To the lighter side today, I received the following question about a timeframe I referenced when writing about high-frequency trading. I believe the question is somewhat “tongue in cheek,” but who can know for sure, so I will answer it …
“Less than a millisecond.” What is that called? Just for my info.
For your information, I did not specify the actual time length, but suffice it to say it is fast, and I mean really fast. Less than a millisecond could be a microsecond, which, in order of magnitude, is 10-6. Of course, as everyone knows, the order of magnitude for a millisecond is a measly 10-3, which makes the microsecond quite a bit faster than a millisecond, which, actually, is relatively slow for high-frequency trading. In fact, a microsecond is the time it takes to execute one machine cycle by an Intel 80186 microprocessor. Now for those who don’t remember the early days of personal computers, that was fast back then, but today, well …
No, today if you are not trading in nanoseconds, you are chasing the tail, so to speak. You see, a nanosecond (10-9) is the time it takes to execute one machine cycle by a 1GHz microprocessor, which is, give or take, the speed of most personal-computer microprocessors today. This is pretty fast actually. In fact, it so fast that a particle of light can move 12 inches in a nanosecond. Considering light travels at 186,000 miles per second, well …
A nanosecond is really, really, really fast, but, as stated, nanosecond speed is what you get when you buy off-the-shelf. I suspect the folks who do high-frequency trading don’t buy off-the-shelf. My guess is that these folks want the fastest processor money can buy, so they could be using computers powered by silicon-germanium semiconductors, which can compute in picoseconds (10-12). In fact, it only takes four picoseconds to execute one machine cycle by an IBM Silicon-Germanium processor.
Now this class of speed (picoseconds) is fast, so fast in fact that it may not be affordable for even those who trade in the multi-million-dollar range. If this is the case, then, these traders probably buy computers with super-charged processors that allow for processing speeds somewhere between nanoseconds and picoseconds, which means somewhere between 10-9 and 10-12 power. Of course, this is just a guess on my part.
I guess when all is said and done, none of us needs to know the actual speed of computers that can process and execute tens of thousands of trades per second. All we need to understand is that most of the little guys out here (me included) do not have this capability. All we really need to know is that this is an unfair advantage, and, as we have seen, dangerous to all of us in the form of both market manipulation and technology out of control.
So, I say, slow it down a bit in the pits, and we all will feel safer on the trading highway.
Trade in the day; invest in your life …
