The first step in High Frequency Trading (HFT) is to place the systems where the exchanges are. Light passing through fiber takes 49 microseconds to travel 10,000 meters, and that’s all the time available in many cases. In New York, there are at least six data centers you need to collocate in to be competitive in equities. In other assets (foreign exchange, for example), you need only one or two in New York, but you also need one in London and probably one in Chicago. The problem of collocation seems straightforward:
- Contact data center.
- Negotiate contract.
The details, however, are where the first systems problem arises. The real estate is extremely expensive, and the cost of power is an ever-crushing force on the bottom line. A 17.3-kilowatt cabinet will run $14,000 per month. Assuming a modest HFT draw of 750 watts per server, 17 kilowatts can be taken by 23 servers. It’s also important to ensure you get the right collocation. In many markets, the length of the cable within the same building is a competitive advantage. Some facilities such as the Mahwah, New Jersey, NYSE (New York Stock Exchange) data center have rolls of fiber so that every cage has exactly the same length of fiber running to the exchange cages.
via Barbarians at the Gateways – ACM Queue. A fascinating look at the technology stack behind High Frequency Trading (HFT) companies.
A nice run down into how Hezbollah rolled up a CIA spy ring in Lebanon in late 2011.
The adversary, Hezbollah, used access to the telephone company logs they have those, and searched for atypical mobile phone usage patterns:
- phones that only receive a few calls / messages over long periods of time
- mobile phones that are never mobile
- weird / unusual messages PIZZA!!
That is, they were looking for phones that were kept at home, turned on occasionally, and only received calls/sms infrequently. The exact usage pattern one would expect for a mobile that is used exclusively for a handler to contact an agent.
This data gave Hezbollah a general location down to the apartment complex of where the agents were located. Next, the adversary correlated the location data with the home addresses of members who had access to secret information. They conducted surveillance on those members and discovered they were using a Pizza Hut to meet with their handlers.
via anonymity is hard – Hacker OPSEC.
There are not that many people who can so eloquently explain economics to the masses. Post-Scarcity Economics is a great in-depth look at the history of growth in relation to wars, public spending and debt.
What is to be done?
Our policy makers are desperately hoping that ultra-low interest will spark a new asset price bubble and we can return to the fool’s paradise of 2005, right before house prices started falling in Nevada and mortgage-backed securities started stinking up bank balance sheets. Not only is this looking unlikely, it also ignores that debt fuelled consumption didn’t give us strong or equitable growth. Remember, real GDP growth during the bubble years was lower than it was even the unlamented 1970s.
In the short run, the first thing we should do to emerge from this debacle is to increase government deficits and focus this spending on infrastructure and education. These investments in our future create jobs today, and by putting money in workers wallets, give the private sector reason to hire and invest in increasing capacity.
This is a no-brainer.
Pundits and economists enamored with austerity argue against this policy and insist that firms require lower government deficits before they have confidence to invest. This shows a breathtaking lack of understanding of the business world. Only one thing makes entrepreneurs expand capacity and that has nothing to do with government tax policy. A businessman will hire more workers and invest when his inventory is shrinking, specifically, when he is able to sell more than he is able to produce. If stock is sitting on his shelf, he instead fires workers, no matter what his tax rate. Only someone living in Washington who has never run a business could assume that entrepreneurs are fixated on the possibility of future tax hikes. Of course, like all of us, businessmen would rather pay less tax, but what makes employers hire is the realization that they cannot meet the demand for their goods and services with existing staff. If they do not expand production, customers willing to buy their goods will have to leave the store empty handed and spend their money instead at a competitor’s shop.
The need for increased government spending is basic Economics 101. Gross national product equals consumption plus investment plus government spending. If households are consuming less and firms are investing less, government has to increase spending is the economy is not to shrink.
Austerity has been a dreadful failure. A return to sensible Keynesian policies is the first step to restoring prosperity.
via Post-Scarcity Economics.