Re:Goldman Sachs is spending $100M to shave milliseconds off...
by bostik on Friday August 02, 2019 @09:38AM
(#20592789)
> There are bots that feign transaction so that others react in a specific way. In the last moment these are canceled again, too late for competitors to still react.
In stock exchanges at least, what you describe is called spoofing. The regulators are not friendly towards it, because spoofing enables to skew price discovery.
It's generally hard to detect and hard to prove, but there have been cases where the regulators have proved sufficiently well that in certain cases, there were orders never intended to be executed. And yes, if you get caught, there are sanctions.
The real reason are competitors. You have an advantage if you have the faster line. In the name of fairness there are lines of the exact same length* in many trade centers precisely for this reason.
There are bots that feign transaction so that others react in a specific way. In the last moment these are canceled again, too late for competitors to still react. This is an example for when you need a faster line.
To suggest this arms race in high frequency trade has a serious economic benefit is ridiculous in my opinion.
* I do literally mean cable length. Yes, they have become that crazy