Goldman Sachs is spending $100M to shave milliseconds off stock trades

Re:Goldman Sachs is spending $100M to shave milliseconds off... by 1e-9 on Friday August 02, 2019 @05:42AM (#20591704)

The bid/ask spread is a separate issue from latency (Edit: although it should tend to be less with better price discovery). To appreciate the benefit of lower latency, I think you have to consider the bigger picture of many interrelated price discovery feedback loops involving many instruments. Many small speedups can result in a much more stable and beneficial system. In the case of Berkshire Hathaway, the value of their stock is dependent on the value of many other equities, interest rates, energies, raw materials, etc.

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Re:Goldman Sachs is spending $100M to shave milliseconds off... by sumedh on Friday August 02, 2019 @09:02AM (#20592609)

> the value of their stock is dependent on the value of many other equities, interest rates, energies, raw materials, etc.

Exactly, its the same with other stocks.

> The bid/ask spread is a separate issue from latency.

Yes but it also the second point made by HFT's that they reduce the spread.

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Re:Goldman Sachs is spending $100M to shave milliseconds off... by ycombobreaker on Friday August 02, 2019 @10:15AM (#20593081)

Any market maker's bid-ask spread will be dictated by a combination of factors, including aspects like latency (relative to competitors), expectations on holding time, historical volatility and spread (that one is somewhat circular), availability of information from correlated markets, ability to hedge into correlated markets (and what are _those_ spreads, as the market maker will be crossing that spread to hedge), trading fees, etc.

In markets where many of those aspects can be minimized, market makers will end up very tight and the dominant factor becomes latency. a fast market maker can offer a tighter spread to counterparties and will see a virtuous cycle of increased trading opportunities leading to revenue to stay fast.

If the other factors remain significant risks, then the benefits of latency optimization fall off. So, spread and latency are related, but other market fundamentals do play a part.

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Re:Goldman Sachs is spending $100M to shave milliseconds off... by sumedh on Saturday August 03, 2019 @04:54AM (#20599375)

> will see a virtuous cycle of increased trading opportunities leading to revenue to stay fast.

Not sure whose revenue you assume to be fast.

Anyway I think you did not understand the point I was making, Berkshire's spread is huge and has been huge for decades, yet you dont see lot of people complaining.

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