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Raising the temperature on HFT | 211 comments | Create New Account
Comments belong to whoever posts them. Please notify us of inappropriate comments.
Positive Feedback == Explosives
Authored by: Winter on Monday, September 24 2012 @ 02:14 AM EDT
Positive Feedback is what makes an explosion.

It is also what makes your audio system "sing" when you hold the
microphone too close to the speaker.

Systems with positive feedback explode eventually.


---
Some say the sun rises in the east, some say it rises in the west; the truth
lies probably somewhere in between.

[ Reply to This | Parent | # ]

Raising the temperature on HFT
Authored by: Ian Al on Monday, September 24 2012 @ 03:04 AM EDT
My control expertise is purely intuitive: I hate the math.

The traditional heating control of a bi-metal strip has the advantage of low
gain, high latency, high hysteresis and a brick-wall end-stop control of the
bi-metal strip turning off the power.

My intuitive model of HFT is a public address system. The system is high-gain,
high power and very fast response time compared with a heating system. The only
limit to positive feedback (howl-round) is when the speakers hit the end-stops
and cannot push out any more energy. The brick-wall limiter is the destruction
of the loudspeakers and the burning out of the amplifiers.

Early systems were poor in terms of frequency response, speaker efficiency,
system gain and power. All of these measures were massively increased as
technology met the demands of business. However, now there are all sorts of
feedback suppression built in, after some spectacular failures.

Computer trading started like the early public address systems. Since then, the
only changes have been reduced hysteresis/latency, special algorithms to enhance
the positive feedback, much greater gain with much higher trading volume and the
restriction of the 'improved' technology to the super-groups managed by big
finance. Big finance refuses all safety end-stops or automated howl-round
reduction as this reduces profits.

When the first spectacular failures occur it will not destroy a single venue
system, it will destroy all of the venues on a global basis.

As I have asserted in the past, the only recovery strategy will be to keep the
vast bulk of minor trading running and freezing the super-group assets until a
safe major trades infrastructure can be professionally built to replace the
existing system. If ever.

The existing system has been created and developed by rich kids with loads of
money and a complete lack of technical understanding of the systems they
continue to develop. The rich kids private club ruthlessly excludes any
prospective members and any attempts to safeguard the working of the system.
This comes out of a reckless drive to personal profit and a disregard of the
financial well-being of anyone other than themselves.

---
Regards
Ian Al
Software Patents: It's the disclosed functions in the patent, stupid!

[ Reply to This | Parent | # ]

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