The Trader has written extensively on the Algo/HFT trading over the past year. Regulators do not understand, and the Algos are running the markets. We are not against technology, as we use it ourselves, but we are concerned on the long term implications of the markets if a respectable player like Knight can practically go under over one rogue algo going crazy. More by Felix Salmon of Reuters.

Barry Ritholtz has an excerpt from Frank Partnoy’s new book, Wait, all about an HFT shop in California called UNX:

By the end of 2007, UNX was at the top of the list. The Plexus Group rankings of the leading trading firms hadn’t even mentioned UNX a year earlier. Now UNX was at the top, in nearly every relevant category…

Harrison understood that geography was causing delay: even at the speed of light, it was taking UNX’s orders a relatively long time to move across the country.

He studied UNX’s transaction speeds and noticed that it took about sixty-five milliseconds from when trades entered UNX’s computers until they were completed in New York. About half of that time was coast-to-coast travel. Closer meant faster. And faster meant better. So Harrison packed up UNX’s computers, shipped them to New York, and then turned them back on.

This is where the story gets, as Harrison put it, weird. He explains: “When we got everything set up in New York, the trades were faster, just as we expected. We saved thirty-five milliseconds by moving everything east. All of that went exactly as we planned.”

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