representing a microsecond. Later, while giving these lectures while working for DEC, she passed out packets of pepper that she called picoseconds.

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The 91,000 square-foot building, half of which will be filled with 1,600 server racks, will consume more power than the Shard, which as Europe's tallest building is more than ten times as large. Most of that will go towards servicing high-frequency trading firms.

When I think about what that processing and electrical power cold be doing, it's hard not to think "I don't want to live on this planet anymore."

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