Latency and the Fed
In the past few days, there’s been a lot of talk in the news about latency. Working at a company that makes network simulators (www.apposite-tech.com), I spend my day talking about latency, but still I was not prepared to wake up to the sight of Cramer howling about latency on CBNC this morning.
For those of you who have been too busy fighting fires on your network to follow the financial news, here’s a brief recap: The WSJ and CNBC this week have been covering a report by Eric Hunsader that shows that high-speed traders were making huge trades on gold, stocks, and bonds within a millisecond of the Federal Reserve’s surprising announcement last week that they would not scale back their purchase of bonds.
High-speed traders regularly buy and sell based on news in a matter of milliseconds or less. No surprise there. However, the news was supposed to be released from Washington at exactly 2:00 PM EDT as measured by the official USNO atomic clock. For the information to reach Chicago from Washington takes about 6 ms. (For more gory details, see my article on latency: http://www.lovemytool.com/blog/2013/08/its-the-speed-of-light-dudeby-dc-palter.html