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Comment by harryh | Hacker News Reader

You don't actually have 10ms to act in the scenario you describe. Because there is new information entering the world at all times, you would want to wait until the last possible microsecond before the end of the 10ms window before entering any bids.

The window does nothing to remove the need for speed.

The world is a continuous system. No matter how hard you try you can't force it to be discrete.

(There are other problems in your proposed scenario to having to do with mismatched buy vs sell volume, but we'll ignore those for now.)

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What new information?

I think the above poster meant to imply that the 10ms delay would cover all market transactions, so if you put in an order now, then no one knows it till the next 10ms stop post.

Essentially its buffering all the data then releasing it at once, so it's not a truly continuous system anymore.

> What new information?

Stuff that happens in the real world. The stuff that all security prices are eventually based on. It's not a closed system you know?

Ah, that's why I wanted an example. Your answer is fairly obvious, but it's pretty absolute too so there's no way to ask questions like "is this information actually going to affect the bid size or price of a bidder?" or "is this event important but infrequent, like quarterly reporting?"

For example, infrequent important events will result in a race for people to submit at the last microsecond, but because they're infrequent 99% of the time the 10ms buffering will effectively change the behaviour of market participants.

At the level of a penny, which is what the minimum price change is on most US stocks, almost anything can affect a sophisticated market-maker or proprietary trader's pricing: information in the stock's own order book, the price of related securities globally like the same stock trading in foreign markets, prices of correlated stocks, index futures prices around the world, his or her risk exposure in that stock and others in a portfolio, foreign exchange and interest rate market shifts, news feeds, sentiment analysis of online sources like twitter, company exposure to oil or other commodity price changes, etc. etc.

> What new information?

Trades occurring at other locations. Even if the other location are operating in discretized time, there's going to be variability in how fast different market participants can transmit information from one location to another. From Wolfram Alpha, Tokyo to NYC is 36ms at speed of light in vacuum and 51ms at speed of light in fiber, so someone with a faster network could be multiple discretized ticks ahead.

That's silly, because it's an universal truth. Yet they still close the exchange and the dumb traders go home to sleep.

You can design the rules to optimize for one thing or another, continuous world notwithstanding. I'm suggesting a way to optimize for something more useful.

And I'm saying that your optimization wouldn't accomplish any goals that you might have.

Exactly. Instead of the game being "who communicates fastest" it would be "who can time the sample rate the best"

There are plenty of solutions to that but it wouldn't even be a problem if exchanges weren't -selling their order flow before the trades happen-

By selling order flow brokers have reduced your commissions significantly (and all the way to zero in the case of robinhood.com).

This is good for you, not bad.

Can you give an example of an exchange that sells the order flow before it happens?

Are you perhaps confusing exchange in this case with a broker?

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