
Nanex Gets $700k Whistleblower Award from SEC - theandycamps
http://www.nanex.net/aqck2/4712.html
======
TheNanex
Yikes. Lots of misinformation here.

First of all, this has nothing to do with High-Frequency Trading. It's about
the NYSE not delivering a product (SIP real-time data) while collecting $100M
a year for that service. This was happening for at least 3 years.

I am a champion of free markets. The term "High-Frequency Trading critic" is a
label others use when they either can't understand and/or refute solid
evidence.

I'm happy to answer questions.

~~~
kbenson
Can you comment on how hard it was to find another period exhibiting this
behavior? The article says _We chose this period because there was a
noticeable lag in the public quote from the NYSE versus quotes from other
exchanges, allowing us to rule out the consolidation process as a source of
the delay._ Did you have to look for a few periods to see the behavior, or did
you look for a few to get a sample that showed the problem more clearly?

Do you have any info on how often lag was present, or how often over a
specific threshold?

Do you know how representative you sample was with respect to when lag was
present?

I understand you may not have gone into this much detail in your research, but
if you have any info like this, I think it helps illustrate the scope of the
problem.

~~~
TheNanex
It happens all the time (ALL. THE. TIME.) and have documented dozens of
examples. There are links to many of those examples on that page
(fantaseconds).

I've also posted many examples on twitter @nanexllc using recent data (yes,
this is still a problem!)

------
tsunamifury
So essentially the NYSE is a provably fixed game, with large HFT houses paying
for the right to trade on non-public information, and it hides behind the idea
that it was just a few hundred milliseconds.

All the while they are selling non-public information as a product that is
deliberately used to micro-manipulate the market?

I mean, deep down I always knew this, but to have it all spelled out is
shocking because it exposes the NYSE as systemically fraudulent. The
implication of that is so overwhelming it causes me to want to ignore it out
of sheer inability to think of a way to solve the problem.

~~~
reverend_gonzo
Market data is not non-public definition. NYSE was simply slow in aggregating
market data during times of high volume.

This did not affect you as a retail investor, as you get the NBBO price. This
only affected you if you were an HFT firm with bad infrastructure who depended
on the aggregate feed and not their direct line.

Like tptacek said, the price for getting a direct line, while expensive, is
not unreasonable for a business. The largest cost will be salaries for the
people writing your code and maintaining your infrastructure.

~~~
jsprogrammer
Are you saying that there is a special market operating in the NYSE that some
traders cannot access? Why would my order not be eligible for being matched,
but a HFT's would?

Edit: wow, rate limited after three posts this morning. A new HN low.

My response to tptacek below:

My dumb order?

How can HFT's intercept and redirect my trades to their, appently, captive
pool of dumb trades?

Sure sounds like multiple markets are operating...and you are even telling me
that my orders will be scraped before they can even reach some markets.

~~~
Lazare
Oh boy, you got this 100% the wrong way around.

As a small trader, you get access to special lower prices that a hedge fund
can't get. Your broker will be routing your order to a wholesaler who will
fill it at lower prices (ie, narrower spreads) than you would get on the open
market, because they have a legal obligation to not screw you over.

You can request that they route it to anywhere you want, and they are legally
obligated to do it if you ask, but you _really_ don't want to do that. Unless
you like giving money away of course.

(Also, you don't seem to understand basic market mechanics. You use words like
"scraped" or "picked up" which are nonsensical in context.)

IEX recently suggested that retail investors should request their broker to
route their orders to IEX, for which they got criticised very harshly. And
rightly so.

~~~
jsprogrammer
As a small trader I don't get paid to provide liquidity. A hedge fund may.

I used the word scrape in response to tptacek's response below my above post.
If a trader is not aware that what tptacek describes is happening to their
orders, then I believe my characterization is accurate.

~~~
Lazare
You're still not addressing my main point.

As a small investor, your order is probably routed to a wholesaler like
Citadel, where you will get a better price than you would otherwise get.

And you are upset because you incorrectly believed that your order would be
routed somewhere else (where, exactly?), where you would get a worse price,
which you think would be better because...why?

> I believe my characterization is accurate.

It's not even slightly accurate; it's literally the opposite of the truth.

------
reverend_gonzo
What he's saying there was that due to inefficiencies in NYSE's
infrastructure, the feed that went to the consolidation (which provides the
NBBO) was delayed. Firms were able to then exploit those inefficiencies by
dumping a ton of quotes into the market to cause it slow down those feeds.
This is called quote-stuffing and is illegal and against exchange rules. (I
don't know if this was illegal then.)

From a technical perspective, as orders are sent to the exchange, NYSE sends
them out on a direct line to subscribers who listen to that feed. This is not
private information, but it is relatively expensive, given you'd need to have
servers at a colo, and pay for fast networking, boxes, software, etc.

They also then aggregate that data and send them out on a feed to the NBBO
which is much more accessible to the majority of traders. Obviously, it is
somewhat delayed, as they need to aggregate, and a firm that can aggregate the
data faster than NYSE thereby has an advantage. This aggregated data gets set
out as soon as possible, and NBBO defines a time range that they need to be
accurate. For what its worth, NBBO means "National Best Bid and Offer" and
they will aggregate bids and offers from all exchanges and provide the best
one in a single consolidated feed.

Nanex determined that at certain times during high volume, Nasdaq's aggregate
feed was delayed by up to 30 seconds, and this was cause by certain entities
quote stuffing (which like I said earlier, is against the rules).

That is all that was determined. There is nothing about trading on private
information (which there is none here) or front-running (which HFT firms can't
do) or any of the other nonsense that gets spewed out.

If anything, other firms with good infrastructure would have been able to arb
out the inefficiency and make the markets right again, quickly.

~~~
biot
Your summary is incorrect; the 30 second delay was six years ago and was
caused by selling access to real-time data vs delaying the data for the
public. Quote stuffing resulted in delays of hundreds of milliseconds:

    
    
      > Once again, we detected sizable delays between time-stamps
      > in the public quote and Open Book. These delays ranged in
      > the hundreds of milliseconds. Though the delay magnitude was
      > far lower than the tens of seconds discovered during the flash
      > crash, it was still hundreds of times higher than expected.

~~~
reverend_gonzo
Regular quote stuffing generally delayed by hundreds of milliseconds, which is
a pretty bad sign regarding their infrastructure.

The 30 second delay was only during the flash crash. For an aggregate feed
that's not aggregating very efficiently, that would make sense, as there was
an abnormally high amount of volume during the crash.

------
chollida1
So essentially the exchanges offer multiple data feeds. These feeds are
differentiated by a couple of points.

1) How much market data they give out. Typically this is broken into 3 levels:

    
    
      - Level 1, Just the top of book quote, this is the best bid and offer and their corresponding number of shares at this price level.
    
      - Level 2 Depth of market at each price level, same as above but you can see all liquidity offered.
    
      - Level 3 same as Level 2 but you can see each individual order that contributes to each price level
    

This differentiation is generally considered to be a good thing as most people
including most hedge funds can get by with even Level 1 quotes.

The other way they differentiate is the speed at which you get updates.

Have a look here to see what just the Nasdaq offers.
[http://www.nasdaqtrader.com/Trader.aspx?id=FeedMIPS](http://www.nasdaqtrader.com/Trader.aspx?id=FeedMIPS)

You can spend anywhere from $500/month to $75,000/month to receive market data
from just the Nasdaq, one of 50 trading venues in the US.

As you can imagine the difference is speed. The slower methods will use the
text based FIX protocol and the fastest methods give you a feed and an FPGA to
parse the feed with.

It's this later feed that is getting the exchanges into trouble as these feeds
notify the user of trades before the SIP can be updated which lets firms have
a 300 millisecond second peek at the market before everyone else does.

Couple these faster feeds with many dark pools not reporting trades in a
timely manner and new order types that allow firms to sweep liquidity at one
exchange only( ie not rout-able orders) and you get a situation where latency
arb can thrive.

~~~
kbenson
> It's this later feed that is getting the exchanges into trouble as these
> feeds notify the user of trades before the SIP can be updated which lets
> firms have a 300-700 nano second peek at the market before everyone else
> does.

From the article:

 _Specifically, we found that stock quotes from the NYSE were delayed by more
than 30 seconds to the public quotation feed (chart 1), relative to Open Book,
which is NYSE 's expensive direct feed product used mostly by High Frequency
Traders (HFT)._

That indicates it was quite a bit more than 300-700 nano seconds at it's
worst, by a few orders of magnitude. The chart showing the delay over time in
their testing period shows a delay of 200ms routinely. That's way more than a
few hundred nanoseconds.

~~~
chollida1
Yes, but to be clear that was a very special situation that hadn't happened
before or since. They were essentially fined for not having good developers.

The NYSE has always had a reputation of being awfully inept from a technology
standpoint, though they have made strides in the past few years.

That particular time was made even worse by the direct feed holding up much
better that their SIP feed, though the direct feed was also slower than
normal.

An accurate title might be NYSE fined for having a software bug that slowed
down one feed occurred during the busiest time in the markets history.

~~~
kbenson
> Yes, but to be clear that was a very special situation that hadn't happened
> before or since.

If by _a_ special situation, you mean directly observable at multiple time
periods. Here's what the article says:

 _To satisfy a curiosity of whether the NYSE public quote delay was unique to
May 6, 2010, we ran another quote-by-quote comparison of time-stamps from the
public quote and Open Book for a 30 minute trading period in General Electric
stock (GE) on July 21, 2010 (see chart 2). We chose this period because there
was a noticeable lag in the public quote from the NYSE versus quotes from
other exchanges, allowing us to rule out the consolidation process as a source
of the delay._

So they were able to find another time period exhibiting the same behavior as
the flash crash at a later date, and it doesn't appear they had to look very
hard (but there aren't a lot of details on that). Thirty seconds is a crazy
amount of lag, but that was during the "special situation". That they look to
have routinely had lag well into the hundreds of milliseconds is more
troubling, because there's no longer a special situation to point towards as
an excuse.

~~~
chollida1
Umm, I think what you posted proves my point. The 30 second delay was a
complete aberration. 100 millisecond delays happen all the time at every
exchange.

To be fair to you I originally posted nano second when I meant millisecond.
I've corrected my post.

As I've said before, I'm not at an HFT firm but we routinly see latency
changes in messagesfrom all excahnges and dark pools.

Just like Google can't guarantee each query will be served in 250
milliseconds, each exchange can't guarantee every message will be delivered in
nano seconds.

I'm good with this.

~~~
kbenson
> To be fair to you I originally posted nano second when I meant millisecond.
> I've corrected my post.

Ah, that makes a big difference. :)

> As I've said before, I'm not at an HFT firm but we routinly see latency
> changes in messagesfrom all excahnges and dark pools.

From separate feeds to the same exchange? My understanding from the article is
that that is not allowed:

 _A crucial sub-ruling in the regulations prohibits exchanges from giving
stock quotes to special groups faster than to the public._

So as long as you're measuring from the start of the request, not the end, you
shouldn't see delays in the hundreds of milliseconds to the same exchange,
regardless of feed. At least that's how I understand it, but you sound like
you have more practical experience, and may be able to correct where I'm
misinterpreting something. Is that not how it works in real life?

------
epx
Nuclear reactors are planned in a way that their response time is in human
scale e.g. they take something like 20 seconds to increase or decrease
activity. This leaves room for human intervention.

IMHO markets should do something similar: create something like 30-second
barriers for trades. Trades that cross the bid/ask are carried out. Trades
submitted cannot be canceled until the next 30s cycle. Trades outside of the
range (bid too low/ask too high) stay open. The open trade book is sent to
everybody every 30s.

Allowing µs-range trades (and particularly adding and removing bids and asks
so fast) is asking for trouble, it is obvious that at some point of time two
or three HFT robots will react on each other's trades and do something
veeeeery stupid.

~~~
tptacek
Even people who support quantized markets don't propose markets running on
human timescales.

Meanwhile, if you're the kind of trader that is impacted by trade latency
(read: a competitive market maker or decently well capitalized prop trading
firm), there are already venues you can trade in that are quantized. The
problem is that nobody wants to trade in them.

~~~
cdetrio
Not sure what you mean by "quantized market" (discrete-time auction?). But the
opening and closing sessions at the NYSE run at human timescales (twice per
day), and most of the daily volume is traded at open and close iirc.

edit: "Across Wall Street, less trading is taking place at 3 p.m. or, in fact,
most any time but the opening minutes and the final half hour."
[http://www.wsj.com/articles/traders-pile-in-at-the-
close-143...](http://www.wsj.com/articles/traders-pile-in-at-the-
close-1432768080)

------
jobu
Pretty sure this is the initial analysis from 2010 -
[http://www.nanex.net/FlashCrash/FlashCrashAnalysis_LOD.html](http://www.nanex.net/FlashCrash/FlashCrashAnalysis_LOD.html)

 _" If the average or base quote rate is around 10,000/second, then it only
takes an additional 10,000 quotes/second to reach the magic 20,000
quotes/seconds where a corresponding delay is seen in NYSE quote from CQS."_

This seems like a bug related to system load, so a $5M seems pretty harsh
unless they knowingly ignored the issue for the benefit of their high-paying
CQS customers.

~~~
Vraxx
I don't think it's really that harsh if you look at it as a bug in a critical
system. Certain fields with safety critical systems (such as medical or
aviation software) face similarly strict regulations and enforcement for the
good of the public. It seems to me with that with the volume of money being
affected by this system that the potential danger for faults in the software
would be as high as potential damages from medical software or something
similar.

------
Someone1234
I have two questions about HFT:

\- Is HFT a healthy or unhealthy part of the economy? Meaning does it help
flatten out the highs/lows, or does it emphasise them?

\- Aside from a micro-tax on trading (e.g. 1c/trade) is there any other
mitigations/solutions to HFT?

~~~
kbenson
IIRC, HN's yummyfajitas goes into a lot of details in his blog posts on
HFT[1]. My own understanding is that it provides liquidity and reduces bid/ask
spreads, resulting in a more accurate stock valuation. I'm not sure the
negatives, but I'm not a trader nor do I follow such things all that closely.

1:
[https://news.ycombinator.com/item?id=3852341](https://news.ycombinator.com/item?id=3852341)

~~~
jobu
From that blog post:

 _" Most HFTs run a market making strategy. What this means is they play both
sides of the table - they take no position on whether a stock will go up or
down. Instead, they try to offer securities both to buy and sell. If you want
to buy, they will sell to you at $20.10. If you want to sell, they'll buy from
you at $20. As long as their buys and sells match don't get too out of whack,
the HFT will collect $0.10 = $20.10 - 20.00."_

That does provide more immediate trades for both the buyer and seller, which
the pro-HFT camp calls liquidity. Unfortunately it's usually not needed - both
the buyer and seller were already in the market and willing to trade, and now
they both just had an additional $0.10/share sucked out of their trade by some
HFT.

~~~
cdetrio
That's why market makers are also called scalpers, because they skim the $0.10
spread. But in return for paying the spread, what traders get is immediacy.

The problem is, how much immediacy do traders actually want? HFT provides
immediacy in microseconds; its needed for continuous-time auctions because
buyers sellers usually aren't in the market at the exact same microsecond
interval (while the HFT _is_ there at every interval).

Frequent Batch Auctions[1], where orders are matched in batches with single-
price clearing (call auction style) - just like the opening and closing
sessions of NYSE, but much more frequently with shorter periods of say 30
seconds, 1 second, or even 100ms per batch. Their models show that frequent
batch auctions will reduce spreads even further (because it eliminates
mechanical/latency arbitrage rents). In theory, retail traders should get even
better prices (because the spreads will be smaller) if they are willing to
give up microsecond immediacy for 1 second order matching.

[http://faculty.chicagobooth.edu/eric.budish/research/HFT-
Fre...](http://faculty.chicagobooth.edu/eric.budish/research/HFT-
FrequentBatchAuctions-Slides.pdf)

~~~
kasey_junk
Current continuous-time trading already provides you the ability to specify
very precisely how much immediacy you are willing to pay for. Thats precisely
what the market types are about.

I don't particularly have an opinion about the Budish paper, other than it has
some serious impacts to globally traded products and it is way more disruptive
than people seem to suggest.

I do worry that fundamentally altering the way the markets work, because some
participants don't understand order types is particularly troublesome.

~~~
cdetrio
Simplish order types (limit/market, good till cancel, immediate or cancel,
etc.) can only do so much. When you place a limit order on a continuous-time
market, you'll pay exactly your limit price; but on a batch market you'll pay
the clearing price (which may be _less_ than your limit price).

The complicated types (hide-n-slide, NBBO pegs, and conditional pegs[1]) may
help some players at the expense of others. The only players who wouldn't
benefit from batch auctions (according to Budish et. al.) are latency
arbitrageurs.

1\. [https://mechanicalmarkets.wordpress.com/2015/10/05/iex-
peg-o...](https://mechanicalmarkets.wordpress.com/2015/10/05/iex-peg-orders-
last-look-for-equity-markets/)

~~~
kasey_junk
> you'll pay exactly your limit price

Thats not quite true. Price improvement happens all the time on limit orders,
but I'll concede you'll pay close to it if it fills.

> The complicated types (hide-n-slide, NBBO pegs, and conditional pegs[1]) may
> help some players at the expense of others.

This is true of limit/market/stops as well.

The Budish paper is very interesting.

What we don't know is what it would do to the spread, which is very important
especially given that it will be harder to predict the clearing price. It is
also a major change to the markets, virtually impossible to implement and its
not clear to me what that risk is buying us, especially given that I fully
expect most participants to go through an intermediate first.

~~~
tptacek
What are some circumstances in which you'd get price improvement on a resting
limit order?

~~~
kasey_junk
You wouldn't on a resting order, but if you hit the other side you will.

------
atemerev
While I am fully pro-HFT, and in fact work as a consultant for a few HFT
shops, this is certainly illegal and anti-competitive.

(Somewhat akin to using game engine bugs for artificial lag creation in MMOs
on the opponent side).

------
Dwolb
Note, the SEC has a protocol for all whistleblowers. Here's the largest ever
award [1] and the wiki article on the topic [2] (sorry for mobile link).

I asked my accountant friend about whether he'd ever consider whistleblowing
if he saw wrongdoing. His decision criteria was based on whether he'd A) Ever
be able to get hired again or B) If the size of the prize was so big he'd
never have to worry about it.

[1]
[https://www.sec.gov/News/PressRelease/Detail/PressRelease/13...](https://www.sec.gov/News/PressRelease/Detail/PressRelease/1370543011290)

[2]
[https://en.m.wikipedia.org/wiki/SEC_Office_of_the_Whistleblo...](https://en.m.wikipedia.org/wiki/SEC_Office_of_the_Whistleblower)

------
rcavezza
Anyone know what this quote means?

When the SEC called Hunsader in June 2015 to tell him about the award, he said
to them "I would have accepted $1 if you simply acknowledged me at the time."

Was he initially ignored?

~~~
TheNanex
I was ignored by the Trading and Markets people at the SEC, but not ignored
(obviously) by the Enforcement people.

~~~
eewffwe
I don't want to be silly but it appears the SEC ignores the siren often
(Madoff is another). Is this due to sheer workload or friends in high places?

~~~
TheNanex
Wealthy friends with promises of a nice job (and other things)

------
lr
This might be of interest to people:

A NYSE Speed Bump You Weren't Aware Of
[https://www.iextrading.com/about/press/op-
ed/](https://www.iextrading.com/about/press/op-ed/)

~~~
tptacek
The "speed bump" here being that NYSE's ancient creaky FIX gateway is slower
than the NYSE ARCA gateway that they tell everyone to use instead. _Quelle
surprise!_ 80s text network protocol slower than 90s binary protocol: film at
11.

~~~
minimax
This is almost right. NYSE and Arca are two separate exchanges (both owned by
NYSE). Both exchanges offer FIX and binary gateway protocols. Annoyingly, the
Arca binary protocol and the NYSE binary protocol are not the same protocol.
NYSE does not suggest using the Arca gateway to access NYSE. They suggest you
use a NYSE binary gateway to access NYSE.

~~~
tptacek
Dammit. I even looked this up before I wrote the comment, and got the opposite
impression. (I'm a little familiar with the Arca protocol for other reasons).

Thanks for correcting me.

------
uptown
Ultimately, the market has been setup to almost mandate participation. If you
work someplace that provides a matching 401k program, and you choose not to
contribute, then you're passing-up on matched dollars if you don't contribute
to a 401k. If you're a part of any endowment, pension plan, or other managed
retirement plan there's a good chance that plan (and your money) is being
invested in the market.

So what are your options? Do you not contribute to a 401k or IRA, pay the full
tax rate on all of your income today, and invest in real estate or some other
investment?

------
itchyouch
Nasdaq does go through great pains to ensure that public & private feeds go
out "equally"-ish on the wire whether it's a quote going out of the prop or
public data feeds. At the packet level, a public quote to the SIP or a private
quote via Itch are within the sub ~10u level. But once the packet leaves, the
fate of that packet is surrendered to the speed of the SIP system.

There's a couple of inherent challenges.

The SIP that aggregates the data is by design a separate system from the
trading systems. This is for obvious reasons, as every participant provides
their quote to the SIP. So no matter how fast the SIP the is, even with a
99.999% latency of 20 microseconds, the SIP will always be 20 micros + travel
time to the SIP (1 to 500 to 7000 micros) as opposed to a direct feed. Nasdaq
is in Carteret. NYSE is in Mahwah. BATS is at NY4 in Secaucus, etc. So direct
feeds will always be the fastest, even with a SIP that can defy the speed of
light a little bit.

Nasdaq does actually read marketdata directly from other exchange participants
and falls back to using the "slower SIP" data as a fall back in the event of
any issues. This allows for the latest quotes to be respected.

The challenge with the SIPs being hundreds of millis behind is partly due to
the criticality & member-driven consensus system in place. Each of the
marketcenters NYSE, Nasdaq, Bats, etc have a stake and voting power on how the
SIP would be run & operated. Since it's a system that "works" there's really
no motivation to continually improve the technology/latency of the SIP.
There's also a fear to change the SIP and lead to it going down. If a SIP goes
down, by rule, a regulatory halt must be issued and all trading in the
securities that particular SIP handles must stop. This is what occurred during
the 3 hour outage several years back at Nasdaq. The trading system was fine,
but since the SIP was down, everything had to be halted. Halts are detrimental
to business since the respective marketcenters make money on trades. Halts =
No Trades = Lost Revenue, so there is a lot of motivation to not halt by all
the member exchanges.

That ambivalence to a tech refresh has since changed since the scathing
critique of Flash Boys and the Nasdaq SIP is in process of being refreshed to
the same architecture as the trading systems, which should bring median
latencies of the SIP down into the tens of microseconds and 99% latencies into
the hundreds of microseconds. Current medians and 90th percentiles are at
450/810 microseconds, which is considered an eternity.

[http://www.wallstreetandtech.com/infrastructure/nasdaq-
omx-w...](http://www.wallstreetandtech.com/infrastructure/nasdaq-omx-won-over-
sip-committee-with-latency-reductions-and-tech-upgrades/d/d-id/1317316)

[http://www.utpplan.com/DOC/UTP%202015-Q4%20Stats%20with%20Pr...](http://www.utpplan.com/DOC/UTP%202015-Q4%20Stats%20with%20Processor%20Stats.pdf)

On the technical side, one of the challenges with synchronizing packet
delivery between a private & public feed is that the absolute fastest NICs
available today with kernel bypass can get a packet from wire to memory or
memory to wire in about 2-3u. So every hop of a computer costs a minimum of
4-6u. Usually this is Order Port Ingress -> Matching Engine -> Order Port
Egress. An FPGA NIC that does the IP Header processing and delivers data to
memory can do wire to memory in about 1-2u. One-way PCI-E latency is around
800 nanos. So there's about a 500-1000 nano budget to process a packet in the
FPGA, then another 800 nanos to deliver it over PCI-E to memory to be
processed. The fastest cut-through switches have a port-to-port latency of
around 250 nanos, so switch hops are pretty negligible in the overall latency
of a system, but they do play a part. Anyway, making sure that everything is
super duper optimized and running as it should be in a semi-continuously
deployed environment makes for interesting and quite crazy/bull-shit level
challenges.

------
fitzwatermellow
Congrats on being rewarded and recognized for the very important work you do
in bringing transparency to the financial markets. The whole story of how this
went down is just epic!

My question is about the business side of Nanex. Are sales of your products
such as NxCore enough to sustain the company? Do you also actively trade? And
what opportunities do you see currently around data science and machine
learning for entrepreneurs in the quantitative finance world?

------
__d
Is there any good reason that the SEC shouldn't ban direct feeds? If everyone
were forced to use the SIP, what issues would remain here?

------
neximo4
I never realised the NBBO could cross because of HFT. (Technically a market
type order is required to prevent this, but the quote stuffing lags price)
Definitely seems wrong.

------
mrbill
For someone who knows next to nothing about trading, but has read "Flash
Boys", any other recommended books on the topic?

~~~
tptacek
Yes: read "Flash Boys: Not So Fast", a very readable and very technical
takedown of "Flash Boys", which is a terrible, incoherent book --- without a
doubt Lewis' worst.

For a better version of "Flash Boys", read "Dark Pools"; Dark Pools also takes
a gimlet look at high-speed trading, but also does a great job of documenting
the birth of the NASDAQ ECNs and the transition from the early-90s centralized
markets to modern, decentralized, electronic trading.

If you want to get into the technical detail, the best book is still Larry
Harris' _Trading and Exchanges_; it is almost exactly the "TCP/IP Illustrated"
of trading.

------
nostromo
Google should open a stock exchange.

Sure, they'd be weary of the immense regulation involved. But I imagine
they're much more qualified to build a fair, fast and accurate trading system
than any of the existing exchanges are.

~~~
tptacek
What would be more "fair" or "fast" or "accurate" about Google's exchange?
I've gotten to do software pentests of several huge exchanges. They work
pretty much the way you'd expect them to. A lot of things people are just
starting to do in web software (message-mediated microservices) were idiomatic
in finance in the 1990s.

~~~
nostromo
Look no further than the linked article.

> a high quote rate from any NYSE stock will cause a corresponding delay in
> all NYSE public quotes! Anyone with this knowledge can easily cause latency
> on demand across many stocks, by simply blasting quotes in any one stock

Or another link from this thread.

> U.S. stock exchanges have invested huge sums of money creating two-tier
> markets - building and offering faster data and technology infrastructures
> at a price that only a small niche of traders can benefit from or afford,
> while at the same time continuing to offer slower products to everybody
> else.

[https://www.iextrading.com/about/press/op-
ed/](https://www.iextrading.com/about/press/op-ed/)

~~~
tptacek
That was true on _one_ exchange in _2012_. It's no longer true today on NYSE,
and probably wasn't true at any other venue (Hunsader is able to explain how
he found this in a relatively small blog post; dollars to donuts he looked
_everywhere else_ for it too).

So: not delaying public quotes is table stakes. What could Google do better
than that?

I'm not so much challenging you as I think it's an interesting question, and
would like to see it hashed out in technical detail.

------
Chefkoochooloo
Now that shows you how far the whistleblower laws have gone ever since Enron.
A big step up from what there was before.

