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  • - A modern stock exchange isn't people yelling at each other

  • to buy and sell things.

  • It's a matching engine,

  • a computer system that takes in all the information

  • of who wants to sell, who wants to buy, and what prices they want,

  • and then pairs them all up,

  • and exchanges money and shares automatically as fast as it can.

  • Over the last couple of decades, though,

  • something called high-frequency trading appeared:

  • computers trading on a stock exchange faster than any human ever could,

  • watching for price fluctuations

  • and reacting instantly before anyone else can.

  • The faster they react, the more money they can make,

  • so companies collectively spent billions

  • on moving their equipment closer to or even inside the exchange,

  • or building private microwave and cable links

  • that send signals faster than anyone else.

  • One of the strategies

  • was to see someone else send a trade request

  • and then get the same offer to the exchange faster,

  • buy the shares first,

  • and then sell them on for a tiny, tiny profit

  • thousands and thousands and thousands of times.

  • Each microsecond advantage could mean more profits.

  • These days, though, so many companies have spent so much money

  • to get those tiny speed gains

  • that they're all trapped in a stalemate.

  • They're all as close to the exchanges as they can be,

  • and the signal routes are as close to light speed

  • as they can possibly make them.

  • When everyone's bought the same expensive advantage,

  • no one's in the lead.

  • There is another solution, though,

  • and it's being used by another stock exchange

  • a couple of blocks that way.

  • - IEX is now a fully-fledged stock exchange,

  • so a lot of people obviously know names like New York Stock Exchange and NASDAQ.

  • We're regulated and established the exact same way as those stock exchanges.

  • We're one of 13 in the US.

  • Sometimes, people will take the argument of 'high-frequency trading is bad'.

  • What we'll tell you is, there's nothing wrong with those strategies,

  • but different than any other stock exchange,

  • what we've done is we level the playing field for not only those folk,

  • but also for the slow traders, the human traders,

  • and the only way in which you can really do that

  • is actually, as an exchange, to slow things down.

  • Generally, in the US,

  • you're obligated to know what's going on in all markets,

  • so the only way in which you can do that is

  • you have to connect to all the other markets,

  • you have to take in all these super-fast feeds,

  • and you have to make a determination on the best price at that time.

  • If someone can take in that information

  • quicker than the exchange they're trading on,

  • then they can pick off people trading on that exchange

  • before the exchange even knows what the new price is.

  • We can take in all that data,

  • we can make a determination on what the fairest price is,

  • and as long as someone is not 350 microseconds faster than us,

  • we will always have the clearest snapshot on what the true price is in the market,

  • which is key.

  • The biggest proponent of delay is something called propagation delay.

  • Just means the further away you are from the signal,

  • the longer it takes you to get it,

  • so we said, why don't we introduce distance?

  • 350 microseconds is 61 kilometres.

  • We called up a fiber-optic provider, and we asked them to coil cable for us,

  • and we had them fabricate this box.

  • This is actually 38 miles of cable.

  • It looks like three big fishing spools,

  • so anyone who wants to trade on our exchange

  • has to come in and traverse this distance.

  • The high-frequency guys can be fast,

  • and that's totally fine with them being fast,

  • but because physics is physics,

  • they'll never be 350 microseconds faster than us,

  • so we can always ensure that we give our clients the fairest price.

  • The filing to become a stock exchange for IEX

  • was the most controversial filing of any stock exchange ever.

  • All the negative comments were around

  • 'you can't possibly introduce a speed bump into the market'.

  • 'It's going to cause a calamity in the markets.'

  • 'Everything's going to explode.'

  • But in any case, we did get approved.

  • I always found it funny, like in a market

  • that has billions of dollars of technology invested into it,

  • the most talked-about thing is IEX's exchange filing

  • and a piece of equipment worth $27,000,

  • but this $27,000 literally has billions and billions of dollars

  • notionally trade through it every day,

  • and trade at the fair price.

  • So, it was worth the battle. We did get approval,

  • and the SEC two years later put out a white paper

  • saying not only did the calamity not occur in the market,

  • the market overall, not just IEX,

  • has been more stable since IEX became a stock exchange.

  • - Sure, you could do this by having a computer receive every signal,

  • wait for however long you want, and then send it on.

  • It would probably be cheaper.

  • High-grade fiber-optic cable is expensive stuff,

  • but that would be another system

  • that could crash, or fail, or be defeated somehow.

  • It's unnecessarily complicated.

  • There's a lot to be said for a solution that just uses physics.

- A modern stock exchange isn't people yelling at each other

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ケーブルの38マイルで証券取引所をスローダウン (Slowing Down A Stock Exchange With 38 Miles Of Cable)

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    林宜悉 に公開 2021 年 01 月 14 日
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