"Naslund, Steve" <SNaslund () medline com> wrote:
It seems to me that all the markets have been doing this the wrong way.
Would it now be more fair to use some kind of signed timestamp and
process all transactions in the order that they originated? Perhaps
each trade could have a signed GPS tag with the absolute time on it. It
would keep everyone's trades in order no matter how latent their
connection to the market was. All you would have to do is introduce a
couple of seconds delay to account for the longest circuit and then take
them in order. They could certainly use less expensive connections and
ensure that international traders get a fair shake.
I can't see any incentive for any *influential* party involved (the
big firms or the exchanges) to make the process "fair". The exchange
gets more money for low-latency network access and expensive
co-location. The moneyed firms with HFT capability of course do not
want anyone else to have their advantage. Even governments don't want
long-distance traders to have "fair" access, as that reduces the
advantage of local tax-paying firms, thereby reducing tax revenue,
HFT is not just a US phenomenon; all major exchanges have basically
the same sort of phenomenon. So UK-based trading firms with HFT setups
very close to the FTSE exchanges have advantage over US-based firms
that don't have HFT setups in London.