The low latency game: reported 176 ns for high performance trading

While I don't have any way to verify the reported results,  the low latency portal reports on  "groundbreaking results" by Argon Design. Anyway - the reported latency is 176 nano second,  to those unfamiliar with the term -- there are billion (1,000,000,000) nano second within one second...   Recently I wrote on time perception of different animals.  If the time perception of a person is limited to 1/60 of a second, then you can do the arithmetic to calculate how faster this technology is relative to human perception.  It is interesting to check is there a limit to the time perception of computerized system.   Building low latency systems can help building robots that are very fast and one can think of the potential of what such robots can do to compensate for the relative slow reaction of humans...   

Acting faster than the speed of thinking

Chris Taylor from TIBCO has written in a Blog with the nice title: "a place for good ideas in a fast changing world" entitled "getting there faster than your opponent".  In the same spirit of TIBCO's two second advantage, it makes the point that event processing is vital for getting things faster than others.  Chris enlists the famous OODA loop originated in the US Air Force, for mentioning that faster decision can impact the combat field.   Note that OODA is one of the variations of  control loops, other variation I have written about is the 4D variation.    

It is interesting to note that speed of reaction has been one of initial reasons for using event processing technology in applications like high frequency trading, where trading programs compete on speed.  I guess that military applications also gain from competition in fast reaction, as well as cyberspace wars.   

While these are notable applications, a common misconception is that event processing is restricted to these type of applications, however, there are many other applications in which competing on speed is not an issue that can benefit from the use of event processing due to the benefits in reducing cost of development and maintenance due to higher level abstractions.  In fact one of the first posts in this Blog, almost five years ago tried to answer the question whether the only motivation to use event processing is high performance?  in this post I have discussed the Total Cost of Ownership as a function,  I guess it is also applicable today.

The two  main observations are:   acting faster than the speed of human thinking issue an important type of event processing applications,  but not the only reason, also in many cases event processing is not enough, and some real-time decision mechanism (reactive or proactive) need to be applied to achieve autonomic action, since the required speed requires the elimination of human from the loop.

On image and unfair disadvantages

This is the logo of the "Hebrew Reali School" - a famous Israeli private school, in which I have spent 8 years of my life, my wife and myself are both products of private schools and we sent our daughters also (at some point) to study in this school. Yesterday I spent all evening there, in a ceremony to celebrate my daughter Hadas graduation from junior high (9th grade), she will stay in the same school, but move to a different location for the "upper division". The coordinator of the 9th grade classes in his speech claimed that by learning in that school the children gain advantage over other children for their future, from my experience - this is definitely true. Some people may view it as unfair advantage, but that's life -- the public system provides a low common denominator, and if I can afford getting more than that, I am not ashamed of pursuing it. I admire people that I know who send their children to public schools because of ideology and values , but I don't share their attitude.

Somewhat unrelated --- I read in Marco Sierio's Blog that quoted an article in the Atlantic magazine about the unfairness of using high-frequency-trading, Marco asserts: When this is what the public reads about CEP, then I think we might have a minor image problem.

Some quick comments about Marco's assertion:

1. I did not find the phrase CEP in the article, it has talked about high-frequency-trading. If my memory does not mislead me, Marco's company has a nice event processing software-as-a-service offering, and its typical applications are not really high-frequency-trading. This is also true for what we do in IBM in this area (there are many applications in many industries), and other companies as well. Algorithmic trading applications were indeed some of the early adopters of event processing technology, and there are some vendors that are still centered around trading applications. However, one of the issues, that is indeed a misconception that exists among some people is the event processing = algorithmic trading, but this is only one of the applications, and there are many others.
2. Furthermore, there are some other applications that are indeed aimed at the benefit of humanity as a whole, and our event processing grand challenge as noted in the EC FET FLAGSHIP presentation (that we want to realize with the help of government funds) is certainly in that direction.
3. Now getting back to the unfair advantage, I cannot say that I have deep understanding of the trading issue, so unlike some people who have opinions about everything on earth, I tend not to express opinions about something I don't understand, so I'll leave the discussion to those who understand more and avoid expressing opinions here.
4. However, I'll write in general about using technology for providing unfair advantage. When I was young, I worked in the IT shop of the Israeli Air-Force, and saw how sophisticated informations systems have shifted the balance of power in organizations, gave one organization advantage over others, and eventually changed the organizational structure and missions. I noted how some people could take advantage of technology in order to advance the organizations they managed, it was fascinating lesson. Was it unfair to the others? certainly, one can think this way; but nothing stopped the others from doing similar things, those who made high priority in investing in technology benefited in more than one way, there is nothing special in that assertion. Event processing technology can certainly provide real-time observations or automated actions in many areas, and one cannot stop the progress of technology.
5. Again, I don't know if some traders abuse the system, this is a question to regulators, and I have no knowledge and opinion about it -- but it is well known the terrorists have used Email and SMS to coordinate among themselves. Every technology can be abused in some way.

Getting to the beginning of the posting -- I am sending my children to private schools to give them advantage in life; likewise the wise organizations take advantage of sophisticated technologies to get advantage in many areas -- and I still have no opinion about the high-frequency-trading, as I don't know much about it.