| Neither of those describes sub-millisecond, programmed trading. It is, instead, simply gambling. Like poker, it is not really a game of chance, so those with better algorithms and faster hardware win, but it provides society absolutely nothing of value. Generally it amounts to leeching off of other traders who might be providing something of value. It has got so many have custom electronics connected directly to the fiber that delivers market event reports, and trigger sending an order even before such a packet finishes arriving, the response calculated in an FPGA in under 100 nanoseconds. Nowadays those traders have equipment in cages in the same building as the exchange, and the fibers to all the cages are exactly the same length. They may have a collection of order packets already formatted, and just pick one of them to send according to the update. For a while some would trigger sending an order early, and then add a bad checksum if calculation indicated it was not right. The exchanges banned that, not because it was unfair, but because it added load not paid for. A way to preserve value for the non-gamblers would be to place a (proportionally) small tax on trades, so whoever does it most frequently pays most. |