$300M To Save 6 Milliseconds 524
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."
Re:Proof that the system is corrupt (Score:5, Interesting)
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.
Re:Proof that the system is corrupt (Score:4, Interesting)
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.
Zero sum game (Score:5, Interesting)
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.
But this also adds more bandwidth as well right? (Score:5, Interesting)
But this also adds more bandwidth as well right? as well acting as a back up for other cables.
Re:Proof that the system is corrupt (Score:4, Interesting)
When will people understand that liquidity is a GOOD thing? How would you like to be in the situation 100 years ago where you want to sell your stock but no one is around to buy it?
Those are not the only two options. We didn't have millisecond buy/sell operations 30 years ago, the market was still working so there is no reason to assume that restricting trade speeds would cause us problems. Conversely excessive trade speed is a genuine problem. The taxation plan suggested is a reasonable way to address this.
Re:Proof that the system is corrupt (Score:5, Interesting)
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.
Re:Cheaper than a huge flying vacuum (Score:3, Interesting)
Absolute earnings are irrelevant at this point in history. It's the relative wealth holdings and the ability to translate that wealth into political power that really divides the classes. The whole system no longer has to enforce a gap between the rich and poor, it is now so well honed that it can perpetuate a gap between the empowered and the disempowered without requiring a wealth gap any more.
Re:The giant leach on society (Score:5, Interesting)
Re:Cheaper than a huge flying vacuum (Score:4, Interesting)
This would imply valuation would no longer matter, but it does. There are enough other competitive investments besides the stockmarket, like real estate, antiques, art, gold and commodities.
What you seem to be describing is a pure Ponzi scheme. It relies on infinite growth (and parts of our current economy unfortunately do) for prosperity. But what happens when Baby Boomers pull out their stock fund during their retirement and it's not replenished?
Bernie Madoff and Penny Stocks - people lose fortunes everyday.