FPGAs as enablers of bad behavior

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I know nothing about stock gambling, or rather trading, and couldn't care less about it. As far as misuse of technology by a laundry list of government agencies; since disgraced impeached former president Bill Clinton's office was caught with several hundred of his political opponent's FBI files, its clear there isn't much we can do but keep scum like the democrats out of office.

These guys are just trading against each other. Did anyone really think the average joe investor stood a chance against the likes of Goldman Sachs? Before they started using FPGAs, they were using thousands of high speed parallel processor chips. The average joe has no business *trading* stocks -- no matter what you hear in CNBC. High Frequency trading just allows them to loose their money faster if the underlying algorithm is bad. The real value is in the algos. Anyway it just creates more jobs for FPGA coders which we should all be thankful for in this economy.

The point of free market is "she with the best information gets the best deal" - whether it is price information, or news releases, or arbitrage (difference in real stock price from the implied price of an option or derivative traded elsewhere). The FPGA just automates what humans have done for centuries. There is no way to regulate that away.

It is futile to try to police high frequency trading by controlling implementation of trading algorithms. Whether hardware or software, there's always another improvement that smart people motivated by a lot of money will come up with. Banning such improvements is reactive and will never work. The problem with the current situation in high frequency trading is that insiders like Goldman Sachs buy a preferred access---their computers are collocated with the trading exchanges and have enough of the timing advantage to be able to skim from all the other market participants. There has been economic research indicating that such activity doesn't improve the market and instead is equivalent to a tax they impose on the overall market. The insiders defend their position by claiming that anyone can buy their way in, but this is disingenuous because a) the price is prohibitive for all but biggest players, b) they already crowded everyone else out from the limited collocation resource and c) their claim of helping the free markets is most likely incorrect.

Just mandate a randomized delay of up to several minutes (or hours) on each stock trade on the exchange, and have the SEC monitor all trades to make sure. Problem solved.

Not-a-trader, sounds compelling, like a good game of musical chairs!

Couldn't this be done on a much more fundamental system level? Instead of fighting fire with fire like Geno suggests, why not just freeze the stock for 10 minutes around any earnings release? People could set up their trading positions around where they think the stock should be valued (much like the after/before market trading) and then when the stock is released all of the actions occur. Perhaps I am misunderstanding how the actual market interacts, but I would think this problem would be solved by taking the technology (which is only going to get better/faster/stronger) out of the equation.

Geno, I wasn't suggesting that the fast nature of the appliance itself caused the harm. In fact, Desert Rat pointed to the uptick rule as the real source of the problem. Combine that with the obsession of traders with chasing speed of response as an end in itself, and you end up with a problem bigger than traditional data-mining. Your reference to the dbX use in medical and genomic applications is very cool, and I'll be looking forward to seeing Xtreme land in vertical applications.

An interesting piece that is missing from this article is that dbX is/can be used to stop the very problem you discuss. SEC Regulatory compliance, MiFID, internal back-office regulations, and other "risk profilers" are looking to dbX to catch problems faster and more accurately. Or if the argument is that dbX (and even Altera FGPAs)are simply "too fast" for the common good than I disagree. We have cancer, MS, and genomic research happening on dbX already.. and I'm thankful our disruptive technology can play a small part in this discovery and potential cure.

The problem here is the release of specific trade data to the high-frequency traders 30 milliseconds before the rest of the world can see it. Stop that practice, and everyone is on the same level....and the fairness of the system should balance back out again (in theory). That's why we were discussing the re-implementation of the uptick rule a few months back (the stock must go UP before it can be shorted). But, everyone is trying to game the system they are forced to live within...for various reasons.

As employees, we had to wait three days after an earnings announcement to trade our company's stock at a company I worked for, with management explaining to us that Wall St had to have time to digest the news. Curious how Wall St's bandits are allowed to have an edge measured in nanoseconds, while the great unwashed get sidelined for days. One other food for thought - NSA self-funding its black programs via Black-Scholes on the same hardware, since FPGA compute resources are reconfigurable and since nobody will be able to do much more than gasoline in a beer bottle with the current state of the economy as any kind of threat to monitor, anyway.