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Submission + - Barbarians at the Gateways ( 1

CowboyRobot writes: Former high-frequency trader Jacob Loveless gives an in-depth description of the math and technology involved in HFT. FTA: "The first step in HFT is to place the systems where the exchanges are. Light passing through fiber takes 49 microseconds to travel 10,000 meters, and that's all the time available in many cases. In New York, there are at least six data centers you need to collocate in to be competitive in equities. In other assets (foreign exchange, for example), you need only one or two in New York, but you also need one in London and probably one in Chicago. The problem of collocation seems straightforward: 1. Contact data center. 2. Negotiate contract. 3. Profit. The details, however, are where the first systems problem arises. The real estate is extremely expensive, and the cost of power is an ever-crushing force on the bottom line. A 17.3-kilowatt cabinet will run $14,000 per month. Assuming a modest HFT draw of 750 watts per server, 17 kilowatts can be taken by 23 servers. It's also important to ensure you get the right collocation. In many markets, the length of the cable within the same building is a competitive advantage. Some facilities such as the Mahwah, New Jersey, NYSE (New York Stock Exchange) data center have rolls of fiber so that every cage has exactly the same length of fiber running to the exchange cages."
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Barbarians at the Gateways

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  • The article provides a nice primer for the novice to the HFT domain. While the technical considerations are all very impressive I fail to understand how HFT actually adds value to society. If anything, flash crashes and other evils of HFT [] suggest to me the whole practice ought to be done away with. Sure there's lots of "economic activity" generated by buying and selling mind boggling amounts of assets in the blink of an eye but what use is it? Seems like the whole business is yet another leech sucking out

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