High-frequency trading is cuckoo
Published 6:40 AM, 11 Apr 2012 Last update 6:40 AM, 11 Apr 2012
In the Australian Stock Exchange’s Sydney data room, which is about the size of a big lounge room, there are six “cuckoos”. These are the banks of servers installed by high frequency traders.
They sit against the wall opposite the ASX servers and each is connected directly into the host by a fat fibre optic pipe. Each cable is precisely the same length by agreement with the ASX so that none gets an advantage; if one server is closer to the input, its cable is looped around to lengthen it.
Think about that: one less metre of optic fibre carrying data at 299.8 million metres per second would give one share trader an unfair advantage over the rest. It suggests that something pretty quick is going on.
The question is whether it’s fair to the rest of us; whether those six parasites with their suckers fastened directly into the heart of the ASX should be allowed to get away with it.
The ASX is no longer a regulator, just a business, so it says that if the practice is legal and it pays a fee – not to mention a handy rent in the data room – then it can’t and won’t stop them.
Cont' in his article http://www.businessspectator.com.au/...=Alan%20Kohler
Nothing new, but regulation of sorts needs traction for the sake and well being of general investors.