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Unformatted text preview: raded IXP and co lo catio n f irm with f acilities wo rldwide, has added a
gro wing number o f high-f requency trading f irms to a ro ster o f custo mers that includes eco mmerce, Internet, so f tware, and teleco m co mpanies. In no rthern New Jersey alo ne (the
lo catio n o f many o f the servers where “Wall Street” trading takes place), Equinix ho sts so me
eighteen exchanges and trading platf o rms as well as the NYSE Secure Financial Transactio n
Inf rastructure (SFTI) access no de. Less than a decade ago , eighty milliseco nds was acceptably lo w latency, but no w trading f irms
are pushing belo w o ne milliseco nd into micro seco nds.I. Schmerken, “High-Frequency Trading
Sho ps P lay the Co lo catio n Game,” Adv anced Trading, Octo ber 5, 2009. So it’s pretty clear that
understanding ho w the Internet wo rks, and ho w to best explo it it, is o f f undamental and
strategic impo rtance to tho se in f inance. But also reco gnize that this kind o f auto mated trading
co mes with risks. Systems that run o n their o wn can mo ve many billio ns in the blink o f an eye,
and the actio ns o f o ne system may cascade, triggering actio ns by o thers. The spring 2010 “Flash Crash” resulted in a nearly 1,000-po int f reef all in the Do w Jo nes
Industrial Index, it’s biggest intraday dro p ever. Tho se black bo xes can be mysterio us—mo nths
af ter the May 6th event, experts were still parsing thro ugh trading reco rds, trying to unearth
ho w the f lash crash happened.E. Daimler and G. Davis, “‘Flash Crash’ P ro ves Diversity Needed
in Market Mechanisms,” P ittsburgh P o stGazette, May 29, 2010; H. Mo o re, “‘Flash Crash’
Anniversary Leaves Unanswered Questio ns,” Marketplace Radio , May 5, 2011. Regulato rs and
lawmakers reco gnize they no w need to understand techno lo gy, teleco mmunicatio ns, and its
bro ader impact o n so ciety so that they can create platf o rms that f uel gro wth witho ut putting
the eco no my at risk. Watching the Packet Path via Traceroute Want to see ho w packets bo unce f ro m ro uter to ro uter as th...
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This document was uploaded on 01/31/2014.
- Winter '14