Months search for a bug that was not. And in simple words about high frequency trading.
Exchange and near-exchange companies create a serious demand for programmers who are engaged in completely different things - from the automation of back office to the date of mining. The developers of the so-called High Frequency Trading algorithms, high-frequency trading algorithms have very serious salaries and responsibilities. To write this post I was inspired by one boring and at the same time funny movie (youtube, 50 minutes, without translation) , in which the developer Haim Bodek very simply explains the essence of what is happening in HFT.
The flow of applications for the purchase and sale in the exchange " glass " Bodek associates with the queue for a rare product, which is not enough at all (Update: its turn is formed at each specific price in the glass). Those who are in the queue first are able to quickly buy all the goods cheap and start selling expensive to others. Actually everything. The whole point of high-frequency trading is to get to the tidbit faster than the queue and immediately turn it off to the one who almost had time for you. All this happens in a split second, so that slower participants either do not have good opportunities to evade it, or the resulting price difference for them is cheap, uninteresting and not worth the fuss. However, sophisticated programs do such tricks thousands of times a day, so that a penny to a penny tens of thousands of times accumulates and gives good money to guys like Goldman Sachs. In fact, very close to the infrastructure figures, taking advantage of their technical superiority, take these pennies from other market participants. And in this case you need not only to hire good programmers, you also need to have your own server physically on the shortest wire to the exchange servers. Well, be friends with the exchange, getting better conditions than competitors.
So that's funny in the movie. Haim Bodek was doing just that - he had his own HFT algorithm programmed. However, Bodek did this not in collusion with a powerful infrastructural division of any exchange. And one day he discovered that his orders did not work - at times he seemed to be the first in the queue, but then he was the last. 12 months (!!!) Bodek searched for a bug in his code. Not found. In the end, it turned out that from that day the stock exchange had the lowest priority for the type of orders that he used. Those. almost the whole line was instantly ahead of him. Only after this, Bodek went to complain to the Federal Commission on Securities, saying that somehow this is all unethical, unfair, and robbery in general.
')
If the community is interested, from time to time I will post stories about the adventures of programmers on the exchanges.
The flow of applications for the purchase and sale in the exchange " glass " Bodek associates with the queue for a rare product, which is not enough at all (Update: its turn is formed at each specific price in the glass). Those who are in the queue first are able to quickly buy all the goods cheap and start selling expensive to others. Actually everything. The whole point of high-frequency trading is to get to the tidbit faster than the queue and immediately turn it off to the one who almost had time for you. All this happens in a split second, so that slower participants either do not have good opportunities to evade it, or the resulting price difference for them is cheap, uninteresting and not worth the fuss. However, sophisticated programs do such tricks thousands of times a day, so that a penny to a penny tens of thousands of times accumulates and gives good money to guys like Goldman Sachs. In fact, very close to the infrastructure figures, taking advantage of their technical superiority, take these pennies from other market participants. And in this case you need not only to hire good programmers, you also need to have your own server physically on the shortest wire to the exchange servers. Well, be friends with the exchange, getting better conditions than competitors.
So that's funny in the movie. Haim Bodek was doing just that - he had his own HFT algorithm programmed. However, Bodek did this not in collusion with a powerful infrastructural division of any exchange. And one day he discovered that his orders did not work - at times he seemed to be the first in the queue, but then he was the last. 12 months (!!!) Bodek searched for a bug in his code. Not found. In the end, it turned out that from that day the stock exchange had the lowest priority for the type of orders that he used. Those. almost the whole line was instantly ahead of him. Only after this, Bodek went to complain to the Federal Commission on Securities, saying that somehow this is all unethical, unfair, and robbery in general.
')
If the community is interested, from time to time I will post stories about the adventures of programmers on the exchanges.
Source: https://habr.com/ru/post/202970/
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