In Stephen Chow's movie Kung Fu, there is such a scene-the axe helps everyone to take out their fast guns and sharp axes and aim at the fire cloud evil god! The fire cloud evil spirit responded, pointed the gun at his forehead and fired a shot. Slow motion shows that when the bullet is about to hit the head, it is suddenly firmly grasped by the finger. Everyone was shocked. Fire cloud evil spirit is very domineering, saying: all martial arts in the world are unbreakable, only fast is unbreakable.
This scene can not help but remind people of the IT development pattern of futures companies at this stage and the "arms race" around futures market transactions.
At present, the core of innovation and development of many investors, investment institutions and futures companies serving them is around the high-speed, stable and safe development of transactions and systems.
The competition from equipment configuration, network environment to trading software, trading strategy and trading skills is increasingly focused on the word "fast". If market trading is an invisible war between investors, then "fast but not broken" has increasingly become a magic weapon to defeat the enemy in this war.
"Fast" has become synonymous with profit.
High-frequency trading swept Wall Street like a storm, the reason is nothing more than its huge profitability of "preemptive strike". In the early days, Simmons, a Fuxing technology company, made a profit of $2.5 billion through high-frequency trading in 2008, becoming the highest-paid fund manager of that year.
Let's take a look at the records of JPMorgan Chase Investment Banking Department: the use of high-frequency trading reduced the trading loss day from 3 1 of 20 1 to 7 days of 20 12, and 20 13 was zero, which made market participants sit up and take notice.
20 14 in March, Virtu, the world's top high-frequency trading strategy company, declared in its prospectus that only 1 day had a loss in all trading days in the past four years. The miraculous trading record surprised its competitors.
Traditional trading technology focuses on the choppy water surface, while high frequency trading focuses on the ripples under the water surface. Trading opportunities used by high-frequency exchanges may not be noticed by traders, or they may be easily overlooked by traders, but it is these seemingly insignificant trading opportunities in the market that constitute the core of high-frequency trading. The secret of high-frequency trading lies in the accumulation of soil and the prosperity of wind and rain.
The martial arts in the world are fast and unbreakable. When the speed of martial arts reaches the extreme, there is often no need for complicated moves, and a simple "one step ahead" move can defeat the enemy.
The high-frequency trading speed in the futures market is the most important condition, and it is a programmed trading method that uses computers to seek profits from extremely short-term market changes. The speed of this transaction is often in the order of milliseconds or even microseconds, which is difficult for people to achieve.
High-frequency trading is permeating many markets around the world, among which the United States and Europe are the most prominent. However, as more and more traders adopt this method in recent years, it is gradually difficult for Wall Street to profit from high-frequency trading. However, high-frequency trading, which has been popularized in the United States, is still in the initial stage of development in China.
How to enter the ranks of "fast"
The implementation of T+0 trading system in futures, coupled with the openness of trading interfaces, has greatly promoted programmatic trading. The exchange sends market information every 500 microseconds. High-frequency traders hope to send commissions as soon as possible after receiving the market and "grab" the quotations in the existing trading orders. More high-frequency trading institutions hope that the over-the-air signal can further reduce the time loss. It is estimated that the speed of signal transmission through optical cable is 200,000 kilometers per second, while the speed of signal transmission through air is 300,000 kilometers. Jump Trading LLC of the United States spent $6.7 million to buy a retired military signal transmission tower to improve the transmission speed. Tradeworx is also building a series of microwave transmission equipment to realize air transmission.
Traders put forward higher and higher requirements for the trading speed of futures companies, and a large number of futures companies also attract customers with their so-called speed advantages. Under the propaganda and guidance of futures companies, artificial speculators also require futures companies to supply faster trading channels, hoping to improve the speed through special lines or even closer to the computer room. For example, I want to reduce the network delay from the trading place to the computer room from 3 microseconds to 1 microsecond. But for the vast majority of traders in the market, it is meaningless whether it is manual or procedural. According to statistics, the network delay to the computer room in the previous period is as follows: 5 microseconds in Shanghai, 30 microseconds in Guangzhou, 30 microseconds in Beijing, 45 microseconds in Haikou, 40 microseconds in Xi 'an and 35 microseconds in Chengdu. Combined with the artificial reaction time and its volatility, it can be seen that no matter how fast the operator fires manually, no matter whether he is sitting near the computer room in Shanghai or in other cities in China, the network delay will not affect his quick trading. The difference of network delay is almost negligible compared with the speed influence brought by people's own fluctuations.
So now, in addition to the main trading system, futures companies also provide special fast trading systems for program traders. In order to pursue lower delay, futures companies put the counter system and customer transaction server in the data center where the exchange matching engine server is located (co-located). The whole trading environment is equivalent to being in the same local area network, so as to achieve the fastest trading speed. But when more and more companies are doing this, it is impossible to be faster than competitors just by co-positioning. Therefore, in every company, how to reduce the delay of the system and make the transaction data reach the fastest speed in both directions from the computer where the strategy is located to the trading engine of the exchange has become a very important task, which is often called "zeroing" on Wall Street now.
The risks involved in "fast"
In recent years, with the rapid development of information technology, more and more programmed transactions have been applied, and high-frequency transactions can generate, modify and cancel a large number of transactions in a short time. In view of the high speed and complexity of high-frequency trading, the high risks associated with it are also inseparable.
On May 6th, 20 10, the trading signal sent by the computer program incorrectly caused the US stock market to be abnormal. The Dow plunged 1000 points in the day, and the market value of nearly 1 trillion dollars evaporated, and then rebounded sharply. This incident was the most turbulent 20 minutes in the history of Wall Street. The SEC and CFTC blamed the accident on the high-frequency trading company.
Judging from the supervision of high-frequency trading in the international financial market today, Germany is recognized as being in a leading position. On May 2013 15, the new German High Frequency Trading Law came into effect, which marked that the programmed and high frequency trading was formally brought into the scope of supervision. The core content of the new regulations is to put forward the qualifications and organizational structure obligations of high-frequency trading to control risks. The new regulations require financial institutions that adopt programmed trading technology to obtain high-frequency trading qualification when trading financial instruments independently, because high-frequency trading requires higher scale of their own capital. In addition, for the obligation of organizational structure, relevant stock trading companies, capital investment companies and self-run investment companies are required to ensure that their trading systems can withstand pressure and have sufficient capacity and are not used as tools to manipulate the market.
High frequency traders are really responsible for some predatory behaviors, because they are easily tempted by some bad behaviors in the market, just like other trading groups. But these are all caused by the market structure and cannot be simply attributed to those high-frequency algorithms. Of course, a rough algorithm will also have a negative impact on the market. The crux of the problem lies in whether high-frequency users have any attempt to manipulate the market.
For the risks involved in high-frequency trading, the international regulatory experience is that high-frequency traders should be assigned identification codes; Analyze its trading behavior every day or after the transaction, and take corresponding regulatory measures; Identify and limit strategies that are harmful to the market and other investors; Analyze the types, concepts, operation methods, liquidity quality and its impact on other markets under normal and extreme conditions, identify and limit predatory strategies that damage the profits of other traders, and maintain market fairness; Improve the custody system in terms of technical means, provide custody services to the market fairly, and establish a regulatory framework for high-frequency transactions from various aspects.
"Fast" is a trend
In the financial ecological chain of the law of the jungle, snipers always lurk in the dark, burying soldiers and laying countless traps. When the prey appears, they fight like lightning, and the whole process is fast, ruthless and accurate. They are high-frequency traders-they have created many wealth myths of "sparrows become phoenixes", and also created many troubles such as "oolong fingers" and "fat fingers". Market participants pay more and more attention to the expansion of high-frequency trading, and gradually use various quantitative and high-frequency tools. High-frequency traders' pursuit of speed has reached a feverish level, and individual funds have even reached the nanosecond level.
There are so many gaps in the market, whoever is fast will gain more. The top high-frequency trading teams in the world are all directly coded by hardware, and the calculation of reaction speed is exquisite. The fastest trading counter platform in China is almost millisecond, but there is still a big gap with the international advanced level. IT is believed that with the upgrading of IT technology in the future, the acceleration of trading system is definitely an inevitable trend.