In the first chapter I made an introduction today I will talk again about high frequency trading Chapter 2.
I have described the technological system that hides behind high-frequency trading through fiber optic cabling, investment companies spend millions of dollars to use the aforementioned “dark fibers”, but it is not only this technology that is the best, now I will explain another novelty.
In Belgium there is a prop very top where there are antennas that are capable of transmitting information at the speed of light between the Frankfurt stock exchange and that of London, this property belonged to the Us Army, and was purchased by a company of high-frequency trading Chicago.
The structure is 250 meters high, this pylon was sold at auction from Belgium, do you know at what price it was bought?
5 million euros in 2012, so think about how many pylons there are in Europe and the United States to go faster and faster?
You don’t believe it, do you? Why doesn’t anyone talk about it? Why is the world of high frequency trading so mysterious?
Stéphane Tyc is the man with the faster technology in the world, is a person of French nationality, he studied at Harvard, and before founding his own company creating software for the French bank Bnp Paribas, after he rediscovered an “old” technology that radio waves.
Stephane Tyc understood that light goes much faster in the air than fiber because fiber has to follow a more articulated path than radio waves that can go straight.
If with fiber The New York-Chicago record was 13 milliseconds with radio waves came to 8 milliseconds, it will not seem like much but believe me that software can do many more operations in such a short time.
Ladies and gentlemen we are talking about microseconds, in Dunkirk in France it is present on a silo at 100 meters of altitude where the antennas are installed to communicate with those installed in England.
Stéphane Tyc talks about 4 milliseconds to cross Frankfurt-London, is everything ok?
It’s not over dear investors, the big business banks have found yet another way to be faster, you can earn a few thousandths of a second by settling inside the exchanges.
With 25000 euros per month banks rent boxes where they place their computers (it is called in technical language collocation / proximity) and the managers of the exchanges to avoid that there are no disadvantages between users verify to the millimeter the distances between computers and servers.
The length of the cables must be the same for all financial operators.
Now that you are reading this article do you still think you know trading?
Unfortunately there are many people who “sell” algorithms written in easy language or Pyton making them believe that they are fast and performing, if I place an order after how many millions of investors will I be executed and at what price?
Robots eliminated humans, for example Danny O ‘ Donnel spent 25 years on the New York Stock Exchange this person was a fighter in the market especially when there was a lot of volatility.
Now Danny has a restaurant, robots and frequency trading have wiped him out, isn’t that incredible?
Do you understand why between 80 and 90% of traders lose money on financial markets?
Danny with the arrival of robot traders has been replaced by ultra – fast programmed software, who are these programmers?
Mathematicians and physicists and statisticians who earn at least 10000 dollars per month, their job is to create computer programs with the aim of making the best possible financial transactions.
These algorithms incorporate for sensitive market information such as when the president of the Federal Reserve or the European Central Bank speaks, I can assure you that having a subscription to Bloomberg or Refinitiv is not enough to have advantages over transactions.
In practice you will never have time to go faster than a programmed algorithm, imagine a battle between the various algorithms of business banks where the only goal is speed and consequently earn millions of dollars.
See you in the next chapter.