No Images? Click here Market Observations August 2018 Folks, A microsecond is one-millionth of a second. Sum up about 350,000 microseconds and you have the time it takes the average person to blink, so 8 of these is still pretty darn fast in my book. What would the founders of the NYSE think of this as they signed the agreement under the shade of a buttonwood tree forming the exchange on May 17, 1792? It is astounding this delay makes a difference for some investors. Not for us, mere mortals, but for computer-driven, high frequency trading (HFT) firms the delay was noticeable - and newsworthy. Hundreds of millions of dollars were spent in 2010 on building just one fiber optics line from Chicago to New York in order to increase one-way speeds by about 3 milliseconds (3,000ths of a second) – over 300 times faster than it takes to blink. Since then, at least two competing microwave networks have been built to increase speeds by even a few more milliseconds between these two cities. Big bucks spent for minuscule, but profitable, time improvements. Consider these speeds the next time you are sitting around in your pajamas day-trading on your laptop, trying to take advantage of the
tiny little blips in stock prices that occur throughout the day. It’s not just some big powerful machine you are competing with. It is the near speed of light trading you are racing against. May the force, and very fast fingers, be with you. Robert A. McCormick, CFA, CAIA |